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Pampers and Charmin are getting more expensive

Get ready to pay a little more for Pampers, Charmin, Bounty, and Puffs.Procter & Gamble said on Tuesday that i...

Posted: Aug 1, 2018 5:23 AM
Updated: Aug 1, 2018 5:23 AM

Get ready to pay a little more for Pampers, Charmin, Bounty, and Puffs.

Procter & Gamble said on Tuesday that it was in the process of raising Pampers' prices in North America by 4%. P&G also began notifying retailers this week that it would increase the average prices of Bounty, Charmin, and Puffs by 5%.

P&G is raising prices because commodity and transportation cost pressures are intensifying. The hikes to Bounty and Charmin will go into effect in late October, and Puffs will become more expensive beginning early next year.

These products are significant sales drivers and market share leaders for P&G.

Food companies, such as Coke, Boston Beer, Hershey, and Tyson Foods, have announced price increases in recent weeks, but P&G's move will serve as a test for how willing Americans are to pay up for big household brands. The strategy could leave the company vulnerable to low-cost competitors or pushback from retail partners. Walmart was P&G's biggest buyer in 2017, accounting for 16% of its $65 billion in sales.

"There is uncertainty and will be volatility with these pricing moves. They will negatively impact consumption. We'll have to adjust as we go and as we learn," Chief Financial Officer Jon Moeller told analysts on Tuesday.

Related: Gillette and Tide maker struggles in 'tough environment'

Pampers is P&G's largest brand, with annual sales of above $8 billion. Last year, Bounty had more than a 40% global share of the paper towel market, and Charmin had more than a 25% share of toilet paper sales.

The company expects the price increases to weigh on sales at first, but turn around shortly after.

Shipping costs have spiked as demand for goods accelerates and the United States faces a shortage of truck drivers. "The transportation market, particularly in the [United States], has presented us with some challenges," he added.

P&G said the two factors were outsized components in the baby, fabric, and home care cost structure.

Related: The fight over razor, diaper and shampoo prices

Pulp, which is made from trees, is the primary ingredient in Bounty, Puffs and Charmin, and a major material in Pampers.

Since 2016, market prices for hardwood pulp have risen 60% and 20% for softwood. P&G sources both types from the United States and Canada and uses them to make tissue papers and diapers.

Growing global demand, particularly in China, and tight supply have pushed up prices, said Arnaud Franco, a senior analyst at the Pulp and Paper Products Council.

The Trump administration has placed 10% on tariffs on Canadian paper and Canada responded by enacting 10% levies on several paper products, including toilet paper. But Franco said tariffs were not currently impacting prices.

If China, however, decided to put tariffs on market pulp, US producers could get hurt, Franco said.

P&G's biggest competitor is feeling the pinch too. Kimberly-Clark, the maker of Kleenex, Scott, and Huggies, said commodity costs last quarter were a "a drag of $200 million...primarily due to higher pulp costs and, secondarily, inflation in other raw materials."

Related: Huggies maker Kimberly-Clark warns of rising costs

Canadian company Kruger Products announced last week that it was raising tissue prices in that country beginning in October to "offset unprecedented and sustained cost increases on input materials and freight." Kruger said pulp costs were up 23% since last year.

P&G is also raising prices as it looks for ways to recoup lower prices in other major categories.

The company's operating profit margin last quarter shrank more than 2 percentage points from last year in part because it dropped price tags on brands including Gillette razors, Crest toothpaste, and Luvs diapers.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 94573

Reported Deaths: 2870
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Harrison380573
Jackson343069
Madison323386
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Jones245279
Forrest242571
Washington219772
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Pike122450
Monroe120768
Scott117126
Copiah116633
Coahoma114428
Holmes109558
Marshall108516
Lincoln107553
Grenada107236
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Clarke57045
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Carroll31412
Wilkinson30218
Kemper28815
Sharkey26513
Jefferson2449
Benton2232
Franklin1923
Choctaw1816
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Alabama Coronavirus Cases

Confirmed Cases: 132452

Reported Deaths: 2335
CountyConfirmedDeaths
Jefferson19306349
Mobile13233291
Montgomery8748177
Madison770978
Tuscaloosa7418116
Lee579261
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Baldwin514149
Marshall389244
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Houston276423
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Blount158015
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Jackson154011
Chilton152431
Dale134644
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Pike11799
Chambers114442
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Clarke107017
Marion95429
Butler91139
Barbour8517
Winston71812
Marengo70519
Lowndes65227
Pickens64514
Bibb63810
Randolph62713
Hale61928
Lawrence60522
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Geneva5864
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Monroe5808
Clay5547
Washington55113
Perry5396
Conecuh53011
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Greene30315
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