Posts tagged with "Competition"

February 12, 2019

Most of us cut back on everything but the essentials when household prices go up, but our budget remains the same. However, according to a February 10 report by The Wall Street Journal, the cost of staples—including such fundamentals as diapers and cat litter—is expected to increase in 2019, leaving us little choice but to ante up.

Producers of household products, from toilet paper to bleach, are set to raise prices again this year after already hiking prices in 2018, hoping to offset higher commodity costs and boost profits, the financial news outlet says.

New Jersey-based Church & Dwight already has increased prices for about one-third of its products, including Arm & Hammer cat litter and baking soda, and some OxiClean cleaning products.

“The good news is that competitors are raising [prices] in those categories as we speak,” Church & Dwight CEO Matthew Farrell said on a conference call last week, during which the company reported higher quarterly sales and lower profits.

What he left out of that statement to financial analysts was that it was good news for the company and its stockholders—but not for America’s consumers.

The company is now discussing more price increases with retailers, including for personal-care products, Farrell told analysts Tuesday. Those brands include Nair, Arm & Hammer Toothpaste, Orajel, Simply Saline, Waterpik, and Viviscal, among others.

Other household names that are planning to release similarly “good” news, according to the Journal, include Procter & Gamble, Colgate-Palmolive, and Clorox, which are raising prices in response to higher costs of raw materials and transportation, as well as unfavorable foreign-currency swings.

For much of the past decade, the Journal notes, price cuts have been far more common than price increases as U.S. companies were mostly reluctant to test consumers’ spending power and brand loyalty in a fragile economic recovery.

When companies tried to raise prices, “they better have had a uniquely strong innovation or be willing to lose market share to competitors,” Sanford C. Bernstein analyst Ali Dibadj told the news outlet.

Adding to the challenge of raising prices is that more shoppers have been switching to store-branded paper towels and discount detergents, or opting for online upstarts such as Dollar Shave Club.

Traditional brands also have been under pressure from big-box retailers such as Costco and discounters like Walmart Inc. and Amazon to keep prices low—pushing the manufacturers to focus on lowering costs in their supply chains or pare back advertising.

Finally, after failing to see success when they tried to combat weak demand by lowering prices, the industry’s biggest player, P&G, shifted its course last summer, announcing it would charge more for several of its brands—and several rivals followed suit, the Journal reports.

The recent price increases are largely playing out in the companies’ favor, Wells Fargo Securities analyst Bonnie Herzog told the Journal. Sales volumes of household and personal products in the United States. declined 1.4% in January, according to Bernstein’s analysis of data from Nielsen. Dollar sales of those products rose 0.7% in the period, Bernstein said, indicating that the price increases, on balance, are padding the bottom lines at consumer-goods companies.

How consumers will deal with the price hikes long-term remains to be seen.

Research contact: aisha.al-muslim@wsj.com