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McDonalds, Coca Cola and Huggies among brands to warn of price hikes as US struggles with inflation

Enjoying a Big Mac and a glass of Coca-Cola will no longer be a cheap treat amid rising inflation.

Major companies, including McDonalds, Coca-Cola, Huggies maker Kimberly-Clark and even the humble New York City bodega owners, have been forced to make their products more expensive to cope with the higher costs, putting pressure on ordinary households. gets bigger.

The warnings about the impact of rising inflation on basic commodity prices come after Walmart lowered its profit forecast for the year as rising food and gas prices force shoppers to cut back on discretionary items, especially clothing, which have higher profit margins.

Russia’s war in Ukraine has exacerbated rising prices for almost everything from wheat and cooking oil to natural gas and crude oil, making it more expensive to produce goods.

Those costs are passed on to the customers, either through smaller sizes or through higher prices.

Unilever, the consumer goods giant with brands ranging from Ben & Jerry's ice cream to Dove skincare, has increased prices by more than 11 percent between April and June in response to high inflation.

Unilever, the consumer goods giant with brands ranging from Ben & Jerry’s ice cream to Dove skincare, has increased prices by more than 11 percent between April and June in response to high inflation.

Russia's war in Ukraine has exacerbated rising prices for almost everything from wheat and cooking oil to natural gas and crude oil, making it more expensive to produce goods.  Pictured: Graphical representation of the rise in inflation

Russia’s war in Ukraine has exacerbated rising prices for almost everything from wheat and cooking oil to natural gas and crude oil, making it more expensive to produce goods. Pictured: Graphical representation of the rise in inflation

Huggies creator Kimberly-Clark has been forced to make their products more expensive to cope with the higher costs

Huggies creator Kimberly-Clark has been forced to make their products more expensive to cope with the higher costs

Unilever, the consumer goods giant with brands ranging from Ben & Jerry’s ice cream to Dove skincare products, has increased prices by more than 11 percent between April and June in response to high inflation.

That supported sales in the first half of the year, with the London company Tuesday reporting underlying revenue growth of 8.1 percent, driven by higher prices to offset the cost of making its products.

“Inflation challenges continue and the global macroeconomic outlook is uncertain, but we remain deeply focused on operational excellence and delivery in 2022 and beyond,” said Unilever CEO Alan Jope.

Meanwhile, Amazon said Tuesday it was raising its Prime fees in Europe in a bid to boost its profits amid a slowdown in demand and rising inflation. In the UK, fees will increase by 20 percent from £79 to £95.

Coca-Cola has also raised prices worldwide to offset higher ingredient and freight costs. Coke chairman and CEO James Quincey said those higher prices are not yet impacting demand.

Meanwhile, Amazon said Tuesday it was raising its Prime fees in Europe in a bid to boost its profits amid a slowdown in demand and rising inflation.  In the UK, fees increase by 20 percent from £79 to £95

Meanwhile, Amazon said Tuesday it was raising its Prime fees in Europe in a bid to boost its profits amid a slowdown in demand and rising inflation. In the UK, fees increase by 20 percent from £79 to £95

But Quincey said it’s hard to get a clear picture of the consumer right now. There are early signs that lower-income buyers are trading for cheaper food brands in, say, grocery and convenience stores, but the demand for travel and leisure—in baseball stadiums and theme parks, for example—is extremely strong.

“This reprioritisation of consumer spending after COVID is tiered above what feels like a pressure on purchasing power,” Quincey said during a conference call with investors on Tuesday.

“How that all plays out in the second half and next year, there are a lot of opinions, and I don’t think anyone will know until we actually get there.”

Due to price increases and increasing demand from Coca-Cola, the company posted strong sales in the second quarter.

The company also raised its revenue guidance on Tuesday, saying it now expects full-year organic revenue growth of between 12% and 13%. That’s higher than previous projections of a 7% to 8% increase.

Revenue grew 12% to $11.3 billion in the April-June period, the Atlanta-based company said. That was well above Wall Street’s forecast of $10.56 billion, according to analysts polled by FactSet.

Coca-Cola's price increases and rising demand led the company to record strong sales in the second quarter

Coca-Cola’s price increases and rising demand led the company to record strong sales in the second quarter

But for McDonald’s, raising prices has negatively impacted US demand. As a result, the company’s revenue in the second quarter fell short of expectations.

The Chicago-based burger giant said its sales fell 3% to $5.72 billion in the April-June period. That was less than Wall Street’s forecast of $5.8 billion, according to analysts polled by FactSet.

Same-store sales, or sales in stores that have been open for at least a year, increased by nearly 10% worldwide. That was higher than the 6.8% that analysts had expected.

But there were double-digit declines for comparable stores in China, where restaurants were temporarily closed across the country for most of the quarter.

Same store sales in the US increased by 3.7%. McDonald’s said most of that increase was due to higher prices, while retail traffic remained flat.

Chief Financial Officer Kevin Ozan said McDonald’s in the US is trading some trade-off for cheaper items and lower sales of combo meals, especially among lower-income consumers.

But for McDonald's, raising prices has negatively impacted US demand.  It meant the company's second-quarter revenue fell short of expectations

But for McDonald’s, raising prices has negatively impacted US demand. It meant the company’s second-quarter revenue fell short of expectations

The number of customers per sale has also fallen since the height of the pandemic, when incarcerated families often picked up large orders from the drive-thru.

Ozan said year-over-year US price increases in the 8% to 9% range are likely to continue for the rest of the year as McDonald’s offsets higher costs. McDonald’s expects full-year food and paper costs to rise 12% to 14%, while labor costs will increase by 10%.

CEO Chris Kempczinski said McDonald’s has benefited from another form of downward trading, with higher-income Americans choosing to visit a McDonald’s instead of more expensive sit-down restaurants on some days.

“While we push prices through, the consumer tolerates it well,” Kempczinski said.

Meanwhile, in New York the classic bodega sandwich – with bacon and egg and cheese – has also been affected.

To keep up with the current inflation caused by the pandemic and Russia’s war with Ukraine, bodega owners have no choice but to raise the prices of their famously cheap breakfast sandwiches.

“Bacon, egg, and cheese — you can’t take that sandwich away,” said Francisco Marte, owner of a bodega in the Bronx. “That’s New Yorkers’ favorite sandwich.”

Marte has had to raise prices on everything from sugar to potato chips — and the cost of his bacon, egg, and cheese sandwich has risen from $2.50 to $4.50.

At the wholesale level, inflation rose 11.3% in June compared to a year earlier, the US Department of Labor reported. Compared to June 2021, producer prices for goods have increased by almost 18% and for services by almost 8%.

“These things happen. And normally, in normal times, the supply chain can absorb some of that shock,” said Katie Denis, a spokesperson for the Consumer Brands Association, a trade group that represents food, personal care and cleaning companies. “Right now there’s just no slack.”

Frances Rice, who stopped by Marte’s bodega for a bacon, egg, and cheese, says she’s trying to work out how to cope with less slack in her budget as prices rise. She says there is always a silver lining.

“It means buying a good breakfast and stretching that until lunch and then eating again when I get home, which means losing weight,” she said. ‘You have to look on the bright side, because you know what? Anyway, if you have to move, you have to pay. If you’re hungry, you have to eat.’

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