Big brands place pricing bets | WARC | The Feed

Big brands place pricing bets

Some major brand owners like Nestlé and Coca-Cola are set to continue raising prices in 2023, while the likes of Kraft-Heinz and PepsiCo are taking stock after a year of increases and growing pushback from retailers.

Context

Inflation shot up in the wake of the pandemic as supply chain issues bit and that trend was exacerbated by war in Ukraine and rocketing energy and commodity prices. Food prices, for example, have jumped almost 17% in the UK over the past 12 months and 10% in the US. Meanwhile, some costs – fuel, transport, cardboard packaging – are coming down, while others – plastics, chemicals, labour – remain high.

Why it matters

FMCG manufacturers in particular face a delicate balancing act as they look to maintain margins but avoid losing sales to private label, in what is effectively a test of brand strength – and marketing has a role to play in that. 

“Retailers cannot truly push back on prices … if the company has an important brand,” Bernstein analyst Bruno Monteyne told Reuters. But at the same time, Mark Hosbein of consulting firm Magid reports that “consumer sensitivity to prices is going up, even in the last couple months”.

The big question

The rising cost of living is forcing many consumers to reassess their priorities: choice factors such as quality are giving way to price. The question is how far the balance will tip towards the latter and how major brands will respond if that happens.

Sourced from Reuters