Not So Fast on Those China Price Increases

A news report out of China indicates that Procter and Gamble and Unilever will each dramatically increase prices for their products sold in China.  Both companies confirmed the price increases but have declined to provide specifics.  The Shanghai Daily reported that prices on detergent and soap could rise up to 15 percent next month.

Last month, P&G indicated that it was facing at least $1 billion in increased commodity costs this year and had no choice but to raise prices.  Similarly, consumer goods companies such as Coca Cola, Hershey, Kraft Foods and PepsiCo have each indicated increased input costs in the hundreds of millions.

The more important implication implied in this recent development is noted in the Shanghai Daily news account, namely that China’s policy makers are invoking a keen eye on price increases from foreign companies operating in China. China’s monetary authorities have had to raise interest rates three times since October because of increasing inflation in the economy. With inflation pressures rapidly rising each month in China there is quite significance to China’s policy makers pushing back on the likes of these multi-nationals.  If either is forced to cutback on the level of planned increases, it will have implications for many other industry players and supply chains.

Bob Ferrari

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1. Bob Ferrari says:

   April 4, 2011 at 2:38 pm

   Hello Everyone,

   Regarding the above commentary related to pushback on proposed price increases within China, media reports last weekend noted that Unilever has indeed bowed to pressure from Chinese regulators and will delay its planned price increases.

   A Unilever spokesperson indicated to the Financial Times: “I can confirm that Unilever China received a request from the National Development and Reform Commission and has chosen to comply with it, and postpone price adjustments previously scheduled for April 1.”

   Also noted in the Times article was that Liby, another leading laundry detergent provider, also chose to delay planned price increases.

   As we noted in our commentary, the implication is that now manufacturers of sensitive goods within China will need to find an alternative way to offset increased supply costs.

   Bob Ferrari