“The Transitory Scam” – Ten Companies Warn About Passing Along Rising Costs To Consumers

It’s not surprising that last week’s 5.0% CPI reading in headline consumer prices year-over-year in May was the fastest pace of increase in more than a decade. The Fed’s destructive money-pumping of $120 billion of Treasury and GSE debt and supply chain disruptions have unleashed an inflationary monster that Fed members swear is only “transitory.”

Days ago, BofA economists told their clients that the evidence of shortages and inflation continues to grow with every passing day, as does the list of reasons to reject the problem as purely temporary.

Others such as Cambridge’s Mohamed El-Erian claim inflation could be here to stay and puzzled why the Fed’s ultra-loose money policies continue as the virus pandemic subsides.

David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, called the Fed’s “transitory” narrative a “scam” and said the latest CPI was not a temporary blip.

Joseph Carson, the former chief economist at Alliance Bernstein, said, “I never thought the US would experience rampant inflation again, but based on the 1970s price measurement methods, the US experienced double-digit inflation in the past twelve months.”

With that being said, there are plenty of companies from Procter & Gamble to Coca-Cola to Campbell Soup Company who have already warned about inflationary pressures and how they are being forced to pass along the costs to consumers.

Business Insider detailed ten companies already passing on rising costs to consumers due to out-of-control inflation.

On June 9, in Campbell Soup’s third quarter, 2021 conference call, the word “inflation” was mentioned 35 times by execs and analysts.

The company revealed it was “impacted by a rising inflationary environment,” and CEO Mark Clouse said he expects “sustained inflationary pressures through the remainder of the year.”

Campbell’s said it will be raising food prices this summer to offset the rising costs. Although CEO Mark Clouse noted, “we are going to be very thoughtful about it. The last thing we want to do is shut down the growth that we’ve worked fairly hard to have.”

In JM Smucker’s fourth-quarter, 2021 conference call on June 3, there were 10 mentions of inflation, and CEO Mark Smucker said the company would be raising prices to offset rising costs.

“Broad-based inflation is impacting many of the commodities, packaging materials, and transportation channels that are important to our business. We are mitigating the impacts through a combination of higher pricing inclusive of list price increases, reduced trade and net revenue optimization strategies, as well as continued cost management,” Smucker said.

In Stanley Black & Decker’s first quarter 2021 earnings presentation on April 28, in a slide entitled “Commodity Inflation Update,” the company said steel, resin, base metals, electrical components, and batteries have pushed incremental inflation costs up for 2021 by $160 million vs. January guidance.

In an interview with Yahoo Finance in April, Whirlpool’s CFO Jim Peters said the company was seeing price increases and would pass the costs onto consumers.

“We took price increases in every region of the world, that range from 5% to 12%,” Peters said. “Those are driven by commodity cost increases, and it’s something we have done historically.”

The company said in its first-quarter conference call that the price increase actions “will offset the impact of global supply constraints and rising input costs.”

Kimberly-Clark said it would be raising prices on products like Scott toilet paper and Huggies diapers by “mid-to-high single digits” in late March.

Then, in the company’s April 23 first-quarter earnings call, execs said they saw “sharp rises in input costs.”

Michael Hsu, Kimberly-Clark’s chairman and chief executive officer, said the company was “moving rapidly, especially with selling price increases to offset commodity headwinds.”

Honeywell’s CEO Darius Adamczyk announced that “inflation is taking hold” and affecting his business’ bottom line in the company’s first-quarter 2021 conference call on April 23.

The CEO said, “there’s no doubt about it. We knew it. We see it.” Honeywell announced it would be “quickly taking action” on pricing to stay ahead of the problem

Clorox’s VP of Investor relations Lisah Burhan told investors in the company’s third-quarter 2021 results on April 30 that the company has seen “significant resin price inflation.”

In order to “manage those rising costs,” Clorox announced “pricing action” effective in July. “As we’ve mentioned, we’ll manage inflationary pressures holistically using all the tools in our toolbox,” Burhan said.

Procter & Gamble COO Jon Moeller told analysts in an April 20 earnings call that “this is one of the bigger increases in commodity costs that we’ve seen over the period of time that I’ve been involved with this, which is a fairly long period of time.”

The company said it will begin “the process of implementing price increases on its Baby Care, Feminine Care, and Adult Incontinence product categories in the United States to offset a portion of the impact of rising commodity costs,” noting that the “exact amount of the price increase will vary by brand and sub-brand in the range of mid-to-high single-digit percentages and will go into effect in mid-September.”

In mid-April, Coca-Cola’s CEO James Quincey told CNBC’s Sara Eisen on “Squawk on the Street” that the company would be increasing prices to offset rising costs.

“We are well-hedged in ’21, but there’s pressure built up for ’22, and so there will have to be some price increases,” Quincey said.

“We intend to manage those intelligently, thinking through the way we use package sizes and really optimize the price points for consumers,” he added.

Reynolds Consumer Products revealed that a three-step price increase is already underway on some of its most popular products last month.

“Price increases have been implemented, and a second-round is underway, with plans for a third-round to be implemented in the third quarter,” Michael Graham, Reynolds chief financial officer, said during the company’s first-quarter earnings call on May 8.

Even as nominal wages are increasing, real wages aren’t keep up with soaring prices for food at the supermarket or fuel at the gas station.

The Fed will have a severe problem when inflationary pressures remain, and economic growth subsides, opening up a can of stagflation.

I bought a New manufactured House in january to put on my property, I paid $200K Delivered, will be done around the end of year or beginning of next year, they are that backed up, Today the same house starts at $300K

Talked this past week with the owner of a popular local diner I’ve gone to for 20+years and with the butcher manager at a great Italian specialty store. Both said meat prices were going up fast and they worried how they could keep customers and still make even a small profit. Too many, especially lefties have zero idea of the small profit margins most retailers, especially owner operated ones , have. From personal observation : I usually buy a pkg of Hatfield thick bacon every two or three weeks. Until recently it cost me $8.99. This week it went for $10.99. I passed. One person, one product, one decision not to buy. Expand that across the country, across products and we have a problem.

I got a real sticker shock for epoxy resin at the local hardware store. Fortunately I have another source that is still reasonable and I am not using the gallons and gallons like I used to.

I’m making high single digit price increases to support payroll increases to keep our people whole. 8% is about right right niw.

I've been seeing similar issues with plastic resin. Last year, Covid was causing supply chain issues, but this year you can see the pricing issues.

Steel for the time being is protected by long term pricing contracts, but earlier this year I've heard the phrase "force majeure" mentioned several times by purchasing managers.

I expect the propaganda by the usual mouthpieces to go into overdrive to protect this illegitimate regime.

Your post does a lot to explain the complexities of measuring inflation.

I usually buy a pkg of Hatfield thick bacon every two or three weeks. Until recently it cost me $8.99. This week it went for $10.99. I passed. One person, one product, one decision not to buy. Expand that across the country, across products and we have a problem.

1. What exactly is the “problem” in this scenario?

2. Your bacon expenditure declined from $8.99 to $0. What did you do with that money?

10 posted on 06/13/2021 10:56:52 AM PDT by Alberta's Child ("And once in a night I dreamed you were there; I canceled my flight from going nowhere.")

Inflation causes wild distortions in the economy, and they are stunningly complex.

It makes it impossible for companies to accurately predict demand, and therefore impossible for them to reasonably allocate resources (on such things as plant expansions, for example).

Consumers will substitute and change their buying habits in a million hard to quantify and hard to analyze ways.

Have you been to a restaurant lately. I wish the prices were only 5% higher. They’re more like 50% higher. Talk about price sticker shock!

Hi.

Methinks Coca Cola will have trouble raising prices.

5.56mm

You’ve seen my post on how producers justify rising prices.

This is a snowball that feeds on itself.

14 posted on 06/13/2021 11:25:13 AM PDT by Sequoyah101 (Politicians are only marginally good at one thing, being politicians. Otherwise they are fools.)

All the things you describe are a “problem” even WITHOUT inflation. Consumer demand changes for reasons that go way beyond inflation. Who could have ever predicted that a company like Starbucks that sells overpriced mocha latte crappuccino garbage could ever attract more than a handful of customers?

That’s called “doing business.” If it was easy, then even AOC could do it.

15 posted on 06/13/2021 11:26:08 AM PDT by Alberta's Child ("And once in a night I dreamed you were there; I canceled my flight from going nowhere.")

Many years ago I crunched numbers for a conglomerate and we were able to have remarkably accurate forecasts of consumer demand (and profitability) for the one to five year period (in chain restaurants, as one example) in that environment of relatively stable costs and prices.

Today that job would be ridiculously difficult.

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