Big A-brand manufacturers like Unilever, Kimberley-Clark, Procter & Gamble, Danone and Nestlé are raising prices due to the sharp increase in raw material, energy and shipping costs. In order to maintain margins, the giants have chosen to pass on the price increase to retailers. As a result, the multinationals could report revenue plusses in their financial results of 2021 YTD.
Supermarkets are faced with a dilemma. Are they going to pass on the price increase to their customers on whom inflation is just dawning? Or will they absorb all or part of the increase and continue with lower margins? Food retailers in Europe have high fixed costs and wafer-thin margins of 1-3%, which gives the companies little room to play. Non-listed retailers like discounters Lidl and Aldi and cooperatives in various countries may have more leeway. The general expectation is that there will be price increases of A-brands in supermarkets. IRI forecasts this will drive more consumers to retailers’ own brands with a better price quality ratio.