The Consumer Brands Association warned that manufacturers continue to face steep production costs as the latest Bureau of Labor Statistics numbers hover near historic levels.
The May Producer Price Index showed a 10.8 percent year-over-year rise, still near record highs. On a monthly basis, PPI rose 0.8 percent. For food specifically, wholesale prices rose 12.6 percent, showing the outsized impact consumer packaged goods companies are experiencing.
“Out-of-control wholesale costs are the origin of pricing frustration rippling through the economy right now,” said Geoff Freeman, CEO. “When 70 percent of your costs come from ingredients and energy and you’ve seen 15 straight months of record high producer prices, the challenge the CPG industry is contending with cannot be overstated.”
Key commodities showed sharp increases over last May. Diesel fuel rose 85 percent over last year, which will mean considerable cost for the CPG industry that accounts for one-fifth of all freight transportation. Commonly used ingredients and materials jumped over last year: eggs spiked 185 percent; wheat soared 56 percent; aluminum is up 24 percent; and edible oils are up 33 percent.
“Prices this high signal a supply and demand imbalance,” Freeman said. “CPG companies are asking not only how much critical commodities will cost, but if they can find them at all.”
The supply chain has struggled to catch up from pandemic shutdowns and slowdowns, and recovery has been further hindered by war in Ukraine, extreme weather and export bans on wheat and palm oil from India and Indonesia, respectively.
“This perfect storm is constraining supply and driving up costs – and we don’t know when it will end,” Freeman said. “We can’t resort to government as usual; we need government to move at the speed of business to weather this storm.”
Consumer Brands has flagged concerns of ingredient shortages and called on FDA to expand labeling flexibility that upholds stringent safety requirements, allowing CPG companies to pivot to alternative ingredients when their original sources become unavailable.
Further, Consumer Brands urges Congress to pass the supply chain provisions in the upcoming USCIA-COMPETES bill that will enable the legislation’s manufacturing security and resilience program to tackle disruptions and see issues before they escalate.
“Today, every American is concerned about the supply chain even though very few ever considered it before the pandemic. Success should be defined by making smart policy decisions now that allow supply chain concerns to fade from consumers’ minds once more,” Freeman said.
For more information, visit consumerbrandsassociation.org.