If you need some toilet paper, tissues, paper towels or diapers, now might be a good time to start stocking up. Just two weeks after market leader Procter & Gamble announced it would be raising prices on these household staples, its main competitor now says it plans to do the same.
Kimberly-Clark is planning to raise prices on products including Cottonelle and Scott 1000 toilet paper, Kleenex tissues, Viva paper towels, Huggies diapers, Pull-Ups training pants and GoodNites youth pants. The Cottonelle and Viva price changes will occur by the end of this year, while most of the others will take effect in the beginning of 2019. Prices will rise by “mid-to-high single digits”, as compared to the 4-5% price increases announced by P&G.
“The increases will be implemented through changes in list prices and package counts and are necessary to help offset significant commodity cost inflation,” the company said in a statement.
The rising price of pulp, which is used to make paper and diapers, is largely to blame. It’s the same reason given by P&G late last month, when it announced upcoming price hikes on Bounty paper towels, Charmin toilet paper, Puffs tissues and Pampers diapers.
“We have seen some early indications of some pricing moves by competitors,” Kimberly-Clark President and COO Michael Hsu told investors last month. So now that P&G has made the first move to raise prices, Kimberly-Clark decided to follow suit. “Clearly, the near-term environment has become more challenging, and we are responding by aggressively reducing costs and increasing selling prices,” Hsu said.
Kimberly-Clark had already made some moves earlier this year, quietly phasing in what effectively amounted to price increases, through the euphemistically-named practice of “desheeting”. Some of its paper products sell for the same price as before, but they come with fewer sheets – so, in other words, they’ve been “desheeted”.
For instance, the company introduced a “new and improved” version of Cottonelle earlier this year. But while the product itself was improved, the unit cost was not. “On Cottonelle, we have got a terrific product improvement superiority versus other brands, and it’s a breakthrough type product for us – and that did come with a sheet count reduction,” CEO Thomas Falk told investors back in April. “It’s much easier to get price or revenue recognition when you’ve got innovation to package it with,” Hsu added. “If it’s a straight list price change, that’s a little harder for (customers) to swallow sometimes. So some of the pricing actions are tying into innovation activities that we have planned.”
But at least there will still be plenty of coupons and sales to help you bring down those list prices, right?
Well, maybe not. In addition to raising prices, Kimberly-Clark says it’s trying to ease up on offering so many deals as well.
“In some categories, we have started dialing back the promotional depth and frequency and have additional plans to do more,” Falk said last month.
The good news is that Kimberly-Clark coupons don’t contain any restrictions on how many can be used per day, per person or per transaction. So when you do get a hold of coupons for Huggies, Kleenex or the like, you actually can stock up at a better price. P&G’s price increases, in contrast, come as it implements increasingly restrictive coupon restrictions, further limiting the deals you’re able to get.
Increasing prices so publicly on household necessities is a risky move, at a time when brand loyalty is eroding and more shoppers are opting for less-expensive store brands. But both P&G and Kimberly-Clark are optimistic that shoppers will decide their products are worth it.
“I think our customers, they understand industry price changes when the commodity cost shifts,” Falk said. “For us, our strategy is not just to raise price indiscriminately. It’s to create value-added products that people would be willing to pay more for.”
So hope you’re willing to pay more for Cottonelle, Scott, Kleenex, Viva, Huggies, Pull-Ups and GoodNites – not to mention Bounty, Charmin, Puffs and Pampers. Because soon, you may not have a choice.
