Nestle CEO Mark Schneider said on Thursday that the company plans to raise prices going into the second half of 2021 by about 2% overall. Earlier this year, the company had hiked its prices globally by an average of about 1.3%, but it has not been enough to compensate for runaway shipping costs and the wage hikes that have been implemented to offset a national labor shortage, the CEO said.
In particular, the company said the cost of dairy-based products like ice cream have continued to rise, alongside the costs of producing bottled water.
Coffee prices are also at a six-year high due to a cold snap in Brazil — one of the commodity’s top producers. Both ingredients are putting increased pressure on the company responsible for brands like Edy’s, Häagen-Dazs, and Nescafe.
Other major companies, including Unilever, Procter & Gamble, and General Mills have warned investors over the past few weeks that rising commodity costs could force their prices higher, especially as demand for products has boomed alongside an increase in US vaccination rates and the return to more normal work and travel patterns. The three major companies had already raised prices by up to 3% across several brands in May.
Last week, Unilever announced it was raising prices for multiple brands, including Ben & Jerry’s, in response to soybean oil prices that are 80% higher than this time last year.
Popular alcohol company Diageo also said on Thursday it is raising its prices on several of its products, including Bailey’s and Casamigos tequila. The company has seen a boost in alcohol sales since the US vaccination rate has increased, but the spike in demand has not been able to compensate for the even greater rise in the cost of imported goods like alcohol.
Similarly, beer prices may also be on the rise. Anheuser-Busch, the company known for its Budweiser brand said on Thursday it is looking into the possibility of selling its products at an elevated price.
Danone, the company known for its Activia yogurt and Evian water, told investors on the same day that it plans to raise prices across all of its products to maintain profit margins.
While many of the companies are looking to raise prices for the second time this year, experts say prices increases will likely not stope there and will continue to rise even further in the coming months as shipping delays show no signs of easing, and poor weather conditions across the globe threaten food supplies.
From the cold snap in Brazil to floods in China and Europe, as well as scorching temperatures in North America, experts told Bloomberg climate change and the weather volatility that comes with it could cripple the food industry.
Insider reached out to all of the companies mentioned in the article about the prices increases but did not receive a comment in time for publication.
As millions of Americans hit the road for the Fourth of July weekend, many will be forced to grapple with elevated fuel prices and a gasoline shortage.
The national average fuel price during the holiday weekend will be about $3.11 per gallon – 43% higher than this time last year and about 2% higher than Memorial Day weekend – according to a GasBuddy analysis.
There have also been several fuel outages reported at gas stations across the country. Gas stations in Northern California, Colorado, and Iowa have run out of gas, according to Tom Kloza, the global head of energy analysis for the Oil Price Information Service, told CNN. GasBuddy analyst Patrick DeHaan told the publication that Indianapolis and Columbus, Ohio have also reported gas outages and the number of stations in the US facing shortages is continuing to grow.
Nearly 44 million Americans are planning to take a road trip this holiday weekend, according to a AAA report. But, Kloza said the shortages have not been caused by a spike in demand or OPEC production rates. Instead, a shortage of oil tank truck drivers has made it difficult for gas stations to get fuel deliveries.
“It used to be an afterthought for station owners to schedule truck deliveries,” Kloza told CNN. “Now it’s job No. 1.”
Transportation is one of many industries facing a labor shortage in the wake of the pandemic. But, unlike other transportation roles, oil tank drivers are required to have special qualifications, making it even more difficult to find drivers with the necessary expertise. An analysis by the National Tank Truck Carriers in April found that 20% to 25% of oil tank trucks are not in use due to the shortage of drivers.
A Campbell spokesperson told Insider the entire food industry was experiencing inflation. “Campbell has a variety of tools to offset the inflationary environment, including pricing actions across most of our portfolio to reflect the broad-based increases in input costs.”
Price tags on consumer goods have risen over 10% from a year ago, The Wall Street Journal reported over the weekend, citing NielsenIQ. Demand for home improvement items caused by the work-from-home boom has pushed prices to new highs and these price hikes are not showing signs of slowing down anytime soon.
The computer-chip shortage has made home appliances difficult to find
The global semiconductor shortage has impacted most electronics, from dishwashers and refrigerators to washing machines. And panic buying of products like freezers during the pandemic has only made the problem worse.
Last month, Consumer Reports announced freezers had sold out across the country, citing data from top retailers like Home Depot and Lowe’s. The product is not expected to be available until mid-summer, according to the publication.
Freezers are just one of many home appliances in short supply. National Housing Board (NHAB) Chief Economist Robert Dietz told Insider about 90% of appliance-delivery dates have been delayed and prices have skyrocketed in recent months.
Prices for home appliances have been climbing every week, according to the Josh Wiener, founder of home-improvement firm Silver Lining Inc. He told Insider he’s seen delivery dates for refrigerators that have been pushed into October.
Steve Cunningham, the CEO of Cunningham Contracting and the chair of the NHAB’s Remodelers Council, said there’s been times when entire remodeling projects have been delayed weeks just for dishwasher deliveries.
In March, Jason Ai, the president of Whirlpool in China, told Reuters that the company was facing difficulty sourcing the processors that power more than half of its product lineup, including washing machines, microwaves, and refrigerators.
The shortage has been going on for months and is only getting worse. Executives from Swedish appliance giant Electrolux said on a conference call in October that it had entered the quarter with “unusually low inventory levels,” despite higher production levels.
“The increased time spent at home during the pandemic has resulted in more intensive use of appliances and higher share of household budgets allocated to home improvement,” executives said at the time.
Wiener told Insider that his company has been working to order the items well ahead of time, but they have also seen shortages of the tools needed to hook the appliances up.
The Texas freeze made paint, windows, and vinyl siding more expensive
Anything that includes resin – vinyl windows, PVC boards, plumbing pipes, and electrical conduits – has become increasingly valuable since the Texas storms. The February deep freeze in the state shut down resin plants and has made windows and vinyl siding increasingly expensive.
The storm also led to a hike in prices of plumbing fixtures, as the storm caused a spike in the repair of burst pipes, Dietz said.
The Texas storm reduced the nation’s capacity to refine petroleum, which means a reduced ability to manufacture nearly all paints. It can be hard to predict which latex paint products will be out of stock and prices are continually fluctuating, Wiener told Insider.
“A lot of it is hit or miss,” he said. “Most of the places we would normally buy from are sold out. Lately we have been forced to pivot and find new vendors.”
Lumber prices have pushed flooring, cabinets, and deck prices higher
Lumber accounts for about 20% of a home, according to John Bitely, president of Sable Homes. He told Insider the record lumber prices have forced his company to raise their home-building prices.
Lumber prices are adding about $36,000 to new single-family homes, according to Dietz.
“As a company, there’s nothing we can do but pass those prices through to the customer,” Bitely said.
Any item that is made out of wood is facing significant price hikes and shortages, Dietz told Insider. From cabinets to flooring, decking, and doors, the products’ prices are skyrocketing along with lumber prices, which Dietz expects won’t slow down until well into 2022.
Price tags on outdoor gear are also spiking
Increased interest in stay-at-home options, including staycations, has created a renewed interest in outdoor home improvement. Dietz told Insider that one unusual shortage is a lack of cushions for outdoor furniture.
Lawn and garden-care products have also had price hikes in recent months. Last week, Scotts Miracle-Gro announced during its quarterly earnings call it would increase prices by single-digit percentages, after record sales in 2020.
“I don’t think we have a choice here,” the company’s CEO Jim Hagedorn said. “Every raw material we’re buying right now is at a materially higher cost than we had planned.”
It has been difficult for companies to adapt.
“The biggest problem is the shortage is random so it’s very difficult to fix or nail down,” Bitely told Insider. “Because it’s impacting nearly every facet of the supply chain, it will be difficult to make it go away.”
Dietz told Insider he doesn’t see a clear end in sight for the supply-chain issues.
“The advice I give builders and remodelers is that at least for the duration of this year we are going to see an increase in the pricing for our materials,” Dietz said. “It’s an unsustainable trend and it’s imperative for policy makers to improve these supply chains.
An ongoing computer-chip shortage has affected cars, iPads, and dog-washing technology alike. Chipmakers like Intel had already seen production issues pre-pandemic, but as with many industries, COVID-19 brought a variety of new supply-chain issues. The chip shortage is a problem for consumers wanting basically anything with a computerized component, which is much of the economy. Take cars as an example.
The semiconductor shortage has hit automakers the hardest. In January, the consulting firm Alix Partners estimated the automotive industry would lose $61 billion in revenue from the shortage this year. As Insider’s Katie Canales reported, demand for chips has gone up as consumers scrambled to buy cars and other technologies that use them.
But as more cars went into production, chip competition went up. Since then, many carmakers have been forced to shut down plants and prioritize which models they produce, while car prices at dealerships have continued to go up.
Buyers are still looking for vehicles, creating a competitive used-car market. As USA Today reported, used-car prices are on the rise as the aforementioned chip shortages affect new-car production, and buyers have turned to older ones instead, while Axios reported the average price of a used car has hit $17,609.
A UBS note estimated that in April, used cars saw their largest monthly price increase in 68 years of tracking, with prices rising between 8.2% and 9.3%.
If you’re looking to rent, you might also be out of luck: Insider’s Brittany Chang reported on the “perfect storm” hitting rental cars right now, with prices surging and demand increasing. Americans are itching to go on vacation this summer, as more people are vaccinated and some restrictions loosen. That’s leading to far more demand — but rental-car companies had sold off parts of their fleets early into the pandemic, leaving fewer cars to go around.
It’s not all bad news for used-car lovers, though: As USA Today reports, the trade-in market is hot, too, meaning your old car could be worth more right now.
Gas prices have skyrocketed in recent months, jumping 22.5% in March from the previous year, according to the US Bureau of Labor Statistics’ Consumer Price Index. Much of the surge in gas prices started with the extreme Texas freeze, which halted a fifth of the country’s oil-refining capacity in its tracks for weeks at a time.
Plastics and palm oil
The devastating winter storms in Texas also left their mark on the plastics industry. As Insider’s Natasha Dailey reported, the state is a key plastics exporter — and the storms made many plants, which are difficult to reactivate, press pause.
According to the Financial Times, rising plastic prices have led to an increase in packaging costs. Citing data from Mintec, the Financial Times reported that those costs have increased by nearly 40% from the start of 2020, marking “historic highs.”
Palm oil, which is in a majority of those packaged products, also saw its prices climb, according to the Financial Times. That’s due to yet another labor shortage; the industry had already been contending with finding more sustainable production methods.
In September, Insider’s Rachel Premack reported that pay for truck drivers was on the rise, coming in at “record-smashing levels.” But the pay hike — and increased demand — comes after an exodus of drivers in 2019; Premack reported at the time on what some called a “trucking bloodbath,” as trucking companies saw profits fall, with some even going bankrupt.
Now demand is surging, according to The Journal, and if everything continues as is, that gap could deepen.
Homes and vacation houses
The US was facing a shortage of 3.8 million homes as of April, according to Freddie Mac. Home builders have been struggling to keep up with demand as remote work fuels interest in spacious housing, with house prices rising at their fastest pace in 15 years, The Wall Street Journal reported. Lumber prices are also driving the cost of new homes even higher.
Even vacation-home rentals are at an all-time high. A house in the Hamptons rented for $2 million this summer, and 85% of vacation rentals in popular destinations like Cape Cod, the Outer Banks, and the Jersey Shore are booked through August, according to the rental site VRBO.
If you’re wondering why the houses around you are getting more expensive, look to their component parts. No, seriously: Lumber prices have soared, and, as Insider’s Ayelet Sheffey and Libertina Brandt reported, builders are even increasing house prices in an attempt to offset demand.
It’s due to another pandemic disruption, as lumber mills were forced to temporarily close for safety concerns. When they reopened, they couldn’t keep up with a scorching-hot housing market, goosed by a work-from-home economy, record low mortgage rates, and the need for personal space during the pandemic.
According to an April analysis from the National Association of Home Builders, soaring lumber prices added $36,000 to the cost of a new home. Lumber prices “remain stubbornly high,” according to the report, due to mills shutting down, unexpected demand from big-box retail and DIY-ers, and tariffs imposed on Canadian lumber.
Household products like toilet paper and tampons
Many household goods including toilet paper, diapers, and tampons are also facing supply problems.
One of the biggest producers of the pulp used to create toilet paper told Bloomberg that port delays and high shipping costs are causing companies to push delivery dates back months.
The work-from-home lifestyle helped the furniture industry boom but to such an extent that customers are seeing delivery dates that are months out.
In February, La-Z-Boy executives said customers could expect delivery dates that are five to nine months out from their order dates. Other furniture companies like Kasala, a Seattle-based chain, said they don’t expect to get furniture parts until at least December.
The furniture shortage has been exacerbated by a spike in homeownership, as the number of available and unsold homes sits at record lows. In other words, a lot of new homeowners are waiting a long time for their new living-room sets.
Bacon and hot dogs will likely be in short supply this summer.
The pig shortage dates back to the onset of COVID-19 and outbreaks in at least 167 meat-processing plants forcing almost 40 plants to close as of June 2020. As vaccination rates pick up and people prepare for summer vacations and cookouts, analysts told Insider’s Natasha Dailey demand will outstrip supply.
With pork companies still struggling to overcome lower production rates in 2020, the matter only intensified when high instances of disease hit the hog population this past winter.
Some companies are already seeing the impact on their shelves. In March, Costco said its supplies of cheese, seafood, and olive oil were running low.
General Mills said it has been forced to raise prices due to the delays increased shipping costs. Coca-Cola also raised prices to combat the supply-chain crunch. Neither company specified which products would be affected.
Coffee has also been hit by delays, Bloomberg reported in March. Peet’s and JM Smucker, the brands behind Folgers and Dunkin’ coffee, have said they’re facing rising costs. Reuters reported that in February, port delays pushed coffee prices to their highest point in more than a year.
This summer pool owners will see the worst chlorine shortage in US history, according to CNBC.
Supplies of the chemical have been strained since a fire at the chlorine manufacturer BioLab in Louisiana in September. The price for chlorine used in pools has nearly doubled this past year and is expected to rise even more to meet demand this summer.
Corn is a key crop for many products, including fuel and different foods. As supply concerns loom, corn prices are popping off, according to Axios.
There’s a few reasons that demand is so high: After an outbreak of swine fever in China, pig herds were “decimated,” according to Axios, leading to huge corn demand in China. That spike in demand is coupled with corn crops in Brazil and Argentina experiencing both bad weather and pandemic-related labor shortages.
Now corn prices are on a record-setting clip, rising by 16% in April alone.
And, as Fortune reported, there could be a domestic supply issue too. Droughts and a rough winter are both concerning — and if American crops can’t fill in the gaps, prices could rise even more.
Finally, a commodity unlike all the others is in surprisingly short supply: workers.
Major labor shortages are hitting businesses across America. As Insider’s Kate Taylor reported, chains like Dunkin’ and Starbucks are struggling to find workers — leading to reduced hours and hesitance on opening indoor dining back up.
There’s a few possible reasons that unemployed workers are opting not to return, according to Insider’s Ayelet Sheffey. They include workers making more on unemployment benefits than in their prior work as well as continued concerns over COVID-19 and the need to provide childcare at home.
Corn tacos will be more difficult to find in grocery stores as demand for corn – a key product in anything from fuel to animal feed, as well as your favorite tacos – paired with supply-chain woes makes the product even more difficult to produce.
Demand for the grain has surged in recent months. Increased interest from China, as well as a combination of poor weather and labor shortages, has made the key crop an increasingly valuable commodity.
At the same time that supplies are down in major corn-producing countries, demand for the product commonly used in animal feed is spiking. China is leading the surge in demand, importing 40% more corn in 2021 than the last 60 years combined, according to an April report from the World Agricultural Supply and Demand Estimates.
Factories can’t keep up with the reopening of the American economy.
Popular metrics tracking the US manufacturing industry indicated strong growth in April. The Institute for Supply Management’s purchasing managers’ index dipped 4 points to 60.7, while IHS Markit’s own gauge rose to a record high of 60.5. Readings below 50 indicate industry contraction, while those above the level signal growth.
The April reports further support the industry’s resilience throughout the pandemic, but underlying trends point to growing risks at American factories. Supply-chain disruptions and raw-material shortages plagued manufacturers throughout the month as the broader economy rebounded. New orders accelerated even further amid stronger client demand, leading backlogs to climb at their second-fastest rate since IHS Markit began collecting data.
“In 35 years of purchasing, I’ve never seen anything like these in terms of extended lead times and rising prices,” one business in the plastics and rubber sector told ISM. Another remarked that they’re “worried about getting the materials to support” such strong sales.
At the same time, gauges of manufacturing-industry employment slowed last month, leaving firms to address burgeoning order books with inadequate headcounts. The hiring woes, coupled with historic supply chain pressures, dragged IHS Markit’s measure of business confidence to a three-month low.
The labor-force shortfall mirrors dynamics seen throughout the service industry as well. Businesses from restaurants to rideshare companies have reported difficulty in hiring as the economic recovery ramps up. Payroll growth is expected to near 1 million new jobs in April, but worker shortages could curb the labor market’s rebound sooner than economists expected.
The growing backlogs and rising material costs are likely to augment the sharp rise in inflation that the Federal Reserve has been warning of for months. Officials have said that reopening and stimulus would boost price growth in the near term before this “transitory” surge fades away.
Manufacturers reported passing down higher input costs to their clients, adding to the inflationary dynamics seen elsewhere in the economy. The rate of sector-specific inflation cooled slightly from March, but still registered at its second fastest on record, according to IHS Markit.
Still, experts see most of the industry pressures easing as the economy settles into a new normal. The continued rollback of economic restrictions will help firms more effectively address issues curbing production, Oren Klachkin, lead US economist at Oxford Economics, said.
“Supply-chain stress will hinder, but not derail, manufacturing’s expansion,” he added. “Bottlenecks will gradually open up as the global economy returns to full health.”
It doesn’t help that half of the ships are considered “mega-container ships,” or ships that can hold 10,000 “Twenty-foot Equivalent Units” (TEUs).
The size of these boats – which are two to three times the size of ships from over a decade ago – are also a contributing factor to this backlog as they use more resources and manpower to unload, according to Louttit.
Another contributing factor to this delay is, unsurprisingly, the COVID-19 pandemic.
“As more Americans get vaccinated, businesses reopen and the economy strengthens, consumers continue to purchase goods at a dizzying pace,” Gene Seroka, the executive director of the Port of Los Angeles, said in a news release.
This has caused the number of imports to increase, adding more ships to the congested waters.
This congestion may be unique to California waters, but consumers around the US could soon begin seeing the consequences of this backlog.
This problem is more than just a temporary depletion of imported goods and a blocked view of the Pacific Ocean.
There’s also a massive shortage of shipping containers, which has already been contributing to the global supply chain and shipping delay issues.