P&G raising prices 16%

Who says producers can’t pass on rising costs? This is one of the reasons many economists fear commodity inflation; somehow it gets embedded into the system if it goes on too long.

Procter & Gamble Co., the maker of Tide laundry detergent and Head & Shoulders shampoo, announced yesterday it will raise prices as much as 16 percent because of higher costs for plastic, energy and paper.

The increases are the Cincinnati-based company’s steepest in at least 18 months. Procter & Gamble is betting customers will continue to buy its Gillette shaving cream and Ivory soap rather than switch to store brands with lower prices.

Retailers will pay P&G 2 percent to 16 percent more for fabric, home and hair care, bar soaps, and health and shaving products beginning in September, P&G spokesman Paul Fox said yesterday.

The company tries to counter as much as a third of rising expenses for pulp, used in paper, tallow, an animal fat used in soap, and oil-based products such as plastics through the reduction of distribution costs, Fox said.
–Bloomberg, 8 Jul 2008