Paper or Plastic?

Increasing packaging costs raise consumer prices

Published in CSP Daily News

BOSTON -- A sharp run-up in plastic costs is starting to have an impact on store shelves, pushing up the price of products packaged in plastic and forcing some beverage companies to consider shifting to cardboard, according to a report in The Boston Globe.

Citing the aftereffects of the Gulf Coast hurricanes, many milk producers have started passing along surcharges for raw materials and fuel costs. One food industry official, who asked not to be identified, said most milk producers added a surcharge of 9 cents a gallon last month and tacked on [image-nocss] another 5-cent increase this month. The price increases by and large are being passed along to consumers.

Other products packaged in plastic, including soft drinks, orange juice and bleach, are also facing upward pricing pressure. Clorox increased the price of its liquid bleach 9% in July and is increasing the price an average of 8% Jan. 1. One food-industry official said soft-drink prices are expected to rise later this year because of a shortage of petroleum-based resin used to manufacture plastics. According to the Globe report.

Dennis Lane, the owner of a 7-Eleven convenience store in Quincy, Mass., said he hasn't received a surcharge notice from Garelick, his milk supplier. But he said 7-Eleven has notified him that quart and half-gallon plastic milk containers may be replaced with cardboard in the future to keep costs down. ''This is a backlash from Katrina," Lane said.

Manufacturers of the resin, a key ingredient in many plastics, were hard hit by the Gulf Coast hurricanes. A combination of rising natural gas prices, transportation bottlenecks and factory outages for some manufacturers of key feedstock products have created an extremely tight market for resins. The International Dairy Foods Association said several resin manufacturers notified dairy customers that they were activating ''act of God" clauses in their contracts and to anticipate supply shortages through December.

Plastics News, a trade publication in Akron, Ohio, said the cost of high-density polyethylene, which is used to make milk jugs and bleach bottles, has risen more than 50% in the past three months. Prices are currently about 90 cents a pound, up from 58 cents a pound at the end of August. The price of PET bottle resin, which is used to manufacture soft drink, water and other clear food container products, has risen to 93 cents a pound, a gain of 25%, according to Plastics News.

''We've been told by suppliers of the possibility of continued price increases due to the hurricanes and the run-up in natural gas prices," Faith Weiner, a spokeswoman for Stop & Shop Supermarket Co., the largest supermarket chain in the Northeast, told the Globe. Weiner said Stop & Shop intends to use its new consumer adviser and its circulars to notify customers about hurricane-related price increases and help them find alternatives, if possible.

Plastic packaging is not the only product rising in price following the hurricanes. Lane and others in the food industry say fuel surcharges have become commonplace on many products. Lane said his ice cream and main grocery supplier are now assessing fuel surcharges of $3 to $7 for each delivery.

Folgers Coffee switched from its plastic packaging back to metal cans after the hurricanes hit, prompting speculation that the shift was due to the rising cost of plastic resins. But a spokeswoman for Folgers, which is sold by Procter & Gamble, said the switch back to metal was only temporary and caused by damage to a New Orleans plant that packaged the coffee.

The Folgers spokeswoman said the New Orleans plant is now back on line and Folgers is once again being packaged in plastic. The spokeswoman said the company does not plan to raise prices because of the run-up in plastic resin prices. ''We have no intention of passing on Katrina-related costs," the spokeswoman said.