Food, drug and mass retailers have bristled at the idea of consumer packaged goods manufacturers taking prices up in recent years. Many in private will tell you brands raised prices several years back when fuel spiked, but few reversed course when costs slid back down. Most have warned brands that share losses were waiting if they took prices up. A number of larger chains have gone so far as to threaten to cut shelf space or delist SKUs should prices be increased.
Now, however, brands are seeing increases in a number of commodities and few choices other than a hike are left to those looking to maintain their profitability. For those that want to put increases through, there is some good and bad news.
According to a Wall Street Journal article, David Dillon, CEO of Kroger, recently said, "I don't see [rising manufacturers' prices] as a problem for us. It is a problem for them. Each national vendor must make a choice."
The opportunity for Kroger is that national brand price increases could lead more consumers to shift to the company's private label, even though suppliers there also face inflationary pressures.
Kroger has been exploring buying more private label manufacturing, but has not yet concluded a deal because asking prices have been too steep, according to a Reuters report.
Discussion Questions: Can national brands afford to take prices up in the current environment? What would your reaction be, if you were a buyer, to price hikes from vendors?