The second-largest toilet paper manufacturer in the U.S. warned it’s soon going to start raising prices on everything from bathroom tissue to diapers.
Kimberly-Clark said in a press release the increases “are necessary to help offset significant commodity cost inflation,” reflecting higher supply costs.
The price increases would be “in the mid-to-high single digits,” according to the release, and go in effect in June.
The hikes will affect baby and child care products, adult care, and Scott bathroom tissue. The company is also known for making Cottonelle and Viva, Kleenex, Kotex hygiene products and Huggies diapers.
It’s not clear yet whether any of the price increases will get passed on to individual shoppers and families. Kimberly-Clark said the changes will be made by increasing list prices, which are the prices paid to suppliers of the product. Individual retailers decide what price to charge at the store level to consumers.
Last year, toilet paper and other essentials quickly disappeared from store shelves during the initial weeks of the pandemic lockdowns as shoppers stocked up en masse for months at home.
The national surge in demand quickly sapped a supply chain built on “lean inventory” and “just-in-time” principles that left few stockpiles or extra slack in the system.
Production lagged as producers faced a raw materials and packaging shortfall. Transport providers had higher demand and fewer drivers.
Kimberly-Clark is facing various headwinds, including lower expected birthrates, significantly higher supply costs, and increased costs from higher promotional activity, according to a note by CFRA analyst Arun Sundaram.
During a recent earnings call, Kimberly-Clark CEO Michael Hsu said: “We expect a more challenging environment, especially compared to last year. We expect some of the net benefit from Covid dynamics, including higher consumer demand, to reverse. In addition, commodity costs are rising globally, and we're also reflecting our latest view on economic conditions and birth-rate trends."
The cost of wood pulp, a key input for the paper in bathroom tissues and other products, spiked in February, as speculators in China drove up spot prices by nearly 50 percent. Pulp producers in North America have begun diverting local supplies to the East to take advantage of the price jump, further decreasing supplies for makers like Kimberly-Clark.
The Dallas-based company is the latest to hike prices due to the soaring costs of raw materials. Hormel Foods and Cheerios maker General Mills have both said they will raise their prices to offset the higher cost of grain as well as elevated shipping pricing.
Increased consumer demand and a decrease in logistics capacity have snarled supply chains and shipments across the globe since the pandemic began, adding delays and costs for producers.
The fragility of the interconnected system came into sharp focus last week after the Ever Given, a massive container ship, blocked the entirety of traffic through the Suez Canal, triggering losses of almost $10 billion a day for global trade.
While the Ever Given was eventually refloated and passage through the canal resumed, the backlog could snarl trade for several months due to "supply chain contagion," wherein one event quickly impacts multiple other locations, John Mangan, professor of marine transport and logistics at Newcastle University in England, told NBC News earlier this week.
April 02, 2021 at 03:06AM
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Toilet paper, diapers and other consumer products are latest to see price hike - NBC News
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