Pampers, Charmin, Puffs and Bounty will all cost more soon. On Tuesday, Proctor & Gamble announced that it would be raising the prices for its Pampers 4% in North America. The consumer products maker added that it also started to notify retailers earlier this week that it would be increasing the average prices of Puffs, Bounty and Charmin by 5%.
P&G said prices were being raised due to transportation and commodity cost pressures having intensified. The increase to prices of Charmin and Bounty will become effective during the latter part of October, and Puffs’ increase in prices will go into effect starting in early 2019. Each of the products is a significant sales driver and market share leader for P&G.
Food companies like Boston Beer, Coke, Hershey as well as Tyson Foods, have released price increases over the past few weeks, but the move by P&G will be a big test for how willing consumers in the U.S. and Canada are to pay for the big name brands.
The P&G strategy does not come without risks, the company could become vulnerable to competitors with low-cost products or retail partners would make a pushback. Walmart was the biggest buyer of P&G’s during 2017 representing over 16% of its total sales of $65 billion.
CFO at P&G Jon Moeller said there is always uncertainty and volatility when pricing moves are involved and they will negatively impact the amount of consumption, which means the company must adjust as it goes along and learns.
Pampers is the largest brand at P&G, with sales annually of more than $8 billion. In 2017, Bounty had over 40% of the global share in the paper towel market. Charmin had a share of more than 25% of the toilet paper market.
It is expected that the price increases will weigh on sales to start, but will turn around in a short period.
Costs of shipping have increased as the demand for goods increases and the U.S. faces a truck driver shortage. The transportation market, and in particular in the U.S., has presented challenges said the CFO.
Pulp, which comes from trees, is the primary ingredient for Charmin, Bounty and Puffs and one of the major material used in Pampers.
In the last two years, the market prices of hardwood pulp have increased 60%, while softwood has increased 20%. Both are sourced by P&G from the U.S. and Canada.