The second-largest toilet paper manufacturer in the U.S. warned that it will soon raise prices on products from bathroom tissue to diapers.
Kimberly-Clark said in a news release that the increases “are necessary to help offset significant commodity cost inflation,” reflecting higher supply costs.
The price increases, which will go into effect in June, will be “in the mid-to-high single digits,” the release said.
The hikes will affect baby and child care products, adult care products and Scott bathroom tissue. The company is also known for making Cottonelle and Viva, Kleenex, Kotex hygiene products and Huggies diapers.
It’s not clear yet whether any of the price increases will be passed on to shoppers and families. Kimberly-Clark said it will increase list prices, which are the prices paid to suppliers of a product. Retailers decide what to charge consumers at the store level.
Last year, toilet paper and other essentials quickly disappeared from store shelves during the initial weeks of the pandemic lockdowns as shoppers stocked up en masse for months at home.
The national surge in demand quickly sapped a supply chain built on “lean inventory” and “just-in-time” principles, leaving few stockpiles or extra slack in the system.
Production lagged as producers faced shortfalls of raw materials and packaging. Transportation providers had higher demand and fewer drivers.
Kimberly-Clark faces several headwinds, including lower expected birthrates, significantly higher supply costs and increased costs from higher promotional activity, according to a note by Arun Sundaram, an analyst for CFRA Research, an independent business data company.
In a recent earnings call, Kimberly-Clark CEO Michael Hsu said: “We expect a more challenging environment, especially compared to last year. We expect some of the net benefit from Covid dynamics, including higher consumer demand, to reverse. In addition, commodity costs are rising globally, and we’re also reflecting our latest view on economic conditions and birthrate trends.”
The cost of wood pulp, a key part of the paper in bathroom tissue and other products, spiked in February, as speculators in China drove up spot prices by nearly 50 percent. Pulp producers in North America have begun to divert local supplies to the East to take advantage of the price jump, further decreasing supplies for makers like Kimberly-Clark.
Kimberly-Clark, which is based in Dallas, is the latest company to raise prices because of the soaring costs of raw materials. Hormel Foods and Cheerios maker General Mills have said they will raise their prices to offset the higher cost of grain, as well as elevated shipping prices.
Increased consumer demand and a decrease in logistics capacity have snarled supply chains and shipments around the globe since the pandemic began, adding delays and costs for producers.
The fragility of the interconnected system came into sharp focus last month, when the Ever Given, a massive containership, blocked all traffic through the Suez Canal, triggering worldwide losses of almost $10 billion a day.
The Ever Given was refloated, and passage through the canal resumed, but the backlog could snarl trade for several months because of “supply chain contagion,” in which one event quickly affects other locations, John Mangan, a professor of marine transport and logistics at Newcastle University in England, said this week.