Business

Major consumer goods producers mired in high inflation, rising costs

‘Cost inflation remains at strongly elevated levels, and this will continue into next year,’ says CEO

Major fast-moving consumer goods-producing companies in the world have become entangled in rising prices and climbing costs as high inflation continues to take a toll on the global economy.

Colgate-Palmolive saw its net sales rise over 6% to $4.4 billion in the third quarter of 2021 from $4.15 billion the same period last year, but the American multinational consumer products company said it is feeling the supply chain constraints.

Chairman, President and CEO Noel Wallace pointed to “the impact of restricted mobility and supply chain disruptions due to COVID-19” in the financial results statement released Friday.

“There is still much uncertainty stemming from the COVID-19 pandemic, supply chain disruptions, and volatility in consumer demand and currencies,” he said.

In North America, Europe, Asia-Pacific, and Africa/Eurasia regions, the company saw only 1% growth in net sales during the third quarter of 2021.

British multinational consumer goods firm Unilever posted underlying sales growth of 2.5% in the July-September period of this year from the same period of 2020, but it stressed that inflation is to persist through 2022.

“Cost inflation remains at strongly elevated levels, and this will continue into next year,” CEO Alan Jope said in the company’s financial results statement released on Oct. 21.

Jope said the company is “taking appropriate pricing action and implementing a range of productivity measures to offset increased costs.”

Challenging costs

While concerns related to increasing COVID-19 cases and vaccinations have raised inflationary expectations, global supply problems related to pandemic measures and increasing logistics costs due to a container crisis have pushed up product prices all around the world.

Another US-based multinational consumer goods corporation, Procter & Gamble (P&G), saw its net sales increase more than 5% to $20.3 billion for the three months ending September from $19.3 billion in the same period last year.

P&G Chairman, President and CEO David Taylor defined the latest quarter as “a challenging cost and operating environment” in a financial results statement released on Oct. 19.

The coronavirus pandemic has adversely impacted the global supply chain, including shipping, transportation, and distribution networks.

Rising energy prices, high transportation costs, labor shortages, and a lack of manufacturing equipment have added to the constraints, indicating that the global supply chain crisis may continue through 2022 as well.

‘Central banks should act quickly’

Swiss food and snacks giant Nestle’s Chief Financial Officer Francois-Xavier Roger also warned about increasing prices last month, saying: “If we talk of 2022, it is likely that input cost inflation will be higher next year than this year.”

He said: “Our strategy is to offset anything we receive through pricing.The idea is to pass it on to the trade and to consumers whenever we receive it.”

Previously, international institutions and central bank governors from several countries, including the IMF and the Bank of England, warned against higher, even hyper, inflation.

“While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery,” Gita Gopinath, the IMF’s economic counselor, said in early October.

American multinational food, snack, and beverage corporation PepsiCo also sees supply chain constraints.

Chairman and CEO Ramon Laguarta pointed to a “volatile supply chain and cost environment” in the company’s financial results statement released on Oct. 5.

“We’ve had some supply chain constraints in some of our products. We’ve pulled back on some of the inventory on the perimeter during the summer, voluntarily, I would say, just to make sure that we’re able to service the customers at the right level,” he said during an earnings call the same day.

“That’s something temporary that obviously we will push back as we improve our – the reliability of our – supply chain,” he added.

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