FMCG giants under pressure over price hikes

Major goods makers are under pressure to rein in price rise, after UK inflation stuck in double-digit levels last month.

Yesterday’s news that UK consumer prices climbed by 10.1 per cent in the year to March, with food prices rocketing 19 per cent, has focused attention on ‘greedflation’, the process where firms use rising costs and supply chain bottlenecks as an excuse to pump up their profits.

Dr George Dibb, head of the Centre for Economic Justice at the IPPRthinktank, suggested authorities should take a closer look at corporate profits.

“While families struggle to make ends meet, some companies continue to make higher profits from these price hikes, ignoring the impact on consumers.It’s time for policymakers to look at ‘greedflation’ and prioritise reining in corporate profits, instead of blaming workers’ wages for driving up inflation.

Major consumer goods makers have been hit by rising energy costs and commodity prices, and also lifted wages as workers sought protection from inflation. However, their profit margins have been protected by price hikes.

The Guardian today (20) in a report pointed out that Unilever, for example, recently stated underlying sales growth of 9.0 per cent for 2022, driven by price growth of 11.3 per cent though volumes declined 2.1 per cent, suggesting that many consumers swallowed these price hikes on goods such as Dove, Ben & Jerry’s and Marmite.

Wholesale energy prices are much lower than early in the Ukraine war, and supply chain problems are easing after China ended pandemic restrictions. Some investors are now pushing corporates to ease their price increases.

Tineke Frikkee, a fund manager at Unilever and Reckitt investor Waverton Asset Management, told Reuters companies should instead be investing in product innovation, saying: “Price rises should gradually decelerate as input costs do the same.”

“What have (price hikes) done to volumes and thus to margins? What has that done to their market share as competitors may be pricing lower and gaining share?”

UK latest inflation report showed that food and non-alcoholic beverages costs are up 19.1 per cent over the last year, while restaurants and cafes have put their prices up by ‘just’ 10.4 per cent. That suggests supermarkets have found it easier to persuade customers to swallow higher prices.