The Wall Street Journal this morning has a piece about how "supermarkets and distributors are pushing back on higher prices from food makers, as escalating inflation drives more consumers to rethink their spending.
"Kroger Co. and other grocery chains said they are asking brands to prove why higher prices are necessary before accepting them, and warning manufacturers that they will stop carrying products if food companies won’t negotiate prices. Some companies said they are switching to new meat suppliers with cheaper products, and are delaying price changes for items like canned goods."
The story makes the point that while retailers largely have passed along the price increases that suppliers have imposed in recent months without seeing any real erosion in demand, the sense is that this is changing; shopper resistance is likely to grow, they believe, as inflation persists and the nation considers the possibility of recession.
And so, retailers are pushing back - "checking prices of every commodity, as well as packaging costs, to make sure suppliers’ price increases are warranted, and … devoting more resources to run pricing analyses - looking for suppliers to negotiate increases and being willing to delist SKUs if manufacturers are unwilling to deal.
In the words of Stuart Aitken, chief merchant and marketing officer at Kroger: "We want a justification for it, and what we then do is validate."
- KC's View:
In other words … trust, but verify.
Retailers are entirely justified in taking this approach. This is the kind of environment in which both retail and packaged brands can lose market share, as some players may be better positioned - sometimes in terms of perception, sometimes in reality - to take advantage of tough economic times. Think dollar stores and limited assortment stores. And so, retailers and manufacturers may need to reduce their margins in some areas as a way of preserving relationships with their longterm shoppers.
At the end of the day, it is really important for retailers to figure out ways to give consumers wins wherever and whenever they can. Relationships with shoppers aren't just to be pursued during the good times. In fact, they are even more important during tough times, which can be an opportunity for retailers to demonstrate to their customers that they are on their side.
As it happens, the Wall Street Journal also has a story about how "many of the companies whose mission is to know the U.S. consumer are bracing for a shift in spending as inflation rises and stocks wobble. They are bringing back more bargains, cheaper store brands and rewards programs for shoppers who want to save where they can even as some continue to spend robustly on everything from apparel to pet food … The new product selections, prices and marketing from some of the country’s biggest consumer brands and retailers are the latest signs of how the pace of inflation and the Federal Reserve’s recent decision to raise interest rates are upending daily life for many Americans."