“Many retailers, restaurants and other consumer companies have seen sales fall as shoppers pull back their spending. Businesses are now trying to convince customers that they offer the best deals, fueling a rise in discounts, promotions and value meals.” “Consumers are fed up with deceptive pricing, said Jean-Pierre Dubé, a professor of marketing at the University of Chicago Booth School of Business. They've seen smaller items on shelves, paid tacked-on fees and felt pressure to tip workers for things they didn't tip for in the past.” “Grocery prices have risen just 1% in the past year, according to data from the U.S. Bureau of Labor Statistics. But food at home prices have climbed more than 24% since May 2019, stretching consumers' wallets and stoking anger with companies.” “Consumers' buying power has also increased as inflation cools and the job market remains strong, boosting real hourly earnings for the average private sector worker, according to the BLS data.” “Other key costs are raising Americans' expenses, such as electricity and rent, which have climbed over the last 12 months.” “In a Pew Research Center survey from May, 62% of U.S. adults said inflation was "a very big problem in the country today," a higher percentage than any other issues they were asked about including illegal immigration, gun violence, violent crime and the federal budget deficit.” “That percentage has held roughly steady, even as inflation cools. In the year-ago survey by Pew, 65% of Americans said inflation was a very big problem.” - Melissa Repko, Amelia Lucas
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Inflation may be cooling, but consumers’ outrage over higher prices is running hot. TikTok users blasted Walmart for rolling out digital shelf labels that allow it to quickly raise and lower prices. Wendy’s backpedaled after its CEO suggested the burger chain may start using dynamic pricing, the practice of raising and lowering prices based on demand. At some Chipotle locations, customers filmed workers to try to make sure they didn’t skimp on their burrito bowls. The three joined a growing list of consumer brands contending with customers’ deep frustration over high prices — and wariness that prices will only rise more. Many retailers, restaurants and other consumer companies have seen sales fall as shoppers pull back their spending. Businesses are now trying to convince customers that they offer the best deals, fueling a rise in discounts, promotions and value meals. Consumers are fed up with deceptive pricing, said Jean-Pierre Dubé, a professor of marketing at the University of Chicago Booth School of Business. They’ve seen smaller items on shelves, paid tacked-on fees and felt pressure to tip workers for things they didn’t tip for in the past. “We’re reaching a boiling point on this,” he said. The companies stocking grocery aisles contend consumer perception is skewed. Grocery prices have risen just 1% in the past year, according to data from the U.S. Bureau of Labor Statistics. But food at home prices have climbed more than 24% since May 2019, stretching consumers’ wallets and stoking anger with companies. Consumers’ buying power has also increased as inflation cools and the job market remains strong, boosting real hourly earnings for the average private sector worker, according to the BLS data. Other key costs are raising Americans’ expenses, such as electricity and rent, which have climbed over the last 12 months. In a Pew Research Center survey from May, 62% of U.S. adults said inflation was “a very big problem in the country today,” a higher percentage than any other issues they were asked about including illegal immigration, gun violence, violent crime and the federal budget deficit. That percentage has held roughly steady, even as inflation cools. In the year-ago survey by Pew, 65% of Americans said inflation was a very big problem. Inflation has also become a major talking point on the presidential campaign trail. Former President Donald Trump has blamed President Joe Biden, while has Biden accused companies of greed.
Inflation outrage: Even as prices stabilize, Walmart, Chipotle and others feel the heat from skeptical customers
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Bad news for those who blame Biden for higher grocery prices?: "Target said Monday it plans to slash the price of bread, coffee, diapers and thousands of other everyday items this summer, joining other retailers looking to kickstart business by catering to inflation-weary consumers. Target is cutting its prices because "consumers are feeling pressured to make the most of their budget," EVP Gomez said in a statement. Other staples being repriced include fruit, milk, meat, peanut butter, pet food, vegetables and paper towels. Target said it has already lowered the price on roughly 1,500 items, and the remaining cuts will take effect in coming weeks. The lowered prices will also be available through Target's website and shopping app. The move comes as the U.S. economy is slowing. Although inflation continues to ease and overall consumer spending has remained solid this year, recent economic signals suggest Americans are becoming more frugal. The median rise in monthly household spending in April fell to 4.6%, the lowest reading in three years, according to data from the Federal Reserve Bank of New York. The pullback in spending is also affecting other industries, including fast-food giant McDonald's and casual-dining chains such as IHOP and Applebee's. In April, grocery chain Giant Food cut the price on hundreds of its private-label items. Arts supply retailer Michaels also lowered prices in April, slashing the cost of paint, markers, pens and other products. https://lnkd.in/ehzsTWRA
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“The cost of everyday items topped Americans’ economic worries in a Pew Research Center survey conducted Jan. 16 to Jan. 21. Seventy-two percent of respondents said that they were “very” concerned about the price of food and consumer goods.” “Though many input cost pressures for businesses have eased, expenses are climbing faster than before the unprecedented demand boom of 2021. Most companies are seeing costs up around 3%, still higher than pre-pandemic inflation of 1% to 2%, according to Edward Jones analyst Brittany Quatrochi.” “Retailers, including Target and Kroger, have rolled out new private brands to better compete with national brands and undercut them on price.” “By stealing away sales, retailers can pressure national brands to lower an item’s price, introduce a cheaper version or offer a discount.” “Some industry watchers expect a meaningful wave of price cuts as food makers struggle with weaker demand and lagging sales growth.” “Historically, food deflation happens about once a decade and lasts about eight months, according to Thomas. The last time was in 2016 and 2017, and Walmart was the biggest winner. Rival Target did not see the same benefit.” “Even some of the biggest U.S. brands have signaled that consumers’ tolerance of higher prices has worn thin. Some companies have said they’re done hiking prices or pledged that the increases will be more modest this year.” “According to a KeyBanc estimate, a 1% drop in food prices would add $1 billion per month more to consumer spending, and lower-income households would benefit the most. But shoppers can choose to hang onto those savings instead of spending the extra cash.” “Just as inflation has become a dirty word, deflation can be one, too, said Greg Melich, a retail analyst for Evercore ISI.” “Melich said if customers spend less on necessities like food, they may buy more discretionary items, “but you can’t assume there’s a one to one transfer.”” “Wall Street reflected those concerns in November when Walmart said deflation could be coming soon. Shares of the retail giant slid about 8%, their worst day in over a year at the time. (Walmart’s shares have been hovering near an all-time high).” - Amelia Lucas, Melissa Repko
Consumers are tired of inflation. But some retailers fear falling prices
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Global Leader of Marketing, Sales & Pricing Practice | Managing Director & Senior Partner at Boston Consulting Group
Target made two major announcements this week that underscore the vital importance of getting pricing strategy right. This morning, the retailer said that comparable sales declined by 3.7% in the first quarter of 2024, while its gross margin rose by 140 basis points year on year. Those financial results follow Monday’s announcement that Target will cut prices on 5,000 popular items, including major national brands as well as its own brands. To reinforce the overall message and guide consumers to the savings, Target will communicate the lower prices at shelf with prominent red tags. While some consumers will certainly welcome the lower prices after the cumulative effects of more than two years of high inflation, succeeding with these price cuts is not as simple as it appears. Beyond whether the math will work sufficiently to reverse the sales decline, the cuts will have effects on the power dynamics in the sector as well as on Target’s own price image. Measuring success starts with the fact that Target, like most retailers, plays two pricing games simultaneously. It plays the Power Game in its interactions with major CPG companies and plays the Uniform Game day-to-day in its individual stores. Two tenets of the Power Game are the preservation of balance of power and the importance of game theory, because every deal between a retailer and a supplier has a direct or indirect effect on other relationships. How will CPG companies support Target’s price-cutting efforts? Some may be reluctant, because their other retail partners may demand similar levels of support, potentially igniting a downward price spiral. Other CPG companies may look for adjustments to trade terms instead of prices, as we described in last week’s 𝘎𝘢𝘮𝘦 𝘊𝘩𝘢𝘯𝘨𝘦𝘳 𝘯𝘦𝘸𝘴𝘭𝘦𝘵𝘵𝘦𝘳. Then there are the consumers themselves. An article this week from Vox (see the link in the comments) shows that some segments of US consumers continue to spend, despite high interest rates and persistently high inflation. Winning the Uniform Game requires a deep knowledge of price elasticities, and Target is betting that the lower prices will be sufficient either to lure more consumers or drive higher volumes as consumers stock up for the summer and for upcoming holidays. But these gains will need to offset the foregone revenue from customers who would have paid the previous prices anyway. The lower prices also raise the question of how well Target can own a lower-price positioning in a market where Walmart, Aldi, and Costco have built their entire business models around a low-price premise. Winning with price cuts is rarely as easy as it seems on the surface. It will be interesting to see how this decision works out for Target. https://lnkd.in/gk4Y4zyG
Target to lower prices on thousands of basic items as inflation sends customers scrounging for deals
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Some welcome news for cash strapped shoppers this morning with the news that grocery inflation in the UK fell from 11% to 9.7% over the last 4 weeks. This marked the first time since July 2022 that the headline rate returned to single digits. Scratch away at the surface however and all is not perhaps as it seems, with the reduction being largely driven by discounting, with a higher proportion of promotional sales as the grocers look to build consumer loyalty on the run up to the crucial Christmas trading period. Further details show that of the so called "everyday items" only butter, pasta and milk cost less than 1 year ago. There was also a continuation in trend that has seen own label sales continue to outperform branded sales every month since February 2022 as consumers continue to tighten their belts. Of the grocery chains, Lidl saw the fastest sales growth during October as cash strapped consumers continue to seek value for money at the discounters. It will be interesting to see how the next couple of months play out as the grocers go head to head to win their share of wallet on the lead up to Christmas. #ukeconomy #ukinflation #groceryretail https://lnkd.in/eybZf6d6
Grocery inflation 'back in single digits' - as supermarket with fastest sales growth named
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Consumers continue to change between what, how much, what brand and where they purchase groceries in an effort to balance budgets, despite the moderating rate of #inflation. Consumers don't think month-to-month, but are reacting to the cumulative impact from years of high inflation in all areas of life. Per Circana for the 4 July weeks: - Shopper choices are all but consistent. During the same visit, consumers premiumize some purchases while going ultra value on others. The overall savings strategy focuses on shopping more, across more stores, but buying fewer items. - Promotions are gearing up across the store nearing 2019 levels, but the depth of discounts isn’t always there leading to subdued incrementality. - July Fourth weekly sales grew YOY with the remaining 3 weeks down 2-3% in units/pounds. It illustrates the power of holidays/celebrations. Amazon Prime Day is a, well, prime example of creating your own success. - Home-cooking is typically down during the summer and 2023 was no exception. July was a big month for deli-prepared, with unit gains for all the big sellers, pizza in particular. See IDDBA for more information. - #meat pounds moved back to within a percent of year ago levels and deflation in bacon, sausage, chicken, pork and more, further affected dollar sales. Report made possible by Hillphoenix - For the second time this year, fresh #produce moved more pounds than YA levels. Joe Watson, CPP will have the detail! - #seafood is, by far, the smallest perimeter department and demand continues to be slow. Crab sales remain strong on favorable pricing, while salmon sales are 2.5x that of the number two seller. - #egg prices are now trending much lower, affecting dollar sales, but dairy powerhouses cheese, milk, yogurt and eggs are all holding their own. Ping for the reports or more info!
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Walmart CEO Doug McMillon said Thursday that the US food industry may be heading into a period of deflation after three years of punishing price hikes that have caused sticker shocker for shoppers at the grocery store. Food prices have increased 25% since the pandemic started. “We may see dry grocery and consumables start to deflate in the coming weeks and months,” McMillon said. Walmart could enter “a deflationary environment.” Walmart is the largest retailer in the United States, and groceries make up more than half of its sales. Food prices rose 3.3% annually in October from a year ago, according to the latest reading from the Labor Department. But prices on some staples such as bacon, seafood and eggs have dropped. Prices on appliances, phones, airline tickets and toys have all dropped, according to the Labor Department. Deflation would be welcome news for shoppers because it means lower prices. But it could be dangerous for the economy. Falling prices can indicate weak demand, and consumer spending is a big portion of the economy. If you think prices will go down in the future, you may delay making a lot of purchases today. When many people start to think that way, people spend a lot less money. That causes employers to lay off workers and can put an economy into a recession. It’s also a lot harder for central banks to get an economy to grow if it slips into a period of deflation versus inflation. The Federal Reserve has been raising interest rates to cool the economy down.
Walmart CEO says food deflation may come soon | CNN Business
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Senior Marketing Manager at H.P. Hood LLC | Strategic Alliances | CPG | Branding | National Promotions
No matter which way inflation goes in 2024, Walmart is feeling prepared to handle shifting consumer spending as a response to changing food prices, the retailer’s CFO, John David Rainey, said Wednesday at the Morgan Stanley Global Consumer and Retail Conference. Walmart has been surprised at the resiliency of consumers in the face of high prices throughout 2023, Rainey said, adding that people have been tending to buy less general merchandise because they are spending more on food. “Their dollars aren’t going as far but they’ve still continue[d] to spend and each quarter this year has been pretty consistent. ... We saw that same consistency until October,” he As Walmart approaches 2024, Rainey said the retailer hasn’t seen enough changes in consumer spending to dramatically change its merchandising or pricing strategies. “If times get tougher and there’s probably more pressure on [the] consumer, again, I think our value proposition resonates,” Rainey said. “If we get to a better, healthier economy and we see more growth, I think a lot of the things that we’re leaning into ... really resonate with customers as well.” Because general merchandise generally yields higher gross profits than grocery for Walmart, the retailer wants to see the mix of products it sells shift toward those goods if consumers have more spending power, Rainey said. #groceryindustry #pricing Catherine Douglas M.
Walmart’s CFO talks inflation, e-commerce profitability
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