Under Pressure

By Tom Branna, Editorial Director | March 11, 2011

The recent announcement by Procter & Gamble (P&G) that it was raising prices on many of its consumer products should come as no surprise to anyone who’s been following the rise in commodity costs during the past year. Speaking at a Consumer Analyst Group of New York conference late last month, P&G chief financial officer Jon Moeller said specific details of the price increases would be made public over the next month or so.

According to Moeller, P&G now predicts more than $1 billion in increased commodity costs this year, as prices for diesel, cotton, aluminum and other materials climb. At the same time, underlying growth rates in developed markets, which account for the bulk of P&G’s sales, have been essentially flat. If that sluggishness persists, it could be more difficult for P&G to meet the high end of its 4-6% sales growth target this fiscal year, according to Moeller.

And that, in turn, would put a damper on the recovery that’s currently being enjoyed by most marketers and suppliers in the household and personal products industry. In recent interviews with Happi at the American Cleaning Institute’s annual meeting (see p. 64), several suppliers warned of rising commodity costs and the implications they would have on their customers and their consumers. Suppliers realize that they can’t bear the brunt of rising prices on their own, marketers can’t either and now prices are rising for consumers everywhere.

Sun care, however, should remain hot regardless of how much prices increase, as consumers realize it is better to lighten their wallets than increase their cancer risks. Last year, mass-market sales of sun care products rose more than 10%, and industry observers expect another year of good gains. As a matter of fact, more than a few companies are rolling out more expensive products in an effort to reach the high end of the market. Our coverage starts on p. 91.

Also this month, we look at the resilient hair styling market (p. 69). Thanks to the popularity of some high-haired reality stars, sales of sprays and gels have managed to hold their own during the past year.

Another segment that’s remained strong during the past year is OTC products (p. 81). As U.S. Baby Boomers age, they’re looking for products that will take away those aches and pains without a doctor’s prescription. After all, with the cost of everything going up, the bet here is that more consumers may choose to skimp on healthcare.

We hope that you enjoy this edition of Happi. As always, we welcome your comments and suggestions.