NEW YORK – The largest U.S. consumer products companies have enjoyed pricing power to a degree that put them among the top 100 global companies in terms of revenue, according to a new report from Deloitte LLP.
“Input costs rose dramatically, so price had to follow,” Deloitte says in its “2024 Consumer Products Outlook,” which asserts that suppliers of food, beverages, household goods, apparel and other consumer goods were able to raise prices as much, if not more, than suppliers in other categories, with smaller hits to volume and more margin growth.
“But the world is changing,” Deloitte says. “Further significant price increases might not be possible in an uncertain economy, where retailers are pushing back and consumers are unwilling to pay more and often trade down.”
As price-taking runs its course, the industry may be poised for a pivot to volume in order to sustain momentum, according to the report, which presents a “profitable-volume playbook” that the firm put together from an analysis of financial performance and earnings transcript, interviews with subject-matter specialists, and a survey of 250 consumer product executives worldwide.
“The consumer product executives we surveyed are quite bullish on the industry’s prospects and their company’s strategy and performance,” Deloitte says. “However, their optimism starts to wane when pressed on their ability to succeed on the specifics — areas like unit volume, pricing, or ability to grow margins. They are also decidedly realists regarding and don’t feel particularly optimistic about the global economy despite a stronger ending to 2023 than expected.”
Among insights offered in the report:
• Though price increases were greeted with some sympathy as inflation raged, four in 10 consumer products executives expect to see retailers push back on meaningful price increases in 2024.
• Customers are less willing, and less able, to pay higher prices. The surveyed executives called out consumer bifurcation into haves and have-nots and a growing unwillingness to buy at higher price points as among top consumer challenges for 2024. Few executives thought they could continue to raise prices without materially suppressing demand.
• Higher prices are driving product substitutions. Shoppers are looking beyond the grocery aisle. Nearly seven in 10 executives in the food and beverage category expect renewed competition from fast food and quick-serve restaurants.
• Core brands will become a bigger priority. Two-thirds of surveyed executives say they intend to emphasize their core brands over new branded-product introductions in 2024 as they seek to hold the line on prices.
The post Deloitte: CPG companies pivot to volume in 2024 appeared first on MMR: Mass Market Retailers.
View Original Article
