The grocery industry is changing tactics to manage inflation

On-shelf price increases could slow next year as the majority of consumer packaged goods manufacturers and retailers believe price levels are “more important” in the current market and less than 40% of say they plan to raise their list price in the first half. by 2023, according to a report by Advantage Sales, a division of Advantage Solutions.

“Advantage of sales prospects | October 2022,” based on more than 100 survey responses from select Advantage Sales customers and customers, found that a quarter of manufacturers are not planning any price increases and 37% are unsure if they will accept a price increase in the first half.

When list price increases occur, a majority of retailers (62%) say they pass most of the increase onto the shelves, but still squeeze their margins. Very few (5%) report raising retail prices beyond the increase to improve their margins.

“We are seeing manufacturers and retailers considering and implementing new tactics to combat the effects of inflation on their costs and on buyers’ price sensitivity and the negative impact of ongoing supply chain challenges. “said Jill Blanchard, President, Client Solutions for Advantage Solutions. . “In some areas they are on the same page and working together for mutual benefit. But there are areas where their individual goals may conflict with those of their business partners.

Blanchard highlighted other key findings from the report, including:

  • The most cited strategies for manufacturers to manage inflationary costs in the first half of 2023 are to invest in supply chain efficiencies and to enforce existing payment terms.
  • In the past six months, six out of 10 manufacturers surveyed have reduced their business expenses. Eight in 10 plan to reduce trade marketing funds to some degree in the first half of 2023 and seven in 10 will reduce other marketing expenses.
  • To meet the needs of price-conscious consumers, retailers primarily focus on price points; they say they plan to expand private label assortments, increase promotional offerings and consider longer-term price reductions. The main strategy of manufacturers is to market their products as reliable and high quality brands.
  • Nearly nine out of 10 retailers say their assortments will include more private labels over the next 12 months. To be competitive, manufacturers say they will rely on product innovation, marketing and new packaging architecture.
  • In the event of deflation, most manufacturers will invest in their brands through marketing; half expect to reduce their savings to bottom line to improve their P&L. However, most retailers would consider lowering their daily price and increasing promotions.
  • Despite continued investments and opportunities in digital commerce, manufacturers and retailers expect most of their growth to come from physical sales.

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