Exclusive: Kraft Heinz, Conagra may increase some product prices as the cost of grains, edible oil increases

CHICAGO (Reuters) – Kraft Heinz Co and Conagra Brands Inc said they may choose to increase prices this year for some products that use wheat, sugar and other raw materials that are increasingly expensive due to high demand.

Sean Connolly, CEO of Conagra, said the company, which makes Duncan Hines cake mixes and Marie Callender’s pulled pork mac and cheese bowls, will need to push inflation-justified price increases this year so it can also continue to drive sales growth through innovation.

Ingredient and packaging costs represent 60% to 65% of Conagra’s total cost package, said Finance Chief Dave Marberger on the sidelines of New York’s Consumer Analyst Group virtual conference.

With people cooking at home more often – and still stockpiling in some parts of the world – prices for commodities like sugar, wheat and soy are soaring, forcing food companies to absorb higher costs.

According to the Bureau of Labor Statistics Consumer Price Index, US consumers paid an average of 3.7% more for food consumed at home in January than a year earlier. Year-over-year increases in food prices have risen above 3.5% every month since April last year, the longest period in nearly a decade.

“We have inflation, we see inflation, we worry about inflation. We need to mitigate that inflation, or at least some of it, with hedging and efficiency in the factories, ”Miguel Patricio, CEO of Kraft Heinz, told Reuters in a recent interview. “Will we get price increases for food this year? Maybe in some categories that are very exposed to specific goods. “

“Where we see (inflation) is in grains and everything that has to do with grains… It’s across the board. Sugar has a big inflation; mac & cheese because it contains wheat; mayo because it contains oil; salad dressing because it contains oil; all sweet products such as desserts, ”said Patricio.

Kraft Heinz – which makes Jell-O, Kraft Macaroni & Cheese, and a slew of Heinz mayonnaise products and salad dressings – said it didn’t increase prices in the most recent quarter, but it did on promotions and discounts.

Other major food companies, including Lipton tea and Hellmann’s mayonnaise manufacturer Unilever, have also seen higher prices due to global commodity inflation.

Some inflationary pressure is emerging. And we expect mid to high single digit commodity inflation in the first half of the year. So we need to be at the forefront of pricing going forward, ”said Graeme Pitkethly, Unilever’s Chief Financial Officer, on a recent earnings call.

Food manufacturers are not the only US manufacturers to start responding to sharply higher input costs – the highest in a decade in some national surveys – with price increases of their own. The Philadelphia Federal Reserve’s monthly factory survey for January found that the prices manufacturers receive for their goods have risen the most since 1989.

However, US Federal Reserve policymakers have downplayed any imminent inflation risk. They do not consider one-off price increases in an industry or in a group of goods as inflation, unlike persistent price increases in the broader economy.

“Households buy more groceries. You will see price pressure, ”Kansas City Fed president Esther George said in a presentation at a real estate symposium on Tuesday. “Airlines that eat out, where activity remains low, are compensating for the price pressures,” she added. “In the short term I don’t see that we will have an inflation problem.”