Companies raise prices on food, shoes, diapers

Huggies diapersPrices on Huggies diapers could go up by as much as 7% this summer due to rising raw material costs. By Annalyn Censky, staff reporter


NEW YORK (CNNMoney) -- Look out! From Huggies diapers to Nike shoes, Americans are about to get less bang for their buck on some of the biggest brands.

This week, paper-products maker Kimberly-Clark announced plans to raise prices on diapers and toilet paper later this summer. Nike said it would increase prices on their shoes. And food companies Kraft, Smuckers and Heinz recently announced price hikes on some of their brands.

"The increases are necessary to offset inflationary pressure from higher raw material and energy costs," Kimberly-Clark (KMB, Fortune 500) said in a press release.

Huggies diapers and Pull-Ups prices will rise by 3% to 7%, the company said. Cottonelle and Scott 1000 toilet paper will rise about 7%.

Kraft Foods (KFT, Fortune 500) raised its price on Maxwell House coffee by 22%, or 70 cents per pound, after Smuckers (SJM) said last month it would raise the price of Folgers by 10%.

The increases come as major brands struggle to keep their profit margins intact, amid surging costs on raw materials. Producer prices rose 1.6% in February alone, the the biggest jump in nearly two years, according to government data released Wednesday.

Until recently, producers and retailers resisted price hikes, fearing they would lose customers during a still-sluggish economy and high unemployment.

Now they're starting to cave, mainly on non-discretionary goods, where they still feel they have some pricing power.

The sticker prices on necessities like food and gas, for example, have surged over the last year. Gas prices are 11% higher than a year ago, and food prices are up 2.3%, according to the latest government inflation data.

"We're at the point now, where its harder for companies to avoid raising prices," said Mark Vitner, Wells Fargo senior economist. "Prices are rising the most for the things we buy the most frequently."

Just last month, Heinz (HNZ, Fortune 500) raised its prices on ketchup and Ore-Ida potatoes. Companies can get away with price hikes on food and even diapers and toilet paper, because these products are viewed as household staples.

But now, economists are wondering if rising commodity prices will lead to more broad-based inflation. The Federal Reserve still says that's not an imminent threat to the economy, but some skeptics disagree.

"I have no doubt by the end of this year, inflation will be running at the top of the Fed's comfort zone or slightly above it," Vitner said.

Last week, New York Fed president William Dudley faced guffaws from a raucous crowd, after he explained that overall inflation remains tame, citing iPad prices as an example.

"I can't eat an iPad," an audience member hollered back, according to one report.

But even prices on some discretionary brands are starting to rise, hinting that broad-based inflation could be next.

Nike (NKE, Fortune 500) shoes for example, aren't exactly considered a necessity, but on Thursday, executives said they plan to significantly raise prices on Nike shoes in 2012, to cope with the rising costs of cotton, as well as oil and transportation.

"Who are you going to believe?" Some egg-head economist, or your own eyes?" Vitner said. "It's obvious to anybody who buys anything that inflation is picking up." To top of page

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