Tuesday, October 28, 2008

CPG faces pricing pressure

A few CPG companies (e.g., Hershey and Kraft) have raised prices recently -- passing on their increased commodity, packaging, and transportation costs -- and have managed to make the increases stick, with increased revenue the result.

The recent decreases in some of those costs, together with increased sales of private label goods, are now putting those price increases in question. Private label market share is up close to a point thus far in 2008, and retailers are starting to ramp up their PL efforts.

The analyst quoted in this article says:
He said he anticipates that any increased marketing spending made possible by falling commodity costs will go heavily into incentives and price promotion, given the weak economy and rising unemployment. "Everyone I talk to is worrying about what their revenue is looking like in the next few weeks or months," he said. "So value-conscious offers I think will dominate."
Which is pretty much what I said a few weeks ago.

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