We have been seeing it everywhere: prices are increasing, and sections of store shelves are bare or thin. For nonprofits, the price increases and product shortages have hampered the ability of many organizations to meet clients’ needs. In a time of greater need, where more people are struggling with the rising gas prices and rent, nonprofits are struggling to keep up.
In this month’s Inside In-Kind we take a look at how inflation and the global supply chain issues are affecting products nonprofits routinely distribute to clients.
Everyone is spending more on food than a year ago, but these price increases are hitting the nonprofit sector hard. Overall food prices increased 7.9% for the year ending February, 2022. The increase was even more dramatic for sub-categories like beef (16.2%), poultry (12.5%), and eggs (11.4%). An additional increase of 4.5%-5.5% has been projected by the US Department of Agriculture in the foreseeable future.
As a result, food banks and food pantries are struggling. More clients are asking for help as rent and transportation costs have spiked. Supermarkets have less excess produce and groceries to donate. And with the cost of food increasing so much, food banks have had to make tough choices.
Many food banks are compensating by raising more funds to purchase food outright instead of relying as heavily on donations. Some food banks are also reducing the amount food being provided per family in order to support more individuals. Still others are charging small fees (way below the prices in the store) to cover some basic costs. There are no easy solutions to this problem.
Hygiene & Household Products
The largest consumer packaged goods companies, including Procter & Gamble and Kimberly Clark, have all implemented or announced price increases across a broad range of products over the last 6 months – toilet paper, diapers, personal care products, laundry detergent, and more. In January, Procter & Gamble specifically called out a price increase of about 8% on their Tide and Gain laundry detergents, Downy fabric softener, and Bounce dryer sheets. Additional price increases were announced on personal care items starting this month (April, 2022).
Although nonprofits do not necessarily purchase name-brand products for hygiene and household needs, all suppliers are facing the same challenges – increased transportation costs, labor shortages, higher prices of source materials. As a result, prices are increasing across the board to cover these additional costs.
Nonprofits can consider some of the same strategies that are being employed with food – for example, temporarily reducing the sizes of items to support more individuals. In other words, instead of providing full size shampoo, nonprofits can reduce the size of the bottle in order to support more clients.
An important trend to to keep an eye on for school supplies is the paper shortage. The cost of wood pulp (which is used to make paper) has increased 50% over the last year. Also, the consolidation of the paper mill industry and the refocusing by mills on related paper products (packaging and corrugated boxes) has resulted in lower production of paper. This shortage has already started affecting the availability and cost of some paper-based school supplies. Notebooks, filler paper, and copy paper are obvious candidates for price increases – but other items like flash cards and dictionaries are also being affected. And for programs that also include a literacy component, the cost of books is expected to increase over the year.
Overall, some experts are projecting an increase of 15-30% on the cost of school supplies for families purchasing their own school supplies. Nonprofits can continue to benefit from purchasing in bulk and can still cost-effectively equip students with the needed supplies if they start their programs early and lock down their orders accordingly.
Clothing and Shoes
The cost of apparel increased 4.3% for the year ending February 2022. Footwear jumped at a higher percentage – 7% year over year. Interestingly, men’s footwear increased 5.3%, while women’s was up 6.8% and kids’ 10.3%. The majority of footwear is manufactured in China, where heavy tariffs required retailers to increase prices to cover the added costs.
The good news for 2022 is that the the pandemic-inspired supply issues are expected to improve in the fashion industry. In a recent survey of apparel executives, the respondents anticipated making a price increase of 3% on average in 2022. So hopefully, compared to other product categories, the price increases in clothing at least will be more modest.
It’s a little early to anticipate the full extent of inflation and shortages on the holiday season – the largest toy manufacturers have conflicting views about the potential impact. A recent article from CNBC cites that Mattel is expecting consumers to accept increased prices and purchase at a healthy rate, while Hasbro is is more conservative about peoples’ ability and willingness to absorb price increases.
What appears certain is that much like the other types of goods, prices will go up this holiday season, especially on branded and licensed toys. How much is still unknown. Last year, the price of children’s toys increased as much as 10% leading up to the holiday season – with many shortages on popular items. As 2022 proceeds, it will be important to keep an eye on how the toy market continues. As with all other purchases this year, nonprofits should plan ahead where possible, purchase early, and be prepared to make tradeoffs and substitutions for less popular items as necessary.
It’s certainly a challenging time for nonprofits and other organizations providing basic needs to their clients. As prices increase – especially gas and rent – paychecks are not always able to keep up with monthly expenses. It will be increasingly important for nonprofits to supplement with basic goods that low income families may not be able to afford after paying their housing and transportation costs.
We will continue to monitor the situation in the product categories above and keep you informed of any key changes. If you have any questions or thoughts on how you’re handling the price increases and shortages, we’d love to hear from you! Please leave us a comment below.