Earlier this week the US Government released the January Consumer Price Index (CPI). The latest CPI report showed prices rising 7.5%, the fastest growth in over 40 years. January’s rise was faster than expected and drove speculation that the Fed would quickly increase interest rates to slow inflation. So, what’s going on with Fast Moving Consumer Goods?
Recent Inflation Drivers
Our latest research, done with our partners at NielsenIQ, indicates consumers are now paying 16.4% more for groceries vs. 2018. The major driver is continued promotion declines as both manufacturers and retailers pull back on trade spend. Prior to the Pandemic 1 of 3 units sold was on promotion now it is less than 1 in 4. While promotion frequency is declining, the quality of the promotions is also decreasing. Year over year promotion depth of discounts are down nearly 20%.
Price increases are consolidating across the store with most departments up 9-10% Year over Year. Meat increases have risen after a slight decline in December and are the fastest rising prices in the store along with Home Care, both up 14% year over year.
Retailer Response to Price Inflation
While the overall CPI is up 7.5%, price increases vary widely across retailers and sectors.
- Small independent retailers have the highest prices increases, with prices rising 30-40% faster than their national or chain competitors.
- Low priced national Mass retailers are continuing to improve their price position with their price gap improving by nearly 1pt.
- National high-low retailers are pulling back on promotions driving average price up faster than everyday price
- Dollar retailers are losing price position and market share
- Sector specific retailers such as Home Improvement (+15-20%) and Bev AL retailers (flat) are tracking their overall category level trends
Private Label Price Inflation
As prices have risen over the last year, branded prices have typically climbed faster than Private Label. Retailers have used Private Label to soften the blow of inflation on consumers. Private Label prices were rising 1-2% slower than branded products. Recently we have noticed a shift especially from leading national price retailers, including Mass retailers. As an example, over the last 8 weeks we have seen two rounds of Private Label price increases from a leading Mass retailer. It appears that cost pressures are becoming so steep that retailers are not able to hold down Private Label prices.
Aprices continuing to rise retailers and brands need high quality competitive data they can trust and dynamic AI enabled models that can recommend optimal price strategies. Engage3 powers retailers and brands with the industry’s most comprehensive pricing database and our Price Image models ensure that the pricing actions they take improve trips/loyalty, accelerate revenue growth and maximize margins.