Executive Briefings

Corporate America’s New Dilemma: Raising Prices to Cover Higher Transport Costs

The drive for cost cuts and higher margins at U.S. trucking and railroad operators is pinching their biggest customers, forcing the likes of General Mills Inc and Hormel Foods Corp to spend more on deliveries and consider raising their own prices as a way to pass along the costs.

Corporate America’s New Dilemma: Raising Prices to Cover Higher Transport Costs

Interviews with executives at 10 companies across the food, consumer goods and commodities sectors reveal that many are grappling with how to defend their profit margins as transportation costs climb at nearly double the inflation rate.

Two executives told Reuters their companies do plan to raise prices, though they would not divulge by how much. A third said it was discussing prospective price increases with retailers.

The prospect of higher prices on chicken, cereal and snacks costs comes as inflation emerged as a more distinct threat in recent weeks. The U.S. Labor Department reported earlier this month that underlying consumer prices in January posted their biggest gain in more than a year.

As U.S. economic growth has revved up, railroads and truck fleets have not expanded capacity to keep pace — a decision applauded by Wall Street. Shares of CSX Corp, Norfolk Southern and Union Pacific Corp have risen an average 22 percent over the past year as they cut headcount, locomotives and rail cars, and lengthened trains to lower expenses and raise margins.

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Interviews with executives at 10 companies across the food, consumer goods and commodities sectors reveal that many are grappling with how to defend their profit margins as transportation costs climb at nearly double the inflation rate.

Two executives told Reuters their companies do plan to raise prices, though they would not divulge by how much. A third said it was discussing prospective price increases with retailers.

The prospect of higher prices on chicken, cereal and snacks costs comes as inflation emerged as a more distinct threat in recent weeks. The U.S. Labor Department reported earlier this month that underlying consumer prices in January posted their biggest gain in more than a year.

As U.S. economic growth has revved up, railroads and truck fleets have not expanded capacity to keep pace — a decision applauded by Wall Street. Shares of CSX Corp, Norfolk Southern and Union Pacific Corp have risen an average 22 percent over the past year as they cut headcount, locomotives and rail cars, and lengthened trains to lower expenses and raise margins.

Read full article

Corporate America’s New Dilemma: Raising Prices to Cover Higher Transport Costs