Kraft Foods, a multinational corporation, announced that it will be raising prices in the next several months across several of its key brands to offset the effect of elevated costs of such commodities as sugar, wheat and rice. They’ve absorbed the rising costs for months already and have watched their bottom line get pinched in the vise of rising input costs versus slack sales across some of the teen-oriented product lines, such as gums and candies. Apparently the kids have decided that in the competition for their dollars between candy and Apples, the Apples are going to win hands-down. According to the Yahoo Finance article, Kraft is joining the likes of Sara Lee, Kellogg’s and JM Smucker in deciding to raise prices.
While what will happen is now discernible in the distance, when it will happen is a ball that’s entirely in the air. We’ve been apprised of months of economic data which points towards rising inflation. The logic is inescapable since the finished products that sit on the store shelves are composed of the commodity inputs that are rising. How quickly and how soon will these ripple through the supply chain before it gets to us? That depends principally upon the companies that compose that chain, companies that are caught between weak consumer demand generally resistant to price increases and rising costs that force higher prices in order to maintain profitability. But now we’re seeing that the companies are finally starting to give way to the rising prices and as more leaks are sprung in the dam wall, those of us downstream in the chain will be hit harder. When it reaches a critical mass to break the dam is now a legitimate question.
In the monthly PracticalDad February Price Index, the items that I price are generally store brand. My sense and experience is that when someone is really trying to meet a budget, cost is more important than taste and reputation, so I concentrate on the lower priced generics. While all of these corporate announcements are from major food producers, don’t think that the store brands will be exempt as food retailing is an industry with a very thin profit margin and the rising input costs will apply even greater pressure upon the retailers. They simply don’t have the cushion that an entity such as Kraft has.
So buckle up for the ride and if you’re like me, head on over to Costco for a bulk purchase of Kraft Mac and Cheese.