Home Household items $10 toothpaste? U.S. homeware makers face price hikes

$10 toothpaste? U.S. homeware makers face price hikes

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By Jessica DiNapoli

(Reuters) – Get ready for the $10 tube of toothpaste.

Colgate-Palmolive Co CEO Noel Wallace told an industry conference last week that the homewares maker sees its new Optic White Pro Series toothpaste as the “vital” type of premium product. for its ability to raise prices, which will help drive earnings growth this year.

His remarks come as many consumer products companies are raising prices as much as they can to offset their own rising costs, a trend that could continue due to the conflict between Russia and Ukraine, whose economic risks include rising gasoline prices.

So far, retailers and consumers seem largely indifferent to rising prices. But some lawmakers and consumer advocates say companies are raising prices excessively in order to fuel profits and return money to shareholders.

“We’re seeing significant price increases on virtually every item consumers buy,” said U.S. Representative David Cicilline, who is working on a proposed antitrust law aimed at lowering prices. “They impose real hardship. People pull stuff out of their grocery carts because it’s too expensive.”

In the past, major retailers such as Walmart Inc have pushed back on price increases. But now retailers like Walmart and Target Corp

Target said in an earnings call on Tuesday that raising prices was the last lever it was pulling in the face of rising costs.

Over the past three months, the U.S. Federal Trade Commission has been probing sky-high prices and supply chain disruptions, forcing companies such as Procter & Gamble, Kraft Heinz Co, Kroger Co and Walmart to hand over internal documents on profit margins, prices and promotions.

Comments on the survey are due March 14 and so far show small grocers angry at having to pay more and receive less of crucial goods. Consumers wrote that they couldn’t find oatmeal, cereal, and cat food.

In an interview with Reuters, Cicilline cited Colgate as an example of a company touting price hikes, making basic items too expensive and paying investors more.

Colgate expects its margins to rise this year, in part because of higher prices. It also bought back almost 50% more shares last year, a boon for investors.

Raising prices is a “key capability” for Colgate that will help drive earnings growth, Wallace said last week.

A Colgate spokesperson said in a statement that the company has a broad portfolio of products at various price points and touted its new $10 toothpaste as the first with 5% hydrogen peroxide, with “effectiveness shown to whiten teeth.

Last year, consumer goods companies began raising prices in response to rising raw material costs and labor shortages due to the pandemic.

“There’s an incredible appetite for our products,” said Katie Denis, spokeswoman for the Consumer Brands Association, a trade group for consumer packaged goods companies, including Colgate. “We manufacture the essentials. And there is no option not to deliver.”

Prices also rose on competing private label items, analysts said.

The White House is targeting corporate profits as it grapples with inflation. Bharat Ramamurti, deputy director of the White House National Economic Council, said there are examples of businesses outside of the meatpacking industry – which has been particularly in the White House’s crosshairs – raising prices beyond their own rising costs.

Lindsay Owens, executive director of Groundwork Collaborative, a progressive nonprofit, has singled out diapers as a category with little competition, paving the way for aggressive price hikes.

Kimberly-Clark Corp’s margins were hit in 2021 due to rising costs. Diaper maker Huggies is betting consumers will buy more expensive options made from plant-based materials, helping its profits recover, executives said at the conference last week.

P&G executives said last week they expect margins to continue to improve as prices rise in stores. The company also plans to buy back more shares than originally planned.

Chart – US CPG Gross Margins: https://graphics.Reuters.com/CONSUMERPRODUCTS-PRICING/zdvxoamlypx/chart_eikon.jpg

“Many companies are taking advantage of strong consumer demand to continue raising prices when they don’t need to,” said Jack Gillis, executive director of the Consumer Federation of America, a consumer interest group in non-profit. “As long as consumers are willing to pay these prices, there is no incentive to lower them.”

(Reporting by Jessica DiNapoli in New York; Editing by Leslie Adler and Andrea Ricci)