Price hikes are working for Pepsi and Nestlé

NEW YORK • Kimberly-Clark Corp joined consumer-goods giants that reported surprise sales gains in part by raising prices on key products, sending its shares surging the most since 2008.

To make up for higher costs for raw materials and currency fluctuations, consumer companies from PepsiCo Inc to Nestlé SA have been charging more for common household products, and it seems to be working so far.

Kimberly-Clark’s prices for tissue paper climbed 7% in North America last quarter from a year earlier, helping absorb US$135 million (RM557.55 million) in higher costs globally for pulp and other materials.

PepsiCo passed through increases on its beverages, while Nestlé’s gains came from hikes in categories such as bottled water.

The revenue boost from price increases may embolden other consumer-products makers to consider charging more, a possibility that will get the attention of US Federal Reserve (Fed) chairman Jerome Powell and his colleagues as they watch for signs that inflation is finally perking up.

Fed officials have put interest-rate hikes on hold amid price gains that have stayed below their 2% target for much of the past seven years.

Kimberly-Clark, based in Dallas, rose 6.9% to US$130.44 at 12:20pm in New York yesterday. The shares were up as much as 7.2% earlier, the biggest intraday gain since 2008.

Leaving out currency fluctuations, first-quarter sales were up 3% from a year earlier. — Bloomberg