Given the latest Which? report showing that household brands are disguising price increases by reducing pack sizes by up to 25%, and sometimes adding a price increase, NAMs may prefer to raise the issue with buyers upfront, rather than be forced to go on the defensive when the customer makes it an agenda item…
S: Just to let you know, we have managed to minimise the shelf price increase. We are recommending an increase of 6%
B: …and keeping the pack contents the same?
S: Well, not exactly… We are actually reducing the pack size by 15%. Our research shows that the consumer won’t even notice…
B: Hang on a second. There are a lot of savvy consumers out there, and they are even more value- conscious in the aisle…given all the price comparison tools available… and we even encourage the process instore. Are you guys doing the right research?
S: As champions of the consumer, we are very sensitive to their needs…
B: In reality we like to think that the consumer-shopper regards us as their champion, and given the latest Which research, they seem to need our help..
S: Well, as joint-champions of the consumer–shopper, we feel that the new pack represents good value for money..
B: So, let’s take your 750g pack, currently retailing at £3-25, giving us a margin of 18% i.e. cash of £0.585 . This gives the shopper a cost per 100g of £0.43.
Reducing the contents by 15% increases the cost per 100g to £0.51, an increase of 18.6%! Suppose we add your proposed 6% price increase, this makes the new retail price £3.45.
On a price per 100g of £0.54, that makes it a total price increase of 25.6%. And you think they won’t notice?
S: But the consumer doesn’t think like that..
B: We believe it gives us a competitive advantage to help them think like that, which is why we are putting the price per 100g under every shelf price…
S: Well, other members of the category are experiencing the same ingredient cost-pressures so they will have to follow our lead…
B: As you may have noticed, our private label has a 20% share of category, and we have not seen ingredient cost increases of anything like 15%.. and besides, your competitors have not moved yet…
S: But if you raise your shelf prices on our brand by our recommended 6%, you will generate additional margin of ...
B: You don’t get it. The sales of your brand are going to fall, making even less money for both of us, thereby diluting our category margin…
S: Perhaps you could lower your shelf-prices to maintain rate-of-sale….?
B: Presumably you will compensate me via increased margin?
SuperNAM: I hadn’t actually factored that in…
Buyer: Byeeeee…..
Adventures of SuperNAM (18)
S: Just to let you know, we have managed to minimise the shelf price increase. We are recommending an increase of 6%
B: …and keeping the pack contents the same?
S: Well, not exactly… We are actually reducing the pack size by 15%. Our research shows that the consumer won’t even notice…
B: Hang on a second. There are a lot of savvy consumers out there, and they are even more value- conscious in the aisle…given all the price comparison tools available… and we even encourage the process instore. Are you guys doing the right research?
S: As champions of the consumer, we are very sensitive to their needs…
B: In reality we like to think that the consumer-shopper regards us as their champion, and given the latest Which research, they seem to need our help..
S: Well, as joint-champions of the consumer–shopper, we feel that the new pack represents good value for money..
B: So, let’s take your 750g pack, currently retailing at £3-25, giving us a margin of 18% i.e. cash of £0.585 . This gives the shopper a cost per 100g of £0.43.
Reducing the contents by 15% increases the cost per 100g to £0.51, an increase of 18.6%! Suppose we add your proposed 6% price increase, this makes the new retail price £3.45.
On a price per 100g of £0.54, that makes it a total price increase of 25.6%. And you think they won’t notice?
S: But the consumer doesn’t think like that..
B: We believe it gives us a competitive advantage to help them think like that, which is why we are putting the price per 100g under every shelf price…
S: Well, other members of the category are experiencing the same ingredient cost-pressures so they will have to follow our lead…
B: As you may have noticed, our private label has a 20% share of category, and we have not seen ingredient cost increases of anything like 15%.. and besides, your competitors have not moved yet…
S: But if you raise your shelf prices on our brand by our recommended 6%, you will generate additional margin of ...
B: You don’t get it. The sales of your brand are going to fall, making even less money for both of us, thereby diluting our category margin…
S: Perhaps you could lower your shelf-prices to maintain rate-of-sale….?
B: Presumably you will compensate me via increased margin?
SuperNAM: I hadn’t actually factored that in…
Buyer: Byeeeee…..
Adventures of SuperNAM (18)
