Come 2022, prices on a broad spectrum of promotional products will increase, generally between 2% and 10%. The percentage rise on certain items will be more, with some hikes proving far steeper.

That’s the word from a variety of leading apparel and hard good suppliers in the North American promo products industry, who adamantly maintain that they’ve done their best to keep increases to a minimum. Nonetheless, they point to soaring costs for things like labor, raw materials, transportation of goods, production, utilities and other factors (such as the diminishing value of the U.S. dollar against China’s yuan) that have made further price hikes necessary.

It’s not just promo suppliers being burdened with price pressures, as producers and sellers across industries are shouldering the load, too. In fact, U.S. inflation hit a 39-year high in November 2021. The U.S. Bureau of Labor Statistics’ consumer-price index – which measures what consumers pay for goods and services – increased by 6.8% from the same month the prior year. It was the sharpest rise in a 12-month span since 1982, and the sixth straight month in which inflation rose above 5%.

6.8%
Percentage increase that U.S. consumers paid for goods and services in November 2021 compared to November 2020.
(Bureau of Labor Statistics)

“Whether it’s the food we buy, the gas we put in our vehicles or the heating oil we use to warm our homes, everything at the moment is more expensive,” says Dan Jellinek, executive vice president at Alpharetta, GA-headquartered Top 40 supplier The Magnet Group (asi/68507). “The promo world is not immune.”

Going Up

Wanting to be transparent with customers, SanMar (asi/84863) got out in front of its looming price increases by sending a communication explaining the rises to customers.

The promo industry’s largest supplier, Issaquah, WA-headquartered SanMar shared that, on Jan. 1, 2022, price increases will go into effect on just over half of its complete catalog of more than 3,000 apparel styles.

About 500 styles will experience an average increase of just over 6%. Most of the remaining styles will rise by 2% or less. Mill and private label basic brands are excluded since they change more frequently throughout the year. Pricing on certain core best-selling products will remain unchanged, as will the cost of Carhartt, TravisMathew and WonderWink items.

“I know that price increases are never welcome news and we’ll continue to do all we can to limit them as much as possible,” says SanMar President/CEO Jeremy Lott, a member of Counselor’s Power 50 list of the industry’s most influential people.

“I know that price increases are never welcome news and we’ll continue to do all we can to limit them as much as possible.” Jeremy Lott, SanMar

Koozie Group (asi/40480), promo’s seventh largest supplier by revenue, also will implement price increases on Jan. 1. The Clearwater, FL-based company is planning average rises of 3% to 10%, depending on the product.

Increases will fall in the higher part of Koozie’s range in categories that include bags, drinkware, golf, outdoor/leisure, flashlights and tools/auto. The primary reason is that raw material prices for such items have experienced greater inflation, says Pierre Montaubin, Koozie Group’s senior vice president of product management and sourcing.

“The outdoor category – specifically chairs – and the drinkware category are also significantly impacted by transportation cost increases due to the inherent size and volume of these products,” Montaubin explains.

Products in the stationery and health/wellness/safety categories will see the lowest price increases from Koozie Group. “These items are generally lighter, so sharp increases in transportation costs don’t have the same impact on them,” Montaubin says. “We can produce some of the items in these categories domestically, enabling us to keep prices low despite spikes in raw material costs. Also, we had purchased additional health, wellness and safety products to help our distributor customers answer pandemic challenges in 2021, and this tactic is now helping to mitigate price increases in that category.”

While most Koozie Group price rises will fall in the 3% to 10% range, “in rare instances, we had to go deeper into double digits,” Montaubin shares.

Top 40 supplier Logomark (asi/67866) is anticipating price increases too. Customers could start seeing the higher cost of items in January, says CEO Trevor Gnesin, a Power 50 member. “We’re trying to keep the overall price increase to under 5%,” Gnesin shares. However, “there’s a fluctuation of price increases, from as low as 1% up to 66% on tape measures, for example,” he adds.

“We’re hopeful that as the global economy adjusts to the effects of the pandemic, we’ll see substantial decreases in costs, and we’ll pass those along to our distributor customers.” Pierre Montaubin, Koozie Group.

Power 50 member Brandon Mackay, president/CEO of Top 40 supplier SnugZ USA (asi/88060), says that it’s likely more price rises are coming in 2022, though the exact timing and range isn’t yet clear.

“Pricing for us is rolling,” Mackay says. “We do try to honor pricing as long as possible, as we know that oftentimes our customers have put out pricing on a quote that takes some time to convert to a sale.”

SnugZ has become more strategic about potential price increases. “We do have better optics on our supply chain and a clearer understanding of the challenges we’ve faced in 2020 and 2021 – and have become much better at adjusting pricing by the individual SKU as opposed to a broad price increase,” Mackay shares.

Some suppliers say they haven’t definitively decided to increase pricing in 2022, but that such rises could occur given the cost pressures they’re facing. “We have nothing set in stone, but in fluid situations, you need to react quickly,” says Jellinek of The Magnet Group.

Currently, Florida-based Hit Promotional Products (asi/61125), promo’s fifth largest supplier, isn’t planning on price increases for 2022, but “we can’t really predict or avoid them,” shares CEO CJ Schmidt, a Power 50 member. “It’s very likely with the continued fluctuations overseas, driven mostly by an uptick in raw material costs and rising shipping container rates, that additional price increases could come.”

“We’ve invested in efficiency-boosting production and kitting equipment, along with rebalancing warehousing, production and shipping of items across our eight North American locations to maximize overall cost efficiencies and minimize the need for price increases.” Chris Anderson, HPG

S&S Activewear (asi/84358), promo’s third largest supplier, also reports that price hikes aren’t definite but there’s a “strong likelihood” some could be implemented toward the end of 2021 or early in 2022.

“At the end of the day, S&S Activewear is a pass through,” says Keith Shannon, chief revenue officer at Illinois-headquartered S&S. “While we represent the brands in the market and we’re the customers’ point of contact, it’s our brand partners who are suffering the higher input costs and therefore moving price. It’s not as though we have consciously moved our margins up to cover increases in labor cost. We’re solely reacting to prices that are being delivered to us.”

S&S strives to communicate price adjustments to customers as far in advance as possible of the increases’ effective dates, but “many are taking place with very short notice, and with such a short supply of inventory on hand, wholesalers need to react more quickly than ever,” Shannon explains. “We know this adds another layer of stress on an already stressful situation, and we’ll do whatever we can to help mitigate the impact.”

Combatting Higher Costs

Meanwhile, some suppliers aren’t planning any increases in 2022. HPG (asi/61966), the 10th biggest supplier in the promo market, is among them. Like many other suppliers, the Braintree, MA-headquartered firm raised prices in 2021, but doesn’t have plans to hike listed prices next year.

“We’ve invested in efficiency-boosting production and kitting equipment, along with rebalancing warehousing, production and shipping of items across our eight North American locations to maximize overall cost efficiencies and minimize the need for price increases,” says CEO Chris Anderson, who’s part of the Power 50. “Leveraging this North America-wide footprint has been key to offsetting what, otherwise, could’ve been larger price increases.”

Even suppliers who are planning to raise prices next year have been working hard to limit their price inflation.

“We have managed our transportation and container costs, which has helped,” says Logomark’s Gnesin. “We’ve also invested in more automation to reduce labor costs.”

$22,000+
Projected cost of a cargo container from China to East Coast American ports in January 2022.
( AAA Innovations)

Hit Promotional Products has ramped up investment in automated processes and equipment too, all in an effort to get more efficient and take some of the sting out of higher labor rates. The firm also vigilantly tracks production of its goods, so that “where we see a delay or an increase, we can do our best to pivot quickly,” says CEO Schmidt. “We monitor everything closely. We’ve moved a lot of items to different factories over the pandemic that we deemed to be more stable in certain situations, and we continue to do those reviews where applicable.”

Elsewhere, SnugZ has expanded its purchasing teams to ensure it has the bandwidth to find additional resources at the best prices. “We’re working so hard to keep our costs low,” says CEO Mackay. “We’re grateful for our team members who are doing everything to secure reliable sources to stabilize our pricing efforts.”

Over the past year, Koozie Group has absorbed increased costs to avoid raising prices. “In the case of writing instruments,” notes Montaubin, “we haven’t increased prices in several years.” Koozie Group’s efforts have included continual negotiations with vendors and transportation carriers. “We’re constantly monitoring transportation and raw material costs, which are the main drivers of our price increases,” Montaubin says. Unfortunately, however, “at this time, raising prices was the only sound business decision.”

4.6%
Percentage increase in wages and salaries for private-sector workers for the 12-month period ending in September 2021
( Bureau of Labor Statistics)

It’s a conclusion many suppliers have come to amid a staggering set of cost challenges.

The vast majority of promotional products sold in North America are manufactured overseas, particularly in China. The goods need to be transported here, and that’s become exponentially more expensive.

Before the COVID-19 pandemic, Jeffrey Nanus, CEO of Norwood, NJ-based hard goods supplier AAA Innovations (asi/30023), says it cost approximately $1,900 for a cargo container that would hold goods being transported from China to Los Angeles and $3,100 for the same container to go from China to New York. Some supplier firms, including AAA, have been dealing with container quotes above $20,000.

“Rates had leveled off for a while recently, but with Chinese New Year on the horizon, prices are going up again,” Nanus notes. “Current prices from China to East Coast ports are roughly $16,500. They’re expected to increase to more than $22,000 in January.”

Montaubin shares that, for Koozie Group, transportation costs have skyrocketed 300%. “The increase is due not only to international shipping challenges,” he says, “but also to increased inland transportation costs because of the shortage of drivers, trucks and chassis to move containers once they’re offloaded at domestic ports.”

Raw material prices have, on average, risen 6%, says Montaubin. For some materials, the increase has been more substantial. Cotton, essential to the creation of so many apparel items sold in promo, hit a 10-year price high at the end of October – $1.16 per pound. The price is currently around $1.12 per pound – still well elevated over the $0.70 from the year prior.

“We’re hopeful that as the global economy adjusts to the effects of the pandemic, we’ll see substantial decreases in costs, and we’ll pass those along to our distributor customers,” Montaubin says.

Still inflation continues.

For instance, labor costs have increased significantly, as promo suppliers and companies across industries raise compensation to attract and retain workers amid a labor shortage. Compensation costs for workers in the U.S. rose 1.3% for the third quarter of 2021 compared to the second quarter – the largest increase in 20 years, according to the Bureau of Labor Statistics.

When considering just private sector workers, wages and salaries rose 4.6% for the 12-month period ending September 2021, up from a 2.7% increase a year earlier. The cost of benefits increased 2.6% for the 12-month period ending this September, up from a 2% increase the year before.

About
3%
How much the U.S. dollar has depreciated year over year against China’s currency

“We have a 7% wage increase in California and an inflation adjustment for all staff,” says Gnesin. “Product price increases are coming in from our suppliers as their costs are rising as well.”

Currency exchange rates aren’t helping either. The U.S. dollar had depreciated in value against China’s yuan by about 3% year over year as of Dec. 8. That means promo suppliers’ dollars don’t pay for as much as they did at the same time last year with manufacturing partners in China. And, the dollar depreciation comes as China-based producers increase pricing to account for their own inflationary pressures.

Despite the cost challenges, demand for promotional products has strengthened in 2021.

At around the halfway point of the fourth quarter, leading suppliers reported that sales were surging, even amid already higher pricing and various supply chain challenges, including inventory gaps, that are ultimately rooted in COVID-19 disruption. The reported Q4 growth trend continues the momentum promo gained in the second and third quarters of 2021, when distributors’ sales increased, on average, by 27.3% and 18.4%, respectively, according to ASI research.

Says Lott of SanMar: “As the end of 2021 approaches, I’m a little more cautious [than I was at the end of 2020], but still looking forward to New Year’s Eve with optimism for the year ahead.”