EDITOR NOTE: Some people feel at ease, thinking that the current surge in costs is nothing more than a transitory phenomenon. That’s if you believe the Fed. Perhaps we can get a more reliable read on inflation from food manufacturers like General Mills or Campbell Soup Co. Both manufacturers are working hard to cut costs and increase efficiency to remain price competitive and to avoid having to transfer the bulk of the input costs to the consumer. But there's a limit to what they can do. Recently, General Mills warned its customers that price hikes are forthcoming for all grocery categories. Your Cheerios, Wheaties, and Trix cereal among several other products are going to cost more. And that’s just one company. We’ve all seen our entire grocery bill rise. Well, it’s going to rise even more. Our purchasing power is sinking and sinking fast. Hopefully, you’ve done what you can to hedge it, as it’s likely to fall much further and faster than most people had initially thought. A Fed policy error? Nobody can be certain about that. But betting on it and hedging it would have been the smartest thing to do.
General Mills Inc. said it is raising prices across nearly all its grocery categories around the world, as the maker of Cheerios cereal and Betty Crocker cake mix says it faces its highest costs in a decade.
More expensive ingredients, packaging, trucking and labor will push General Mills’ overall costs about 7% higher over the next year or so, executives said.
“Consumers see costs going up all around them, not just at the grocery store, but with automobiles, at restaurants,” General Mills Chief Executive Jeff Harmening said in an interview Wednesday. “No one wants to increase prices, but we’ve had to.”
Other packaged food manufacturers, including Campbell Soup Co. and J.M. Smucker Co. , are alsocharging more. Shoppers will begin to see most of these increases over the next few weeks, executives said.
General Mills said it plans to offset more than half of its rising costs by making internal cuts and running its operations more efficiently. Price increases, fewer discounts and other strategies will make up for the rest, the company said. Shares rose 1.5% in morning trading.
Original post from The Wall Street Journal