Yes, It would go a long way in helping their consumers now and it would build back loyalty that may have eroded as prices have climbed significantly. Following Chobani’s lead would be a smart move.

The Fed’s interest rate hikes aren’t having the desired effect because today’s inflation isn’t organic. Companies are enjoying record profits. The only solution is for consumers to take a pass on artificially-inflated prices.

Just because inflation is coming down does not mean that prices are declining. If the CPG companies were ethical in their price increases, then the prices they offer their distribution channel should still be fair. I believe there is plenty of competition to keep prices in line and consumers are much more sensitive to the price they pay for products and services, so I think the capitalist system will keep things fair for consumers. Having said that, if a CPG brand has accumulated unexpected profits, I think now is the ideal time to demonstrate to customers that they are in the same camp — this could lead to special offers that help capture marketshare.

This is not just happening in CPG–look at the profits oil companies post. I agree with Mr. Ulukaya that we haven’t seen the price reductions we would expect as costs have come down. It feels like we’re in a game of chicken, no one wants to be the first to start dropping prices and reducing profits. The only thing I think that will drive price reductions is consumer behavior. If and when consumers change their buying habits, and those changes start to have a real financial impact, then we’ll see prices come down.

Of course CPGs should lower prices, but it won’t be out of good will. Every nickel of new found profit will be jealously guarded until some market dynamic forces the issue. Competition and the resulting consumer behavior are powerful factors in this environment. I love the idea of a retailer having their own private label in just about every category. Their own manufacturing data will give them the necessary visibility into what is going on at the raw material level. They can manage their prices and margins accordingly. So it’s not just CPG brand vs. CPG brand. It’s CPG brands vs. store-owned brands. This moment is a huge opportunity for retailer-owned brands.

Commodities aside, when have manufacturers ever lowered prices?

When inflation declines, it does not mean prices are going down. Until we actually see deflation, when inflation drops from 8 percent to 4 percent it doesn’t mean prices drop 4 percent. It means prices increase by 4 percent over the 8 percent they already increased.

The Washington Post article finding retailers asking vendors for proof to support increases or risk of products being delisted, receiving poor shelf placement, and having promotions cut is laughable. Will they delist Tide?

If manufacturers find a windfall of cash and a decline in volume, they will add to promotions but never take the old price list out of the archives.

The bigger question is, will the retailer lower prices if the manufacturer does? — and that is another fantasy.

Grocery prices remain exorbitant. More consumers will shift to brands with competitive pricing and private labels to make their weekly basket more affordable.

This is another example where all parties (CPGs, retailers, consumers) should be on the same page. Ultimately, CPGs won’t benefit if they go against the wishes of retailers and consumers and maintain higher prices when inflation lowers.

The answer seems to vary by category but should it? Margin structures for grocery vs. apparel, home, and other discretionary categories are understood to be different yet retailers and suppliers are expected to jump on price cuts in grocery as soon as it’s feasible. Consumers will be the ultimate deciders, of course, but is the grocery-as-loss-leader approach due for an update?

Yes, CPGs ought to roll back prices, but don’t hold your breath waiting for this to happen. Consumers will and are trading down to private label and other new products that provide more value relief. Ultimately, competition will force traditional CPGs to change their current tactics. It always has, and those that keep prices high will see erosion in their volumes.

It isn’t the supermarkets but the suppliers that are the disconnect. Just like the oil companies have recorded obscene profit margins, CPG companies want to join the gravy train. Consumers need to shop with their wallets and buy local. This might mean changing some buying habits.

The good news is that CPG items are available through thousands of distribution points, aka competing retailers, big and small. So we should see free market forces taking over and retail prices coming back down. But this puts the burden on retailers to cut prices—and margins. That’s why I’d expect buyers to start putting more pressure on their CPG vendors to ease off the higher prices sooner than later.

We saw manufacturers and retailers drop CPG prices once (although I may be hazy in my recollection). Manufacturer price rollbacks do not necessarily mean retailer rollbacks. The only manufacturers who are going to lower prices are the ones whose prices are already way too high. And Walmart is certainly not going to be the first to lower prices as long as they are the low-price leader.

Assume that the following is a fair comparison: When the price of crude oil in the world markets fluctuate, the price at the pump fluctuates in the same direction–therefore as inflation eases, the lower purchasing costs by the CPGs should be passed onto the consumers. Simple?

This is a case in which the first mover may incur reduced profits but if that communicated to their customers properly they should enjoy increased sales and customer loyalty moving forward. This assumes the retailer selling their products reduces the retail price accordingly.

CPG companies were already playing the “shrinkflation” game well before consumers were dealing with 8 percent inflation (or worse) last year. And the rate of inflation may have cooled to 5 percent but that’s still at a high level. So, I don’t expect much movement on CPG firms’ part to lower prices unless they are in a market segment dramatically impacted by the cost of goods (eggs, for example).

Meanwhile, today’s jobs report includes more evidence — including higher labor costs — that the inflation bug is not yet tamed. Companies like P&G report surprisingly little resistance to price increases, so don’t look for rollbacks anytime soon.

Price is the one marketing variable that is always on trial. Prices will come down at the manufacturer and retailer levels when competitive pressures cause such changes. Unfortunately, the ethical argument loses out to the competitive realities.

Brands that lean in and help consumers expand their purchasing power via promotions end up coming out of the inflationary period with greater household penetration — a strategic advantage that lasts for years after economic recovery.

Yes, if input costs come down, prices should. However whether they will or not remains to be seen. Hopefully more consumers voting with their wallets — which is already happening in some areas as P&G and other companies are experiencing strong volume declines — will help nudge companies in the right direction.

It’s obviously not a one-size-fits-all type of problem. Some CPGs will be able to maintain profits based on consumer demand and retail negotiation power; others will probably need to evolve along with the market to remain a relevant option for retailers. The key here is that retailers have the power to drive change on this front. Private label is a good way that retailers can push back and continue to nudge CPGs who won’t lower costs. Promotional opportunities (or lack thereof) is another option. Finally, leveraging advanced analytics during cost negotiations can be a powerful tool to say “if you do x, this will happen vs. if you do y, this will happen” — supported by facts and evidence of real impacts to the CPG. The good news for consumers is that retailers are starting to fight back more successfully than a year ago.

Prices can fluctuate. Food is a commodity and sometimes economic or supply/demand issues impact pricing both directions. Gas prices go up and down. So, why not anything else in retail? Pricing is a strategy with many factors to consider.

CPG cannot lower prices until their own cost of doing business declines, and even so, it’s unlikely because inventory already exist in their own warehouses, as well as in retailer DC’s, with product that was purchased, or made, at higher costs. So, promotions will be a better response than lowering prices.

The playbook for CPG price increases was written during the 70’s era of “wage and price controls” instituted by the Nixon administration. While intended to curb inflation, the policy had the ironic side effect of incentivizing manufacturers to take the maximum allowable base price increases – whether their costs increased or not. They could always give the difference back to shoppers in the form of price promotions, or so the reasoning went.
The lesson learned then was to never go back. (It also created a heyday for TPRs, FSIs and double-coupon policies.)
Brands will always fiercely protect hard-won margin gains. They buffer some increases in ingredient, production and distribution costs, but eventually will always seek ways to pass these along too. Moderating inflation still gives them cover (and some reasons) to sustain recently elevated prices.
Ulukaya is right of course that most brands retain the benefits from lower input costs. Only a few pure commodity items will fluctuate downward. Notice we’re not talking about egg prices so much lately.

CPG’s cannot lower costs until they begin paying less for their own costs and expenses to operate, make products, and manage their existing inventories of finished goods that were already at higher cost when made. The better approach is promotion.

‘Sticky downwards’ pricing is common across so many areas of consumer spending. When the price of crude oil jumps, petrol/gasoline price does to – but when crude drops it takes much longer for the consumer to benefit.
Some might argue that consumer goods are much more complex hence this becomes more difficult to understand. But there is a lot of talk about this phenomenon – and right now certain elements of the media in the UK are looking very carefully at supermarkets and potentially blaming them for ‘pricing issues’ – when their costs – labour, energy etc – have increased considerably so it is much more difficult to understand.
For me the big surprise is that competition authorities have never (that I am aware of) comprehensively looked into the relationship between commodity price changes and consumer prices with a view to acting in relation to price stickiness – perhaps it is time they do.