“Retailers may want to absorb some of the price increase to remain competitive,” said Neil Saunders, the managing director of GlobalData Retail. But “a lot of them will not, because they’ve got their own cost increases,” he noted. “Quite a lot of [the increased pricing] will probably be passed through to the consumer.”
Now, even higher prices on comfort foods are likely to come as companies attempt to combat lingering cost pressures.
One regional distributor to grocery stores received a letter from Kraft Heinz dated November 1 notifying the company that it will raise prices effective January 9 on hundreds of items. The products include varieties of Jell-O gelatin and pudding, which will go up by about 7% to 16%; Bagel Bites frozen snacks, which will increase roughly 10%; and Cool Whip topping varieties, slated to jump by about 7% to 10%.
Dozens of Kraft Mac & Cheese versions will see price hikes, from a 3.5% increase on a pack of EZ Mac to 20% for a 7.25-ounce dish of Kraft Big Bowl Mac & Cheese. The distributor shared the letter on the condition of anonymity to protect the company’s relationship with suppliers.
Strong demand, supply constraints and uncertainty increased input costs for Kraft, the company said in the letter, adding that the “upward trend in packaging, transportation, ingredients and labor costs persists, reaching levels not seen in decades.” Those higher costs led to the company’s decision to raise prices.
‘An ongoing desire for comfort’
According to Mondelez, a 6% to 7% price increase will take effect in the US in January of 2022.
The company provided specifics on some products that will be impacted in a November 1 letter emailed to the grocery distributor, which was seen by CNN Business. The letter states that starting in January, several varieties of Toblerone bars would get about 7% more expensive. The price of 9-10 ounce Sour Patch Kids bags will jump 5.9%, as well.
Demand for Mondelez’s products has been strong. Consumers “have an ongoing desire for comfort,” Van de Put said on the earnings call.
And that demand doesn’t appear to be waning as prices go up, Van de Put noted, saying that consumers have nearly no elasticity at the moment — meaning that their spending habits aren’t changing as prices do.
Consumers may be willing to spend more to get the snacks they love, noted GlobaData’s Saunders. People who love Oreos, for example, “probably don’t want to downgrade to what they see as a subpar alternative.” But companies still have to be careful when hiking prices, because at a certain threshold, even loyal customers may end up buying less rather than switching brands, he said.