Price increases at the shelf may slow next year as a majority of consumer packaged goods manufacturers and retailers believe price points are “more important” in today’s marketplace. Fewer than 40 percent of product makers say they plan to increase their list price in the first half of 2023, according to a report by Advantage Sales, a division of Irvine, California-based Advantage Solutions.
The “Advantage Sales Outlook,” based on more than 100 responses to a survey of selected clients and customers, found one-fourth of manufacturers plan no price increases and 37 percent are unsure if they’ll take a first-half price hike.
When list price bump-ups occur, 62 percent say they are passing most of the increase to the shelf, but still compressing their margins. Five percent say they’re raising retails higher than the increase to enhance their margins.
“We’re seeing manufacturers and retailers considering and implementing new tactics to combat the effects of inflation on their costs and on shoppers’ price sensitivity and the negative impact of continued supply chain challenges,” said Jill Blanchard, president, client solutions for Advantage Solutions.
“In some areas, they’re on the same page and working together for mutual benefit. But there are areas where their individual goals may be at odds with those of their business partners.”
Blanchard pointed to other key findings in the report:
- Manufacturers’ most-cited strategies for navigating inflationary costs in the first half of 2023 are investing in supply-chain efficiencies and enforcing current payment terms.
- During the past six months, six in 10 surveyed manufacturers have decreased their trade spending. Eight in 10 are planning to reduce trade marketing funds in the first half of 2023 and seven in 10 will cut other marketing spending.
- Retailers are focusing primarily on price points; they report planning to expand private-brand assortments, increase promotional offerings and consider longer-term price reductions. Manufacturers’ top strategy is marketing their products as “trusted, high-quality” brands.
- Nearly nine in 10 retailers say their assortments will include more private brands over the next 12 months. To compete, manufacturers say they’ll lean into product innovation, marketing and new packaging architecture.
- Despite continued investments and opportunities in digital commerce, manufacturers and retailers expect most of their growth to come from brick-and-mortar sales.
Advantage Solutions is a provider of sales and marketing solutions to consumer goods companies and retailers. Headquartered in California, it has offices throughout North America and investments in select markets throughout Africa, Asia, Australia and Europe through which it serves the global needs of multinational, regional and local manufacturers.
