Minnesota’s Economic News — W/E 7/1/22
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Prices have been on the rise for all sorts of goods. Turns out this trend might not be short-lived. About a week ago, Wall Street Journal reported that companies like General Mills have warned they will be raising prices for their items in the next foreseeable future.
General Mills Inc. GIS -0.63% 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.
Similarly, makers of other items like wine beer, and spirits also claimed that prices will likely rise for their products.
Here’s another reason to worry about inflation: It’s getting more expensive to make wine, beer and spirits.
Some vineyards, brewers and distillers say they are absorbing those costs for now, and prices for alcoholic beverages are rising more modestly than for other consumer goods, according to government data. That might not last, analysts warn.
Costs for cardboard packaging, aluminum for beer cans, labels, transportation and energy are all going up. That is part of a wider burst of inflation hitting many industries in the developed world as economies recover from Covid-19 lockdowns.
Earlier this year, Cris Steller began receiving emails from suppliers warning his Californian distillery to get ready for price increases. Those costs have arrived, but for now Mr. Steller’s Amador & Dry Diggings Distillery is holding back on raising the prices of its rum, gin and whiskey.
“It’s hard to pass it on to the customer, because once you reset your price you are locked into it,” he said. “You have to decide, is this temporary or permanent…how much can you absorb?” Transporting a pallet of spirit bottles has risen to $905 from $590 last year, he added.
Booze makers are facing many of the same cost pressures as most businesses, including higher energy and transport prices. The cost of moving a truckload of beer or its ingredients 600 miles has approximately doubled to about $2,000 for small and midsize breweries because of high demand and a lack of drivers, said Mitch Steele, co-founder of Atlanta-based New Realm Brewing Co.
Also affecting beer costs are aluminum prices, which have increased around 70% since May 2020. The price of a can has risen from around 10 to 15 cents, depending on its size, to around 25 to 30 cents, said Mr. Steele, reflecting U.S. industry averages.
When Chipotle announced that it was raising prices in order to pay its workers higher wages, numerous people championed that as a victory for workers. In fact, some have celebrated the fact that expanded unemployment benefits are forcing employers to raise wages in order to attract workers. Even President Joe Biden praised his stimulus as the reason for rising wages.
Indeed, it is true that employers are raising wages in order to compete with unusually high government employment payments. But then again, as John Phelan already demonstrated, nobody is better off if higher wages come at the expense of consumers.