Global-level shocks, including not just the pandemic but also extreme planetary weather conditions and international wars and conflicts, continue to disrupt and challenge manufacturers’ ability to get products into stores, retailers’ ability to ensure sufficient stock, and consumers’ ability to find the items they need at a reasonable cost. Even if the most intense inflation of recent years has eased somewhat (remember when eggs were $12 per dozen?), prices on many consumer goods remain troublingly high, with implications for every actor and every price in this supply chain.

In particular, consumers are frustrated and unwilling to keep spending more to get the same amount, or even less, on their regular shopping trips. As a result, their preferences have clearly shifted, toward less expensive and private-label offerings. Although this market has been growing steadily in recent decades, the tumult of the past few years has increase the pace of the transition. According to Nielsen reports, shares of private-label food items increased by 16 percent in a recent two-year period, for example.

Such expansion in private-label success is being egged on by retailers that are determined to keep their customers satisfied and prevent them switching to another, potentially lower priced store. In noting the vulnerability of national brands to price challenges, a vast number of retailers have initiated or expanded their private-label offerings. According to Target’s assessments, its store brands, like Good & Gather, have achieved growth rates nearly twice those of branded competitors.

But retailers’ responses are not limited to expanded store brand strategies. They also are actively pushing back against product manufacturers that continue to charge high wholesale costs. In France, Spain, Belgium, and Italy, the Carrefour grocery chain simply removed all PepsiCo. products from its shelves, until the beverage and snack provider agreed to lower the prices it was charging. In store aisles, consumers looking for Doritos or Pepsi instead will find signs, placing the blame on PepsiCo. for continuing to raise its prices at a pace even higher than the countries’ inflation rates. Notably, Carrefour also has been adding display signs to highlight the manufacturer practice of “shrinkflation”—that is, when companies subtly redesign their products so that the packages contain less volume but continue to charge the same price—so that consumers are not fooled by a hard-to-detect change in container size or shape.

For manufacturing brands, these trends have culminated in intense pressures. PepsiCo confronts the possibility of extended unavailability in Europe; Unilever (which owns brands like Dove soap and Ben & Jerry’s ice cream) has been forced to lower its revenue predictions and admit to substantial losses in many of its market segments. Procter & Gamble similarly lowered its profit forecasts for the coming year.

It may be hard to feel particularly sorry for these brands though. The past several years have seen them enjoy tremendous and increasing profits, due to some of the very same macroeconomic factors that are now creating the challenges. For example, noting that people suffering from post-pandemic stress were happy to pay more to access little daily luxuries, like really good snacks or fancy hair care products, many national brands flexed their pricing power to obtain the highest profits they could. Now that consumers are tired of paying those higher prices though, the manufacturers appear largely unwilling to lower the costs back down. They also claim that their own costs have risen, such that simply maintaining their margins requires these high price levels.

Discussion Questions

1. If you were advising a grocery retailer, how would you recommend it deal with continued high prices on consumer goods? If you were instead advising a manufacturer facing blowback for high prices, what would you recommend?
2. In your opinion, are prices for consumer goods ever likely to come down?

Sources: Richa Naidu, “Unilever’s US, European Market Share Slips as Private Label Booms,” Reuters, January 24, 2024; Mauro Orru, “Supermarket Giant Drops Pepsi and Lay’s over Price Increases,” The Wall Street Journal, January 4, 2024; Jesse Newman, “The Supermarket Aisle Where Prices Are Still Rising,” The Wall Street Journal, July 8, 2023