Why Businesses Are Passing Their Rising Costs On To Consumers
The price of groceries rose almost 12% in March compared with the same month a year ago, while gasoline prices increased almost 40%.
Anyone shopping for groceries or driving a car in Honolulu in the past year has seen it: the sharply rising costs of food and gasoline. In a state with a cost of living that鈥檚 and a large percentage of households living paycheck to paycheck, the changes are especially hard to endure.
Groceries in Honolulu cost 11.7% more in March than they did in the same month in 2021, . Items like cereal, meat, poultry and fish rose nearly 15%. Gasoline prices were up just less than 40%.
Altogether the bureau鈥檚 consumer price index, covering a wide range of goods and services, rose 7.5%, 5.3% excluding food and energy prices, which tend to be unusually volatile.
The to slow down rising costs and indicated more rate increases are coming. Economists with the University of Hawaii鈥檚 Economic Research Organization, meanwhile, are expected to issue a report on Monday offering more detail on inflation in Hawaii.
In the meantime, businesses said they鈥檙e feeling the pressure and they鈥檙e starting to pass costs to consumers.
鈥淲e鈥檝e been hearing a lot from our members,鈥 said Sherry Menor-McNamara, president and chief executive of the Chamber of Commerce Hawaii. 鈥淎lmost everyone is being affected by it.鈥
Among those hit hardest are companies that rely on packaging, which is a big deal for Hawaii food product manufacturers and makers of consumer packaged goods.
is a case in point. The company produces sea salt at a facility on the Big Island and sells it as food seasoning and in spa products like bath salt.
Sea Salts of Hawaii uses glass bottles and tin cans instead of plastic, and the prices of the bottles has gone up significantly, said Sandra Gibson, the company鈥檚 owner.
鈥淭in containers sourced from the mainland went from $0.53 in 2017 to $0.65 in 2021 and then drastically to $0.78 in 2022,鈥 Gibson said in an email. 鈥淥ur popular mini 2 oz. Glass Bottles went from $0.22 in 2017 to $0.25 in 2021 and now we pay $0.28 each.鈥
The cost of shipping the packaging materials to Hawaii also has increased.
Shipping three pallets of containers from Seattle to Honolulu a few years ago cost $1,554, she said. Now, the same shipment costs almost $2,500.
The result: Gibson has little choice but to increase her prices.
鈥淲e really for the most part hadn鈥檛 increased our prices at all since we started,鈥 she said in an interview. 鈥淏ut we recently had to.鈥
For Some, Rising Gas Prices Are The Tipping Point
, is on the verge of doing the same, said Kawika Sebag, the company鈥檚 owner and co-founder. It鈥檚 not that the cost of producing honey has gone up much, Sebag said. But packaging material has.
鈥淕lass has gone up anywhere from 10% to 35%, and the lids that we use have also gone up in price, some of them twice as much,鈥 he said. Even the price of printed labels has risen.
But the killer has been the cost of filling up the four vehicles Wai Meli has for deliveries and farm operations.
鈥淲e did our best to not budge our price for the whole pandemic, and I think that just has to do with how close we are to our customers and retailers,鈥 he said. 鈥淏ut we will be increasing our price soon, and that has to do with the price of fuel.”
鈥淯nfortunately, it鈥檚 the gas that鈥檚 kicking us in the butt right now,鈥 he said.
When basic things like gasoline and food cost more, workers need higher wages to get by, said Gabriel Sachter-Smith, a banana scientist and farmer who runs聽 in Haleiwa. So it鈥檚 not just the costs of fertilizer and lumber for a new packing shed that have gone up, he said. Wages have too.
鈥淚nflation affects everybody, and we still pay wages to people,鈥 he said.
If the U.S. central bank’s interest rate increases work as planned, prices should level off some time this year.
On March 22, the Federal Reserve鈥檚 policymaking Federal Open Market Committee raised the interest rate banks charge each other for short-term loans by 0.25%. It marked the first increase since 2018, and the Fed signaled more increases this year.
Although Federal Reserve controls only the , the rate increase affects what lenders charge consumers and businesses to borrow money. The Fed鈥檚 general goal is to slow down consumer and business spending so the economy into a recession.
The question for business is whether their costs will decrease.
Gibson expressed skepticism.
鈥淭he vendors all say their prices will go down,鈥 she said. 鈥淏ut it鈥檚 rare for things to go down.鈥
“Struggling To Get By” is part of our series on 鈥Hawaii鈥檚 Changing Economy鈥 which is supported by a grant from the as part of its CHANGE Framework project.
