Corporations that took advantage of inflation at grocery stores and restaurants by raising prices are reluctant to give up their margins, reports The New York Times. Evidence suggests, however, that consumers are retaliating by cutting back on high-priced items or trading down to less costly alternatives.
Earnings reports from major brands show that some of the biggest CPG companies raised their prices last quarter, and experienced dramatic growth. Sucharita Kodali, a retail analyst at Forrester, feels these brands risk alienating consumers with their inflated price tags.
“Customers may or may not come back,” she said. “At some point, they will say enough is enough.”
Many brands, including PepsiCo, Nestlé, and Unilever are raising prices enough to offset the drop in sales volume. Unilever, for example, raised prices on items like Hellmann’s mayonnaise by 13.4 percent but only experienced a volume sales decline of 1.3 percent for the product.
But shoppers are likely to continue to change their buying habits as brands continue to incentivize them to buy cheaper or generic-brand products.
“You basically introduced a bunch of people who were your audience to your competitors,” Kodali said. “What you end up seeing is a trade-off.” Full Story (Subscription Required)
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