commercial strategies, Marketing and Sales to adapt the offer

In 2022, the return of inflation has pushed prices down by 5% to 6% overall, and by over 12% in food or daily products. This new situation has shaken the commercial policies of manufacturers and distributors. Everyone wondered how this label waltz would dance to anxious consumers whose purchasing power was under attack.

“The question is decisive at the beginning of 2023. Distributors are forced to pass on some of the double-digit increases demanded by their suppliers. They have to compensate for the increase in their costs, especially energy. All this creates a threat of at least 6% inflation at the end of the first half of the year, which will be added to 12% in 2022”, – IRI panelist Emily Mayer analyzes.

Bestsellers

The hurricane cheapened strategies that had been in place for a decade. In the daily newspaper sector, super and hypermarkets have played with zero inflation and even deflation until 2019 and Egalim’s law. Elsewhere, the flattening of margins between products smoothed the shocks. “Companies can no longer be content to work on the endpoints of their offerings. Bestsellers can no longer be merciless,” says Simon-Kucher’s price expert David Vidal.

Big brands are ramping up promotions, even Leclerc, which is doing little. All have compiled a list of items with blocked prices. Increases are made every three or four months in a sequence and are delayed to avoid a shock effect. Distributor brands as well as first price ranges are highlighted. The former rose from 27% to 33% of sales, while the latter experienced growth of more than 7% (mid-December).

Manufacturers are reducing their assortment and shutting down certain production lines to save money. Distributors are reducing their offerings to optimize their purchases and supply chains.

“Price sensitivity is not the same for all products,” exasperates David Vidal, who presents the differentiation of the offers of brands, each emphasizing “its” choice. “The difference between the cheapest and most expensive channels has increased from 16% to 25%,” he already notes. Monoprix no longer plays the same game as Lidl or Leclerc.

Arbitrations

The catering sector has accelerated price increases for its menus at the end of 2022, after slightly delaying raising prices in the face of a difficult start to the year. Half of the professionals believe that they will continue the movement in 2023. According to Foodservice Vision, the increase in commodity prices they experienced in the fourth quarter was still 12.7%.

Restaurants adapt their offers to avoid scaring away customers due to overpriced prices. They play especially on ingredients. Brands that specialize in red meat are making chicken-based dishes or pushing cheaper cuts of beef. There are more seasonal vegetable offerings. The option to use the quantity effect during price negotiations with suppliers is slightly reduced.

The challenge is also to maintain the desire of consumers who tend to rein in their unrestrained spending. Studies show that eating out is the number one trade-off. Feed prices are therefore kept in token crops. Some low-cost offerings are popping up on high-end brands. Pizza and Italian cuisine brand Del Arte is testing a subscription formula that allows you to eat one of the selected dishes every day in thirteen restaurants.

David Vidal says, “The traditional menu has a psychological effect. “Sometimes you have to go so far as to eliminate it.” For the price specialist, models must change. He has his sights set on a subscription (Monoprix and Casino already offer a 10% discount for less than €10 a month, Carrefour is testing it) or anything at Club Med. “The customer must have a reason to come, other than price,” he summarizes.

It is available for rent

According to the Roland Berger firm, the price increase in the automotive sector in the third quarter of 2022 reached 18% over the year. Increase due to rising cost of raw materials and logistics, persistent shortage of semiconductors. Assembly lines are idle and the supply of new cars cannot keep up with demand. Brands take advantage of this imbalance to increase their prices two to three times a year.

To pass the pill on to buyers, builders are developing leases with an option to purchase (LOA), which have become the majority in the private market since last year. A price increase of 1,500 euros spread over four years increases monthly payments by only about twenty euros. In addition, the residual value of the car also increases.

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