Inflation and CPG brands

Data Technology , Industry Trends

While it would be a mistake to point to one specific cause of inflation, it’s certain that the overall rise in prices and consequent decreased purchasing power much of the globe is now experiencing is due in some degree to the Covid pandemic.

An above-average surge in inflation spread throughout much of the world in the beginning of 2021. Presently, the trend shows no signs of relenting and prices are now at a 40 year high, and rising faster than anytime since the Great Recession. CPG brands are no exception.

“Most products and services have their own costs, competition, and value to customers, and require unique optimal pricing tactics.”
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This means it’s important to look at each product, channel and format individually when considering price increases on the digital shelf.

Another common error is attempting to push large price increases through to retailers, when actually being ready to accept much smaller ones. While there is some wisdom to this approach, the amount of the increase should be looked at judiciously because if it’s artificially inflated it could erode trust and make retailers less likely to take price requests seriously.

The opportunities for CPGs inherent in inflation

For some products, inflation surges such as the current one contain an opportunity to raise margins.

By pricing to the value of a product as opposed to just the cost, CPGs can uncover drivers of profitability. Knowing where products deliver the most value to customers is key. Focussing on how to expand on those drivers by creating new value or using pricing and cost management strategies can yield positive results.

Also, learn how to deliver products as efficiently as possible without taking away the customer experience. When these ways of working are determined, they become a capability.

In this way, inflation becomes a springboard—an opportunity to transform old ways of doing things into new data, technology, and management strategies. All this can lead to enhanced customer experiences and improved economics.