All eyes Thursday will be on the release October’s U.S. consumer price index (CPI) figure, a benchmark reflecting the rate of inflation. Some food prices, such as orange juice, have already reached record levels and are expected to go even higher as the impact of Hurricane Ida on Florida’s citrus industry is reflected in prices.
But inflation has impacted prices across the board — from juice to jeans — prompting consumer products companies to find new ways to please the consumer while growing profits.
SAP’s Take
For more than two years, consumer products companies have been grappling with supply chain disruptions, labor shortages, sustainability rules, war-related food ingredient shortages and now the newest factor: inflation-induced consumer buying patterns.
“These various forces are causing massive amounts of complexity in the business,” said Edward Kenney, SAP senior vice president of Consumer Products, Industry Business Units. “Their costs are increasing at a rate they can’t pass along.”
In some cases, producers are shrinking the size of their products while holding prices. In others, they are looking to change their formulas, Kenney said.
As consumer products companies are limited in their ability to pass along full cost increases, inflation is fueling their chief anxiety: how to grow profitability.
“It used to be very consistent and very easily predicted,” Kenney said. “They attracted new customers in new geographic areas. That kind of expansion has really hit the end of the road. Now, you have to get more of a share of a wallet of a given customer who has gotten infinitely more selective and has infinitely more choices than they’ve ever had.”
