06-2024_Pricing-News: Black Friday and Black Week: Strategic Pricing Insights
Aggressives Pricing am Black Friday und in der Black Week: Unternehmen sollten das Zusammenspiel wichtiger Faktoren beherrschen.
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Increased food prices – who actually profits from it?
Since 2020, food in Germany has become about a third more expensive. Shopping for everyday products in supermarkets has become significantly more costly. This is evidenced by an analysis of the Handelsblatt Research Institute, which evaluated the balance sheets of 70 medium-sized and large brand manufacturers as well as the leading retail corporations in Europe. It also became clear who benefits from higher prices – and who loses.
The Handelsblatt thoroughly examined the consequences of inflation on September 16, 2024. In 2023 alone, the prices for food and non-alcoholic beverages increased by 12.4 percent according to the Federal Statistical Office – significantly stronger than general inflation. The newspaper stated on the basis of its own analysis that not only the manufacturers, but also the retailers make profits. “Manufacturers and retailers have been accusing each other for years of driving up prices to increase their profits”, the newspaper writes. In fact, both benefited equally.
Increased food prices: The winners are primarily the large producers and retail chains
This applies primarily to corporations in terms of producers – globally active brand manufacturers such as Nestlé (Kitkat), Unilever (Dove) or AB Inbev (Beck’s) and Coca Cola. The large European retail chains, including Rewe and Metro from Germany, Tesco from the UK and Carrefour from France, made profits to a similar extent, according to the report.
The losers in this price increase, which set in around the start of the Corona pandemic, are the consumers who have to dig deeper into their pockets. Prof. Dr. Hans-Christian Riekhof evaluates the development from the perspective of the pricing expert: “It is remarkable that both the manufacturers and the retailers were able to use the phase of stronger inflation equally to increase their profits. This can be seen as an indication that both sides master the process of pricing quite well – but at the expense of the consumer.”
Pricing expert Riekhof: Both sides have understood the process of pricing – at the expense of consumers
In addition to consumers, however, another major loser comes into focus: medium-sized companies, producers with less than one billion euros in sales, for example Frosta and Weleda. This is also noticeable in the increasing number of insolvencies of consumer goods companies. According to the Handelsblatt report, they cannot afford to fight tough price wars with the large retail chains, especially not over a longer period of time. Many medium-sized consumer goods manufacturers would have a weaker position in negotiations with domestic trade because they often generate a large part of their revenues in Germany and are therefore more dependent on the four large supermarket chains Aldi, Lidl, Edeka and Rewe.
Increased food prices: Medium-sized companies place less emphasis on the professionalization of pricing
“The study by the Handelsblatt Research Institute makes it clear that medium-sized manufacturers lack market power on the one hand”, says Riekhof. “On the other hand, they probably also lack pricing competence. At least that’s what our own empirical studies show: medium-sized companies place less emphasis on the professionalization of pricing.”
If the market continues to consolidate, and that’s where it’s heading, corporations will become more powerful, a consumer goods manufacturer is quoted. And that’s not good news for retailers either. If the middle class bleeds out in the long run, the trade loses the versatility of its range.
Retail Group Carrefour Practices Pricing Fairness and Takes a Stand Against Shrinkflation
The French retail group Carrefour presents itself as a fighter against hidden and unjustified price increases from a trade perspective. As reported by the food newspaper, products are currently being marked in its markets that cost the same with less content – this is then referred to as shrinkflation.
The retailer is therefore labeling a number of relevant foods with stickers that warn consumers of the hidden price increases. This once again shows that the trade is ready to confront the manufacturers and at the same time strives to present itself as an advocate of consumers.
“A similar direction was recently taken by the Penny campaign with the headline ‘The true costs’, in which a few products were given significantly higher prices for a limited time to express the hidden and indirect environmental costs. A remarkable approach to achieve media attention”, says Professor Hans-Christian Riekhof.
Links:
Read the full article in the food newspaper here (subscription):
https://www.lebensmittelzeitung.net/handel/nachrichten/preisstreit-carrefour-warnt-vor-versteckten-preiserhoehungen-173339