Warren Buffett's business empire hiked prices to offset soaring costs. Here are 9 Berkshire Hathaway companies that battled inflation in 2021.
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- Many of Warren Buffett's businesses hiked prices in response to increased costs last year.
- Berkshire Hathaway paid higher prices for raw materials, fuel, labor, and distribution.
- The cost inflation was driven by supply-chain disruptions, and shortages of workers and components.
Warren Buffett's Berkshire Hathaway faced a sharp rise in the cost of raw materials, fuel, labor, and distribution across a bunch of its businesses in 2021, its annual report shows. Many of its subsidiaries hiked their prices to offset those increases, which helps to show why US inflation has spiked to multi-decade highs.
Berkshire is widely seen as a cross-section of corporate America, given its interests in the insurance, energy, real estate, railroad, manufacturing, services, and retail industries. The conglomerate's costs jumped in 2021 because the COVID-19 pandemic continued to disrupt global supply chains. Lockdowns and travel restrictions also supercharged demand for products such as manufactured homes, building products, and furniture.
Many of Buffett's businesses passed along their increased costs to customers in the form of higher prices last year, and sold more products and services, resulting in double-digit revenue growth across most of Berkshire's divisions.
Here's a roundup of 9 Berkshire businesses hit by inflation in 2021, and how some of them responded:
1. Benjamin Moore, a paint company, saw its manufacturing costs jump after Winter Storm Uri disrupted its supply chain.
2. Fruit of the Loom faced a yarn shortage, a shortfall of labor at a key supplier, and higher prices for raw materials and freight. The apparel maker scrambled to find alternative sources of yarn and raw materials last year, and eventually signed up an additional supplier.
3. The Burlington Northern Santa Fe (BNSF) railroad reported elevated wage inflation, and blamed higher energy prices for a $977 million, or 55%, rise in its fuel expenses.
4. Lubrizol, a chemicals company, boosted its prices to offset rising costs of raw materials and greater manufacturing expenses.
5. Forest River, which makes RVs, cited higher average selling prices as a key driver of its 21% increase in vehicle sales last year.
6. The home-furnishings subdivision, which houses Nebraska Furniture Mart, posted 22% revenue growth last year. The increase reflected stronger customer demand, and price hikes in response to higher inventory and freight costs.
7. Clayton Homes, a housing maker, reported higher costs of materials, manufacturing, and distribution. The wider building-products division hiked prices after supply-chain disruptions raised its raw-material and logistics costs.
8. PacifiCorp and MidAmerican Energy, both part of Berkshire Hathaway Energy, reported higher costs for thermal generation and purchased power.
9. McLane disclosed sizeable increases in personnel and transportation costs, as well as higher fuel costs due to a surge in energy prices. The wholesale supplier of groceries and non-food items blamed shortages of warehouse workers and truck drivers for greater inventory costs and less product availability last year.
The company reacted to a reduction in customer-service levels and operating efficiency by spending significantly more on hiring, wages, and benefits.
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