Kroger Okay with Brand Price Increases
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.
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?