# Analysis-To raise prices or not? Consumer goods makers weigh bets on buyer strength
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-20
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Consumer Prices 2023 Forecast: Bounty Paper Towels, Cadbury
Meta Description: Stay informed on the latest trends in consumer goods prices, as manufacturers adjust their strategies in response to inflation and shifting consumer demand.
URL: https://financedigest.com/analysis-to-raise-prices-or-not-consumer-goods-makers-weigh-bets-on-buyer-strengthhtml

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By Jessica DiNapoli

(Reuters) – Prices of everyday basics like Bounty paper towels and Cadbury chocolate may rise again this year while those of others like Clorox Co wipes and Diet Pepsi are likely to stay steady, as manufacturers make differing bets on the strength of the consumer and their brands.

Consumer goods makers’ strategies on further price hikes depends on their leverage with retailers such as Walmart Inc and Tesco plc, who are pushing back against more increases, how much consumers need and want the items and their arrangements for buying volatile commodities, some of which are falling in price.

Once-in-a-generation levels of inflation, stemming from pandemic [supply chain](https://www.financedigest.com/how-to-bring-immediacy-back-to-the-supply-chain-with-faster-payments.html "How to Bring Immediacy Back to the Supply Chain With Faster Payments") snarls, government stimulus and the Ukraine war, have pinched shoppers’ pocketbooks globally.

In Britain, [consumers paid 16.7% more for food](https://www.financedigest.com/france-leans-on-retailers-to-help-consumers-cope-with-food-prices.html "France leans on retailers to help consumers cope with food prices") in the month to Jan. 22 [compared to the same period last year](https://www.financedigest.com/glastons-interim-report-1-january-31-march-2018-orders-received-grew-23-comparable-operating-profit-at-previous-years-level.html "Glaston’s Interim Report 1 January – 31 March 2018: Orders received grew 23%, comparable operating profit at previous year’s level"), while U.S. [prices for food eaten at and away from home](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll") rose 10.1% in the 12 months ended in January.

But, there are small signs the [pressure is easing](https://www.financedigest.com/analysis-china-central-bank-under-pressure-to-ease-is-hemmed-in-by-inflation-fed-jitters.html "Analysis-China central bank, under pressure to ease, is hemmed-in by inflation, Fed jitters"), with U.S. consumer [prices a month earlier declining for the first time in two-and-a-half years](https://www.financedigest.com/hong-kong-home-prices-drop-15-6-in-2022-snap-13-years-of-gain.html "Hong Kong home prices drop 15.6% in 2022, snap 13 years of gain"), due in part to gas prices.

As the [“tide is turning](https://www.financedigest.com/is-the-tide-turning-for-chinese-brands-overseas.html "IS THE TIDE TURNING FOR CHINESE BRANDS OVERSEAS?") a little bit,” some retailers are also now asking suppliers for “rollbacks” as the cost of fuel, for example, falls, another factor driving companies’ decisions, said KPMG consultant Sunder Ramakrishnan.

The retailer would [drop the shelf price](https://www.financedigest.com/german-residential-property-market-faces-risk-of-price-drop-diw-study.html "German residential property market faces risk of price drop – DIW study"), because manufacturers agree to sell it for less to the retailer,” Ramakrishnan said. “It’s been a fairly recent phenomenon. Not a lot of manufacturers are willing to volunteer to [cut price.”](https://www.financedigest.com/tesla-expands-discounts-with-price-cuts-in-europe-singapore-israel.html "Tesla expands discounts with price cuts in Europe, Singapore, Israel")

The cost of cardboard cases has decreased by as much as 50%, and transportation costs have plummeted as well, by 25-30%, [Reuters reported](https://www.financedigest.com/indonesia-to-tighten-used-shoe-import-controls-after-reuters-report.html "Indonesia to tighten used shoe import controls after Reuters report") last week. Some plastics and chemicals used in household goods have risen, executives have said, and labor remains costly.

Price hikes – or halts – are set to take [center stage](https://www.financedigest.com/2021-predictions-operational-resilience-takes-center-stage.html "2021 Predictions: Operational Resilience Takes Center Stage") at the Consumer Analyst Group of New York annual conference on Feb. 20 in Boca Raton, Florida.

DIFFERENT PREDICTIONS

After more than a year of consistent [price hikes](https://www.financedigest.com/investors-warn-big-consumer-firms-over-price-hikes-as-competitors-gain.html "Investors warn big consumer firms over price hikes as competitors gain"), some consumer goods makers such as Kraft Mac & Cheese manufacturer Kraft Heinz Co are pressing pause as they weigh consumer demand for their items.

[Kraft’s prices](https://www.financedigest.com/kraft-heinz-plans-more-price-hikes-as-sales-earnings-beat-estimates.html "Kraft Heinz plans more price hikes as sales, earnings beat estimates") went up 13.2 percentage points in 2022 over the prior year, according to financial disclosures. Kroger Co is promoting a 20-ounce bottle of Heinz ketchup for $2.49 – below the $3.18 [average price](https://www.financedigest.com/taylor-wimpey-espana-remain-cautiously-optimistic-as-average-selling-price-increases-by-20-4.html "Taylor Wimpey España ‘remain cautiously optimistic’ as average selling price increases by 20.4%") per unit of the condiment according to IRI, a Chicago-based market research firm.

Kraft-Heinz CEO Miguel Patricio said last week that private label, or store brands, are [gaining market share](https://www.financedigest.com/bayer-shares-gain-on-prospect-of-second-activist-pushing-for-change.html "Bayer shares gain on prospect of second activist pushing for change"), mainly from the company’s competitors.

It’s riskier for national brands to hike [prices on products where consumers are increasingly buying](https://www.financedigest.com/4-for-the-price-of-1-what-you-can-buy-in-the-uks-top-northern-cities-for-the-price-of-a-london-pad.html "4 for the price of 1: What you can buy in the UK’s top northern cities for the price of a London pad") store brand items, such as grocery and baby products, according to data from market research firm Numerator.

But other companies like Nestle SA, the world’s biggest food company, continue to plan [price hikes in the future to recoup margins](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") squeezed by high labor and fuel costs, a whiplash for consumers aiming to make sense of their household expenses.

[Prices on Nestle’s](https://www.financedigest.com/nestle-sales-soar-as-price-rises-drive-growth.html "Nestle sales soar as price rises drive growth") products including Coffee Mate creamers already rose 8.2% last year, with an 11.75 ounce package of its Stouffer’s French bread pizza selling for $3.48 at Walmart. Frozen pizza [prices have risen about 14% in the last year](https://www.financedigest.com/world-food-prices-rise-for-first-time-in-a-year-fao.html "World food prices rise for first time in a year- FAO"), according to IRI data.

Price, always a [major factor](https://www.financedigest.com/the-stir-to-be-different-a-major-factor-of-growth-of-the-flax-seeds-market.html "The Stir To Be Different A Major Factor Of Growth Of The Flax Seeds Market") for consumers along with quality, is now becoming even more important, said Mark Hosbein, an executive at consulting firm Magid. Magid’s data from surveys shows that [consumers are spending](https://www.financedigest.com/50-of-consumers-wont-spend-more-than-20-minutes-applying-for-financial-products-online.html "50% of consumers won’t spend more than 20 minutes applying for financial products online") dramatically more on groceries, rent and gas, forcing them to cut back on savings and eat out less.

Consumer sensitivity to prices is going up, even in the last couple months,” Hosbein said, adding that data [tracked by his firm](https://www.financedigest.com/sp-global-acquires-firm-to-bolster-capability-to-track-commodity-shipments.html "S&P Global acquires firm to bolster capability to track commodity shipments") shows shoppers are becoming less discriminating in what they buy and opting for whatever is cheaper.

For example, a shopper who wants blue, 100-thread count sheets but sees cheaper, lower-quality beige ones is now more likely to purchase those, Hosbein said.

[BIG BRANDS](https://www.financedigest.com/big-brands-set-to-miss-plastic-sustainability-targets.html "Big brands set to miss plastic sustainability targets") DIFFER

Brands that retailers and consumers see [“core” or “very strong” in their segment also have more pricing](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") power, Ramakrishnan said, because they help build sales for chains.

Coca-Cola Co’s CEO James Quincey, for example, said on Tuesday the company had “earned the right” to push [prices on to consumers](https://www.financedigest.com/ikea-reports-record-sales-as-price-hikes-offset-weakening-consumer-confidence.html "IKEA reports record sales as price hikes offset weakening consumer confidence") because its classic Coke and Fanta sodas lead the beverage category.

Executives at Bounty maker Procter & Gamble Co said the company was confident the U.S. [“consumer is going to hold up well” over the next](https://www.financedigest.com/britains-next-sees-lower-profit-in-2023-as-consumer-outlook-darkens.html "Britain’s Next sees lower profit in 2023 as consumer outlook darkens") few quarters, and planning more increases. A 16-ounce bottle of P&G’s Dawn Powerwash dish soap costs $5.99 on Target.com, after debuting at $4.99 about three years ago [according to media reports](https://www.financedigest.com/worst-flooding-since-1998-leaves-33bn-economic-toll-in-china-according-to-aon-catastrophe-report.html "Worst flooding since 1998 leaves bn economic toll in China, according to Aon catastrophe report").

[“Retailers cannot truly push back](https://www.financedigest.com/analysis-u-s-retail-traders-pile-back-into-options-as-meme-stock-mania-flares.html "Analysis-U.S. retail traders pile back into options as meme-stock mania flares") on prices … if the company has an important brand,” Bernstein analyst Bruno Monteyne said.

The average prices [consumers are paying](https://www.financedigest.com/best-paying-jobs-in-finance-consumer-services.html "Best Paying Jobs in Finance Consumer Services") for Kraft-Heinz and PepsiCo Inc products have risen faster than Nestle’s, another reason why both Kraft-Heinz and PepsiCo may be holding off on hikes for now.

PepsiCo CEO Ramon Laguarta has said he expects [shoppers to become more price-sensitive later in the year due to fears](https://www.financedigest.com/london-fears-losing-luxury-shoppers-to-paris-and-milan.html "London fears losing luxury shoppers to Paris and Milan") of a recession in the United States, its major market.

(Reporting by Jessica DiNapoli in New York and Aishwarya Venugopal and Mehr Bedi in Bengaluru, editing by Deepa Babington)


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