P&G increases consumer prices on rising costs

By Simon Pitman

- Last updated on GMT

Procter & Gamble has become the first major personal care
producer to announce significant across the board price increases
in the face of mounting costs.

The company says the increases will add from 2 per cent to 16 per cent to retail prices, initiated because of higher costs for plastics, energy and paper.

Although the company has been introducing gradual retail price increases over the course of the last 18 months - amounting to an average of 6 per cent - the most recent announcement is the most sweeping and aggressive.

Hitting soap, hair care and shaving

The price increases are expected to take effect in September and are most likely to affect bars of soap, hair care and both male and female shaving related products.

The increases will also affect household goods, where the company manufacturers brands such as Tide, Ariel and Cascade.

Although the company has been trying to reduce costs by focusing on synergies, - particularly in the area of distribution - it says that economic forces mean that the price increases cannot be absorbed internally.

"We don't price in anticipation," P&G spokesperson Paul Fox told Bloomberg news.

"We only price to recover costs."

Oil prices a trigger One of the key factors in those economic forces has been the price of oil, which has affected manufacturing costs in just about every industry worldwide.

In just over a year the price of crude oil per barrel has doubled, and is currently hovering around $145 a barrel.

But with some financial experts predicting that increases could continue and eventually hit $200 a barrel by the end of the year, pricing pressures look set to stay.

Cost increase move further up the chain Until now price increases within the personal care industry have mainly affected primary manufacturers, particularly in the chemicals and packaging arena.

But now those price increases are being felt further along the production chain, evinced by the fact that ingredients supplier Symrise announced significant price increases for its consumers last week.

Now those price increases have reached the end of the chain and are being passed on to a consumer that is already feeling the pinch from a global credit crunch and significant price increases in other staples such as food and energy costs.

P&G is hoping that these price increases will not drive consumers to private label and other cheaper alternative brands, but with pressure mounting on purse strings, it will be interesting to see what actually happens.

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