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<\/p>\nThere\u2019s no other way to say it: pricing has caught up to everyone. If the recent flurry of TikTok videos about McDonald’s Hash Browns has shown us anything, it\u2019s that companies simply can\u2019t raise prices forever. At some point, they\u2019ll price themselves out of the market.<\/p>\n
Within CPG specifically, prices are rising across the board. Raw materials are increasing. Shipping is up, as are shipping materials. Labor costs and rent are increasing. Places that were once prime for manufacturing \u2014 like China and Thailand \u2014 are more expensive than ever.<\/p>\n
Everyday Cost Curbing <\/strong><\/h2>\nOf course, there are opportunities to dial in, to try to curb costs without significantly disrupting the consumer. Companies that once offshored can certainly consider bringing manufacturing closer to home. Perhaps the labor will be more expensive, but the shipping is less and the timing is better. Decisions like these can ease operational costs, allowing companies to more easily forecast what they need, and when. But they only go so far in curbing costs.<\/p>\n
Package downsizing, more commonly known as shrinkflation, is another option. This keeps prices the same, but customers get a lot less for their dollar. Recent social media backlash reveals the risk of this approach and suggests that it cuts too close to the consumer\u2019s direct experience.<\/p>\n
When inflation is inevitable, what are some other options that allow you to meet company quotas without pushing your customers to the brink of their price elasticity?<\/p>\n
In a corner of the CPG sector, one industry is actively making strides to figure out a solution to rising prices \u2014 one that prioritizes keeping customers while also meeting the bottom line.<\/p>\n
Food for Thought: Strategic Case Studies <\/strong><\/h2>\nFrom rebranding to refocusing, the following four companies show us that rising prices don\u2019t always stymie revenues \u2014 or loyalty. CPG leaders would be wise to consider the following approaches:<\/p>\n
1. Emphasize a lower price point.<\/strong><\/h3>\nOnce the name most synonymous with \u201caffordable,\u201d McDonalds has come under fire recently for its $3 Hash Browns. In Darien, Connecticut \u2014 one of the wealthiest towns in America \u2014 a Big Mac meal will run you $18. Chris Kempczinski, McDonald’s CEO, said recently that the company will begin to pay closer attention to affordability by emphasizing more low-value options.<\/p>\n
Kempczinski\u2019s approach is worth noting here: If you dial in to your customers and their needs and then create options around them, you\u2019ll keep them coming back for more.<\/p>\n
Companies need to understand their consumer demographic goals: What price point are you going after? Are you entry level? Are you luxury? Are you middle of the road? You have to understand and make sure you’re catering to that customer. This doesn’t mean you can’t have some other price points in your offerings \u2014 far from it. But it does mean that you keep your customers front and center and offer them options that meet them where they are.<\/p>\n
Another option for McDonalds would be to focus on bundling. If it absolutely must increase prices to keep up with market value, where could it offer some of that back to the customer? Taking $1 off of a fountain drink (inherently more affordable) when customers purchase that more expensive item helps take some of that sting away.<\/p>\n
2. Focus on novelty and entertainment.<\/strong><\/h3>\nFirst there was \u201cThe Most Oreo Oreo.\u201d Then, there was \u201cSpace Dunk Oreo.\u201d<\/p>\n
Actually, these are just two of the most recent varieties to come out of one of America\u2019s favorite cookie companies. Its focus on novel \u201cone and dones\u201d offers us insight into the power of food as entertainment \u2014 and the impact of limited-time novelty.<\/p>\n
\u201cThe Most Oreo Oreo\u201d came out in January 2023 and was met with intense excitement. Oreo even offered pre-sales for particularly eager customers. And because that variety was limited-edition, it practically flew off the shelves.<\/p>\n
Oreo\u2019s recent Space Dunk Oreo, which supposedly tastes like outer space, has also done well. My local grocery store sold out of them quickly, and I was one of the customers who purchased a package \u2014 at a slightly higher price point than I would have paid normally.<\/p>\n
Novelty is fun and provides entertainment value. I\u2019ll never forget the image of my son and his friend in our kitchen, an Oreo container open on the counter. Both boys were seeing how many \u201cMost Oreo Oreos\u201d they could hold in their hands before posting photos to social media. They spent a half-hour in the kitchen enjoying (and freely promoting) the Oreo brand. They got a memorable experience out of a cookie.<\/p>\n
3. Try a rebrand.<\/strong><\/h3>\nA national cheese company came to us at an inflection point: Leaders discovered its product was no longer competitive among other basic cheddar offerings. They knew they had to keep raising prices in order to make a profit, but they had priced themselves out of their current market.<\/p>\n
At our advice, the leaders opted to rebrand.<\/p>\n
They upgraded the graphics on the brand packaging and refined the product language. They emphasized certain buzzwords they hadn’t stressed before: Imported. Made from milk of grass-fed cows. Aged two years<\/em>.<\/p>\nBy and large, people were willing to pay more per block because the company\u2019s rebrand effectively changed consumer impressions of the product. It became a high-end cheese made for a high-end experience, which helped justify its increased price point.<\/p>\n
The luxury tag and packaging paid for itself, and the cheese \u2014 once an expensive basic cheddar \u2014 became an affordable luxury product. The company met its margins and its cheese ultimately became a top seller.<\/p>\n
4. Lead with honesty.<\/strong><\/h3>\nIt\u2019s tempting to focus on how national corporations are combating rising prices, but that approach overlooks the important work small businesses are doing every day.<\/p>\n
There\u2019s a local diner not far from where I live. It\u2019s known in our community for a series of dishes, including its chicken wings.<\/p>\n
Five months ago, the diner needed to raise the price of its chicken to keep up with market value. The owners put an insert into menus with a clear note: \u201cThe price of meat has gone up so much, so we are forced to raise prices.\u201d They were honest and wrote in their own voice \u2014 no business jargon. They said they felt terrible about the price increase and promised \u2014 in writing \u2014 to go back to previous prices as soon as it was possible.<\/p>\n
The diner owner also added value where possible by offering complementary additions like a side salad to those wings should customers still want to buy them at that higher price point.<\/p>\n
Customers still had to pay more for their favorite dish, but the owners\u2019 honesty went a long way in keeping them coming back for more. A few weeks ago, when meat prices came down, so too did the price of everyone\u2019s favorite wings. The owners kept their word, further establishing trust and long-term loyalty. (And to boot: They corrected the price of the wings at the bottom of their menus in red Sharpie!)<\/p>\n
The Common CPG Imperative <\/strong><\/h2>\nWhether you take your cue out of the McDonald\u2019s playbook or run with a smaller, more local approach, the most important reminder is to understand your customers and what resonates with them. This, above all, is the path forward.<\/p>\n
Robert Gorin is a managing director and consumer products practice leader at Getzler Henrich & Associates LLC, one of the nation\u2019s oldest and most \u00a0respected middle-market corporate restructurings and operations improvement firms.<\/em><\/p>\n<\/div>\n
From rebranding to refocusing, the following four companies show us that rising prices don\u2019t always stymie revenues \u2014 or loyalty. CPG leaders would be wise to consider the following approaches:<\/p>\n
1. Emphasize a lower price point.<\/strong><\/h3>\nOnce the name most synonymous with \u201caffordable,\u201d McDonalds has come under fire recently for its $3 Hash Browns. In Darien, Connecticut \u2014 one of the wealthiest towns in America \u2014 a Big Mac meal will run you $18. Chris Kempczinski, McDonald’s CEO, said recently that the company will begin to pay closer attention to affordability by emphasizing more low-value options.<\/p>\n
Kempczinski\u2019s approach is worth noting here: If you dial in to your customers and their needs and then create options around them, you\u2019ll keep them coming back for more.<\/p>\n
Companies need to understand their consumer demographic goals: What price point are you going after? Are you entry level? Are you luxury? Are you middle of the road? You have to understand and make sure you’re catering to that customer. This doesn’t mean you can’t have some other price points in your offerings \u2014 far from it. But it does mean that you keep your customers front and center and offer them options that meet them where they are.<\/p>\n
Another option for McDonalds would be to focus on bundling. If it absolutely must increase prices to keep up with market value, where could it offer some of that back to the customer? Taking $1 off of a fountain drink (inherently more affordable) when customers purchase that more expensive item helps take some of that sting away.<\/p>\n
2. Focus on novelty and entertainment.<\/strong><\/h3>\nFirst there was \u201cThe Most Oreo Oreo.\u201d Then, there was \u201cSpace Dunk Oreo.\u201d<\/p>\n
Actually, these are just two of the most recent varieties to come out of one of America\u2019s favorite cookie companies. Its focus on novel \u201cone and dones\u201d offers us insight into the power of food as entertainment \u2014 and the impact of limited-time novelty.<\/p>\n
\u201cThe Most Oreo Oreo\u201d came out in January 2023 and was met with intense excitement. Oreo even offered pre-sales for particularly eager customers. And because that variety was limited-edition, it practically flew off the shelves.<\/p>\n
Oreo\u2019s recent Space Dunk Oreo, which supposedly tastes like outer space, has also done well. My local grocery store sold out of them quickly, and I was one of the customers who purchased a package \u2014 at a slightly higher price point than I would have paid normally.<\/p>\n
Novelty is fun and provides entertainment value. I\u2019ll never forget the image of my son and his friend in our kitchen, an Oreo container open on the counter. Both boys were seeing how many \u201cMost Oreo Oreos\u201d they could hold in their hands before posting photos to social media. They spent a half-hour in the kitchen enjoying (and freely promoting) the Oreo brand. They got a memorable experience out of a cookie.<\/p>\n
3. Try a rebrand.<\/strong><\/h3>\nA national cheese company came to us at an inflection point: Leaders discovered its product was no longer competitive among other basic cheddar offerings. They knew they had to keep raising prices in order to make a profit, but they had priced themselves out of their current market.<\/p>\n
At our advice, the leaders opted to rebrand.<\/p>\n
They upgraded the graphics on the brand packaging and refined the product language. They emphasized certain buzzwords they hadn’t stressed before: Imported. Made from milk of grass-fed cows. Aged two years<\/em>.<\/p>\nBy and large, people were willing to pay more per block because the company\u2019s rebrand effectively changed consumer impressions of the product. It became a high-end cheese made for a high-end experience, which helped justify its increased price point.<\/p>\n
The luxury tag and packaging paid for itself, and the cheese \u2014 once an expensive basic cheddar \u2014 became an affordable luxury product. The company met its margins and its cheese ultimately became a top seller.<\/p>\n
4. Lead with honesty.<\/strong><\/h3>\nIt\u2019s tempting to focus on how national corporations are combating rising prices, but that approach overlooks the important work small businesses are doing every day.<\/p>\n
There\u2019s a local diner not far from where I live. It\u2019s known in our community for a series of dishes, including its chicken wings.<\/p>\n
Five months ago, the diner needed to raise the price of its chicken to keep up with market value. The owners put an insert into menus with a clear note: \u201cThe price of meat has gone up so much, so we are forced to raise prices.\u201d They were honest and wrote in their own voice \u2014 no business jargon. They said they felt terrible about the price increase and promised \u2014 in writing \u2014 to go back to previous prices as soon as it was possible.<\/p>\n
The diner owner also added value where possible by offering complementary additions like a side salad to those wings should customers still want to buy them at that higher price point.<\/p>\n
Customers still had to pay more for their favorite dish, but the owners\u2019 honesty went a long way in keeping them coming back for more. A few weeks ago, when meat prices came down, so too did the price of everyone\u2019s favorite wings. The owners kept their word, further establishing trust and long-term loyalty. (And to boot: They corrected the price of the wings at the bottom of their menus in red Sharpie!)<\/p>\n
The Common CPG Imperative <\/strong><\/h2>\nWhether you take your cue out of the McDonald\u2019s playbook or run with a smaller, more local approach, the most important reminder is to understand your customers and what resonates with them. This, above all, is the path forward.<\/p>\n
Robert Gorin is a managing director and consumer products practice leader at Getzler Henrich & Associates LLC, one of the nation\u2019s oldest and most \u00a0respected middle-market corporate restructurings and operations improvement firms.<\/em><\/p>\n<\/div>\n
First there was \u201cThe Most Oreo Oreo.\u201d Then, there was \u201cSpace Dunk Oreo.\u201d<\/p>\n
Actually, these are just two of the most recent varieties to come out of one of America\u2019s favorite cookie companies. Its focus on novel \u201cone and dones\u201d offers us insight into the power of food as entertainment \u2014 and the impact of limited-time novelty.<\/p>\n
\u201cThe Most Oreo Oreo\u201d came out in January 2023 and was met with intense excitement. Oreo even offered pre-sales for particularly eager customers. And because that variety was limited-edition, it practically flew off the shelves.<\/p>\n
Oreo\u2019s recent Space Dunk Oreo, which supposedly tastes like outer space, has also done well. My local grocery store sold out of them quickly, and I was one of the customers who purchased a package \u2014 at a slightly higher price point than I would have paid normally.<\/p>\n
Novelty is fun and provides entertainment value. I\u2019ll never forget the image of my son and his friend in our kitchen, an Oreo container open on the counter. Both boys were seeing how many \u201cMost Oreo Oreos\u201d they could hold in their hands before posting photos to social media. They spent a half-hour in the kitchen enjoying (and freely promoting) the Oreo brand. They got a memorable experience out of a cookie.<\/p>\n
3. Try a rebrand.<\/strong><\/h3>\nA national cheese company came to us at an inflection point: Leaders discovered its product was no longer competitive among other basic cheddar offerings. They knew they had to keep raising prices in order to make a profit, but they had priced themselves out of their current market.<\/p>\n
At our advice, the leaders opted to rebrand.<\/p>\n
They upgraded the graphics on the brand packaging and refined the product language. They emphasized certain buzzwords they hadn’t stressed before: Imported. Made from milk of grass-fed cows. Aged two years<\/em>.<\/p>\nBy and large, people were willing to pay more per block because the company\u2019s rebrand effectively changed consumer impressions of the product. It became a high-end cheese made for a high-end experience, which helped justify its increased price point.<\/p>\n
The luxury tag and packaging paid for itself, and the cheese \u2014 once an expensive basic cheddar \u2014 became an affordable luxury product. The company met its margins and its cheese ultimately became a top seller.<\/p>\n
4. Lead with honesty.<\/strong><\/h3>\nIt\u2019s tempting to focus on how national corporations are combating rising prices, but that approach overlooks the important work small businesses are doing every day.<\/p>\n
There\u2019s a local diner not far from where I live. It\u2019s known in our community for a series of dishes, including its chicken wings.<\/p>\n
Five months ago, the diner needed to raise the price of its chicken to keep up with market value. The owners put an insert into menus with a clear note: \u201cThe price of meat has gone up so much, so we are forced to raise prices.\u201d They were honest and wrote in their own voice \u2014 no business jargon. They said they felt terrible about the price increase and promised \u2014 in writing \u2014 to go back to previous prices as soon as it was possible.<\/p>\n
The diner owner also added value where possible by offering complementary additions like a side salad to those wings should customers still want to buy them at that higher price point.<\/p>\n
Customers still had to pay more for their favorite dish, but the owners\u2019 honesty went a long way in keeping them coming back for more. A few weeks ago, when meat prices came down, so too did the price of everyone\u2019s favorite wings. The owners kept their word, further establishing trust and long-term loyalty. (And to boot: They corrected the price of the wings at the bottom of their menus in red Sharpie!)<\/p>\n
The Common CPG Imperative <\/strong><\/h2>\nWhether you take your cue out of the McDonald\u2019s playbook or run with a smaller, more local approach, the most important reminder is to understand your customers and what resonates with them. This, above all, is the path forward.<\/p>\n
Robert Gorin is a managing director and consumer products practice leader at Getzler Henrich & Associates LLC, one of the nation\u2019s oldest and most \u00a0respected middle-market corporate restructurings and operations improvement firms.<\/em><\/p>\n<\/div>\n
By and large, people were willing to pay more per block because the company\u2019s rebrand effectively changed consumer impressions of the product. It became a high-end cheese made for a high-end experience, which helped justify its increased price point.<\/p>\n
The luxury tag and packaging paid for itself, and the cheese \u2014 once an expensive basic cheddar \u2014 became an affordable luxury product. The company met its margins and its cheese ultimately became a top seller.<\/p>\n
4. Lead with honesty.<\/strong><\/h3>\nIt\u2019s tempting to focus on how national corporations are combating rising prices, but that approach overlooks the important work small businesses are doing every day.<\/p>\n
There\u2019s a local diner not far from where I live. It\u2019s known in our community for a series of dishes, including its chicken wings.<\/p>\n
Five months ago, the diner needed to raise the price of its chicken to keep up with market value. The owners put an insert into menus with a clear note: \u201cThe price of meat has gone up so much, so we are forced to raise prices.\u201d They were honest and wrote in their own voice \u2014 no business jargon. They said they felt terrible about the price increase and promised \u2014 in writing \u2014 to go back to previous prices as soon as it was possible.<\/p>\n
The diner owner also added value where possible by offering complementary additions like a side salad to those wings should customers still want to buy them at that higher price point.<\/p>\n
Customers still had to pay more for their favorite dish, but the owners\u2019 honesty went a long way in keeping them coming back for more. A few weeks ago, when meat prices came down, so too did the price of everyone\u2019s favorite wings. The owners kept their word, further establishing trust and long-term loyalty. (And to boot: They corrected the price of the wings at the bottom of their menus in red Sharpie!)<\/p>\n
The Common CPG Imperative <\/strong><\/h2>\nWhether you take your cue out of the McDonald\u2019s playbook or run with a smaller, more local approach, the most important reminder is to understand your customers and what resonates with them. This, above all, is the path forward.<\/p>\n
Robert Gorin is a managing director and consumer products practice leader at Getzler Henrich & Associates LLC, one of the nation\u2019s oldest and most \u00a0respected middle-market corporate restructurings and operations improvement firms.<\/em><\/p>\n<\/div>\n
Whether you take your cue out of the McDonald\u2019s playbook or run with a smaller, more local approach, the most important reminder is to understand your customers and what resonates with them. This, above all, is the path forward.<\/p>\n
Robert Gorin is a managing director and consumer products practice leader at Getzler Henrich & Associates LLC, one of the nation\u2019s oldest and most \u00a0respected middle-market corporate restructurings and operations improvement firms.<\/em><\/p>\n<\/div>\n