Better stock up on cereals now even if you don't need to quite yet, as these price increases may make the days of free or $0.25 cereal over.
NEW YORK -(Dow Jones)- General Mills Inc. (GIS) is raising prices on some cereals and baking products, the clearest signal yet that food makers will pass some price pressure from higher commodity costs on to retailers and consumers.
General Mills is instituting "low-single-digit" percentage price increases on select cereal brands and slightly higher increases on some baking products, such as flour and baking mixes, spokeswoman Kirstie Foster said. Separately, Kraft Foods Inc. (KFT) is also starting to raise some prices, people familiar with the matter said Wednesday, though the scope of Kraft's increases wasn't immediately clear. A Kraft spokesman declined comment Wednesday, but the company recently said it would selectively raise prices on some brands to offset commodity costs.
New price increases would come at a time of still-widespread caution among consumers, who are still jittery about the pace of the economic recovery. It could also put some retailers in a bind. Supermarket operators, who have expressed caution about consumer confidence, will have to decide whether to raise shelf prices or sacrifice profits.
General Mills will raise prices on select cereal brands starting Nov. 15, the spokeswoman said, affecting about a quarter of its cereal business in the U.S. Specific brands weren't disclosed, though the spokeswoman said it would be the first price increase on many of the cereal brands in more than three years. General Mills' brands include Cheerios and Lucky Charms cereals and Betty Crocker baking mixes. Price increases on the baking brands will go into effect Jan. 3.
Kroger Co. (KR) and Safeway Inc. (SWY) executives have said in recent weeks that they expect to be able to pass along such increases, although other supermarket chains such as Supervalu Inc. (SVU) are engaged in another round of price cuts in stores to keep shoppers coming in.
Supervalu on Tuesday said it was going to run another round of price cuts, a direct response to declining sales and market share. The new strategy comes as a major supplier in the past week told Supervalu that it will raise prices "across the board," Supervalu Chief Executive Craig Herkert told analysts Tuesday. A Supervalu spokesman declined comment on which supplier warned the company of higher prices. (This company owns Save-a-lot and CUB foods)
By Anjali Cordeiro and Paul Ziobro
