$10 toothpaste? US household goods makers face setback in price hikes

A display of Colgate toothpaste on a store shelf in Westminster, Colorado, April 26, 2009. REUTERS/Rick Wilking/Files

MARCH 1 (Reuters) – Get ready for a $10 tube of toothpaste.

Colgate-Palmolive Co (CL.N) CEO Noel Wallace said last week at an industry conference that the home goods maker sees its new Optic White Pro Series toothpaste as a “vital” premium product for its ability to drive up prices, which will help drive earnings growth this year.

His comments come as many consumer product companies raise prices as much as they can to offset rising costs, a trend that could continue due to the conflict between Russia and Ukraine, whose economic risks include raising gasoline prices. Read more

So far, retailers and consumers seem largely unfazed by the higher prices. But some lawmakers and consumer advocates argue that companies raise prices excessively in order to increase profits and return money to shareholders.

“We’re seeing huge price hikes on just about every item that consumers buy,” said US Representative David Cicilline, who is working on proposed antitrust legislation aimed at lowering prices. “They pose real hardships. People take things out of their grocery carts because they are expensive.”

In the past, major retailers such as Walmart Inc (WMT.N) Retreat from the price hike. But now, retailers like Walmart and Target Corp

Target said Tuesday in an earnings call that price hikes are the last lever it pulls when faced with rising costs. Read more

Over the past three months, the US Federal Trade Commission has investigated extremely high prices and supply chain disruptions, requiring companies including Procter & Gamble and Kraft Heinz Co. (KHCO)Kroger Corporation (KR.N) and Walmart to deliver internal documents relating to profit margins, pricing, and promotions.

Comments on the inquiry are due March 14, and so far appear small grocers angry at having to pay more and get less important products. Consumers wrote about not being able to find oatmeal, cereal, and cat food.

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

Colgate expects its profit margins to widen this year, in part due to higher prices. It also repurchased nearly an additional 50% of the stock last year, which is a boon for investors.

Wallace said last week that raising prices was a “key ability” for Colgate that would help drive earnings growth.

A Colgate spokesperson said in a statement that the company has a wide range of products at varying prices, and described the new $10 toothpaste as the first to contain 5% hydrogen peroxide, with “proven teeth whitening efficacy.”

Consumer goods companies last year began raising prices in response to rising raw material costs and labor shortages due to the pandemic. Read more

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

Analysts said prices also rose in rival private-brand goods.

The White House targets corporate profits while battling inflation. Bharat Ramamurti, deputy director of the White House National Economic Council, said there are examples of companies outside the meatpacking industry — which have been particularly in the White House’s crosshairs — increasing prices beyond their own boarding costs. Read more

Lindsey Owens, CEO of the progressive nonprofit Groundwork Collaborative, ranked diapers as a category with little competition, setting the stage for steep price hikes.

Kimberly Clark Company (KMB.N) Margins were affected in 2021 due to higher costs. Executives said at a conference last week that the diaper maker Huggies is betting consumers will buy more expensive options made with plant-based materials, helping to reclaim its profits.

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

“Many companies are taking advantage of rising consumer demand to keep raising prices when they don’t need to,” said Jack Gillis, executive director of the Consumer Federation of America, a nonprofit consumer interest group. “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

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