Question du jour, either the consumer or the retailer, or both will eat this one:
Reuters
UPDATE - P&G to raise tissue prices 5-6 pct this summer
Thursday February 19, 1:35 pm ET
By Brad Dorfman
CHICAGO, Feb 19 (Reuters) - Procter & Gamble Co. (NYSE:PG - News), one of the world's biggest tissue makers, on Thursday said it would raise tissue prices this summer to make up for rising pulp and energy prices.
The 5 to 6 percent price increases will come in the form of higher list prices and fewer promotions like coupons, Clayton Daley, chief financial officer, said at an analyst conference.
The company, whose brands include Charmin toilet paper and Puffs tissues, had lowered prices via higher promotional spending over the past two years when pulp prices fell.
That put pressure on top competitor Kimberly-Clark Corp. (NYSE:KMB - News), which makes Kleenex tissues, because it produces more of its own pulp, a key raw material for paper products, than P&G. As a result, Kimberly-Clark's costs did not fall as much as P&G when pulp prices fell.
A Kimberly-Clark spokesman could not be reached to comment on whether that company would also raise prices. In January, Chairman and Chief Executive Thomas Falk told Reuters that if pulp prices rose much more, the industry would have to raise prices to compensate.
Kimberly-Clark and other competitors like Playtex Products Inc. (NYSE:PYX - News) have in the past year blamed aggressive promotional spending spurred by P&G for cutting into their profits.
Cincinnati, Ohio-based P&G, with more than $43 billion in sales last year, can more easily withstand a promotional battle, since it can make up for lower profits in some segments with higher profits on other products.
Daley said that P&G has traditionally sold less product "on promotion" than competitors.
But P&G will match competitors' promotions, including coupons and packages with extra product, in order to remain competitive, Daley said.
"We will effectively match competition ... to maintain price and value competitiveness in the marketplace," Daley said.
In recent years, P&G has had situations where it lost market share because it either tried to raise prices when competitors didn't or else did not match competitor discounts. But the company now acts much more quickly to have prices in line with competitors, Vice Chairman R. Kerry Clark said at the analyst conference.
Also on Thursday, P&G stood by its previous forecast calling for profit in line with analysts' estimates for fiscal 2004, which ends June 30. Analysts on average forecast profit of $4.56 a share, according to Reuters Research, a unit of Reuters Group Plc.
P&G shares were up 25 cents at $103.20 on Thursday afternoon on the New York Stock Exchange (News - Websites) . The shares rose to a four-year high at $103.74 earlier in the day. |
