More costs will have to be passed onto retailers, and ultimately shoppers
Who says inflation is bad? Rising prices are helping some consumer giants deliver their strongest growth in years.Inflation in everything from coffee to packaging is accelerating. Ultimately, it’s shoppers who will have to pay. And when further price increases are passed along to them, there’s a strong chance they will rein in their purchases of big brands and flock to value retailers, such as dollar stores in the US and the German discounters Aldi and Lidl in Europe.
The trouble is, the pressures on costs show no signs of abating. Manufacturers are already battling supply-chain snarl-ups — getting their products on shelves is hard enough given congested ports and labour shortages. The commodities they need to make their products — from palm oil and milk to aluminium — are also becoming more expensive. Unilever warned that inflation could be higher in 2022 than in 2021, although CEO Alan Jope said it would peak in the first half of 2022.
That’s not all bad. Moderate, consistent inflation gets consumers used to price increases. So if some hikes will help cover soaring costs, why not lift some others to defend margins?
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