Thank You, Sir, May I Have Another (Price Increase)!

Citing continuing “…increases in the cost of our raw materials, supply continuity on critical components and a sustained increase in transportation and logistics costs”, Avery Dennison announced a price increase last week.  This action represents the third price increase in the last 10 months.  The price increases announced (not including freight and surcharge increases by our pressure sensitive suppliers) total anywhere from 13 to 20% depending on the product line.   In the past, I have written about chemical shortages, decreases in liner supply, challenges with freight, and general commodity increases.  These challenges continue.

It is human nature to think things stay the same.  For the last several years, prices did not increase and in some cases, trended down.  We got lulled into believing things would stay that way.  Now that we’re going through a period of increases, we think prices will continue to go up forever.  They won’t but I don’t know if this period of inflation is over yet.  The US economy remains strong.  Supply dynamics specific to our industry (leuco dye shortage and liner supply) remain.  And think about this: over the last year, oil (WTI) is up about $20 a barrel, or 42%.  However, it is still $40, or 60%, below its 2013 price.  The price decrease over this time period is largely driven by the increase in US oil supply from fracking.  If I could figure out the equilibrium price for oil, I wouldn’t be selling labels…


WTI Price Chart

As with most things in life, this too shall pass.  Continue to focus on your value proposition and prices will take care of themselves.  The more value you provide, the easier it is to pass along price increases.


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