Kraft Heinz CEO 'very concerned' about inflation surge, says company studying whether to raise prices

The food and beverage giant has seen inflation primarily in raw materials and areas including labor and logistics

Kraft Heinz CEO Miguel Patricio says the food and beverage giant is studying whether it will increase its prices amid rising concerns about inflation

"We haven’t increased prices to consumers. We do not know if we’ll have to increase prices or not yet. We are studying and building scenarios on that," Patricio told Time in an interview. "We are very concerned, concerned but acting to mitigate the possibility of increasing prices through efficiencies."

INFLATION EXPECTATIONS FOR NEXT YEAR SURGE TO RECORD HIGH

Patricio explained that Kraft Heinz has seen inflation primarily in raw materials, like resin for ketchup packaging, as well as some products like edible oils. 

"Edible oil has a big demand right now," Patricio said. "The crops were not great, and because of biodiesel, with the incentives for biodiesel, there’s more oil that is going to engines than before, so there’s a bigger demand and the prices are skyrocketing."

Soybean oil, an essential ingredient in Kraft's mayo and salad dressing, has hit a 12-year high.  

Ticker Security Last Change Change %
KHC THE KRAFT HEINZ CO. 38.65 +0.18 +0.48%

In addition, Patricio cited inflation in areas like labor and logistics. While the company has had no major issues with hiring, Patricio said the level of absenteeism has slightly increased in the company's factories. 

"There’s big cost spikes going on," he said.

In order to address its recent shortage of ketchup pouches, Kraft Heinz has launched eight new production lines, with plans to increase its manufacturing capacity by 25% by July. 

MARKETS ARE LEAVING LITTLE ROOM FOR THE FED TO BE WRONG ON INFLATION

U.S. consumer prices increased in May at the fastest annual rate in nearly 13 years as the economic comeback from COVID-19 lockdowns continues to build momentum.

The Labor Department said last week that the consumer price index in May rose 5% year-over-year, beating the estimated increase of 4.7% anticipated by Wall Street. The reading was above the prior month’s 4.2% point. Prices jumped 0.6% month over month, quicker than the 0.4% increase that was expected by analysts surveyed by Refinitiv.

Used car and truck prices surged 7.3%, accounting for about one-third of the index’s gain. Food prices, meanwhile, rose 0.4%, matching April’s increase. Energy prices were unchanged from April as a decline in gasoline prices was offset by an increase in natural gas and electricity costs. 

Core CPI, which excludes food and energy, rose 3.8% annually in May, the most since June 1992. Core prices increased 0.7% month over month, outpacing the 0.4% increase that was expected. The index rose 0.9% in April. 

GET FOX BUSINESS ON THE GO BY CLICKING HERE

On Tuesday, the Federal Reserve kicked off its two-day, policy-setting Federal Open Market Committee (FOMC) meeting. Investors will be paying close attention to the central bank's comments on when it may start tapering its asset purchase program and begin raising rates. 

FOX Business' Jonathan Garber contributed to this report