Consumers don’t have to look very far to find shortages in a number of essential parts of the market. Whether we’re talking about baby formula, consumer goods, cars, or a range of other essential items, supply chain disruptions and higher prices within supply chains are hitting certain sectors of the economy hard. The latest shortage which is causing concern is a growing tampon shortage.
Social media accounts of exasperated women searching multiple stores to find their feminine hygiene products of choice continues to grow. However, unlike the recent baby formula shortage which was tied mostly to one manufacturing facility, there are more global issues behind this new shortage.
Let’s dive into what investors may want to know about this shortage, and how it portends to companies in this space.
What to Make of This Tampon Shortage
Supply chain issues are the key driver behind this tampon shortage, as companies scramble to acquire the necessary raw materials for production. In tampons, rayon and cotton are the two key commodities used by manufacturing facilities. However, global demand for these commodities has surged. This has forced companies to pay higher prices to get raw materials sooner, if that’s even possible.
For U.S. company Procter & Gamble (NYSE:PG), which does have a U.S. manufacturing facility for tampons (marketed under the Tampex brand), this has created significant issues. “Just-in-time” inventory models, which worked well prior to the pandemic, have been less-reliable over the past year. Accordingly, P&G, as well as others in this business, have been paying higher prices to acquire the necessary materials for production.
To make matters worse, labor issues at Procter & Gamble’s U.S. facility have led to production delays. So much so that the company is now reportedly paying workers $25 per hour to handle the shortfall.
These higher labor and materials costs are being passed on directly to the consumer. However, unlike other more discretionary parts of the market, higher prices aren’t likely to affect demand. Thus, we may be in this dilemma for some time.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
