Discover more from BIG by Matt Stoller
Unilever CEO: "We will, of course, continue to take further price increases...."
Economists may scoff, but yes, market power is driving price increases.
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In December, I noted that 60% of inflationary increases are going to corporate profits. While economists scoff, it’s fairly obvious corporations are raising prices because they have market power. They say it, every morning, on CNBC. Here’s a non-comprehensive list of large firms over the last week who have announced such increases on their earnings calls.
"We achieved our highest fourth quarter revenue in nearly 10 years as demand for our products remained strong and we captured higher selling prices," said Richard J. Kramer, chairman, chief executive officer and president.
“So let's take a quick look at 2021. We delivered Q4 underlying sales growth of 4.9%, driven by price with volumes flat.
We are facing the highest levels of inflation for over a decade, and the business is responding by leading on price.
We stepped up pricing significantly in a heavily inflationary environment while delivering strong earnings.
We will, of course, continue to take further price increases. These need to be phased in.
We are the price leader. Competition is following in pricing, and we're measuring that.
And so far, our determination to lead on price is going well. Our brands are in very good shape. Our brand health is allowing us to lead on price.
And that's what give us in situations like we're having this year where we have to price, we have consumers following us in spite of higher prices.
So as we move into a world of higher inflation, I do expect that the category prices probably will go up. And at least to date we haven't seen much in the way of elasticity.
And we see inflation going up everywhere. We have the brands. And we have, again, the capabilities to price as what we're doing in majority of the market
I think the combination of our productivity and our pricing should put us in a position where we ought to be able to keep margins pretty well intact for the year.
Price/mix grew 9% for the quarter, primarily driven by pricing actions in the marketplace, recovery in the fountain business and away-from-home channels, and strong growth in premium offerings.
Fourth quarter core price increased revenue by 5.4 percent. Core price consisted of 7.0 percent in the open market and 2.9 percent in the restricted portion of the business.
In the current environment where we're seeing such significant average selling price increases. That's certainly one driver of the SG&A leverage on the P&L…. We're not getting the volume leverage, but we are still seeing the leverage from selling price increases.
Operational efficiencies on top of synergies, along with pricing, have more than offset the impact of divestments and inflation in the year.
Our $6 billion of investments this quarter echo the themes we've long focused on, high quality assets with dynamic sources of demand, which have the pricing power to drive rent growth.
(Disney+) One of the goals was to go ahead and ensure that we had a new title every week, and we've achieved that. But by '23, we want to get to a steady state, which is even higher than we have right now. And I think that will give us the impetus to increase that price value relationship even higher and then have the flexibility if we were to so choose to then look at price increases on our service. But it's all about content, content, content and we are bullish about our future content going forward, not only in terms of quality, but also in terms of quantity. And that's really what's driving our bullishness for what we might see as the pricing power that we would have going forward.
This list isn’t comprehensive, and if you’d like to do some research yourself, you can go here to find out which firms are announcing earnings, and then google around for a transcript of their investor calls. Usually they use euphemisms around market power or pricing, such as the following.
“our pricing performance has been very solid”
“strong performance on price mix”
“price elasticities have been at historical lows”
“Sole source supplier
“disciplined capital allocation”
Anyway, if you do choose to dig in a sea of passive aggressive greed, leave what you find in the comments.
If you need motivation, here’s Obama’s Council of Economic Advisor chief Jason Furman, who authored a paper on Walmart as a progressive success story, mocking us.