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Inflation forces businesses to raise prices

A PwC survey found more than 60% of business leaders believed they'd likely have to increase the prices of goods and services this year.
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Posted at 2:40 PM, Jan 28, 2022
and last updated 2022-01-28 16:42:44-05

The pinch of inflation is creating a crunch for some businesses across the country and across industries. 

Businesses around the United States face a new challenge in this pandemic: raising the price of the products they sell. 

"The rent's going up, the labor's going up, the food cost is going up," said Pete Boland, the managing partner of The Galley and Mary Margaret's Olde Irish Tavern in St. Petersburg, Florida. 

Inflation, Boland said, is a real problem.

"The $3 tacos aren't $3 tacos anymore. The days of $3 beer are long gone, too," said Boland. 

In his business, he said he's looking at the price of things like to-go boxes, fry oil, chicken breasts. Like others, his operating expenses fluctuate with the market. 

"So we're trying to be creative with things like portion control, making sure we're watching people's hours and labor, making sure that if there's a way to increase price that there's a good perception of value," he said. 

They're not alone.

The PwC Pulse Survey of executive views found more than 60% of business leaders surveyed believed they'd likely have to increase the prices of goods and services this year, and more than two-thirds expected inflation to remain high this year. 

"If you think about the continued supply chain difficulties with imports still sitting in containers in major points in the country and the reality that we are living in one of the lowest inventory-to-sales ratios that we've seen probably since World War II, you realize that this inflation, while we had hoped it would be fleeting, is probably here for at least 18-24 months," said Byron Carlock, Jr., the national leader of PwC's U.S. real estate practice. 

Carlock said the adjustments upwards appear prevalent in most industries. 

"I think the fed is going to continue to show us their strength in moderating inflation," he said.

"I think all efforts will be to contain the inflation and hope that once the supply chain levels out again we will see prices begin to stabilize."

Experts say for many managers, it's the first time they've experienced inflation like this. 

"This is the first rodeo of severe price inflation for many businesses and for many managers," said John Quelch, dean of the Miami Herbert Business School.

"It's important they adjust their prices in sync with the cost input adjustments they're having to bear on raw materials, on wages, so forth."

Quelch's advice is to buy early and buy often.

"Even though the supply chain problems were and are still part of the inflation equation, they are not such a large part of it that once they're fixed inflation is going to go away," he said. 

At The Galley, Boland said the digital menu makes it easier for them to adjust their prices.

Right now, customers will find a $4 increase in the wings since September. But Boland explained they have a loyal following. 

"You know the economy's raging here so people are a lot less price-conscious than they used to be, and they are understanding that the world has changed," he said.

This story was first reported by Haley Bull and Lindsay Tuchman at Newsy.