Global Consumer Giants Adjust Pricing Strategies

Two of the world's leading consumer goods corporations, Danone and Nestle, announced their plans to moderate price increases in 2024. This decision comes after two years of escalating prices, prompting consumers to explore more affordable alternatives for everyday staples, such as yogurt and coffee.

Nestlé reported experiencing a reduced impact from freight costs compared to previous years, despite some challenges arising from shipping disruptions in the Red Sea. These expectations are echoed by statements from British counterpart, Unilever, known for producing Ben & Jerry's ice cream and Dove soap. Unilever also indicated that the trajectory of price increases, contributing to a prolonged cost of living crisis, would begin to ease. 

Danone, owner of renowned brands like Evian, Badoit, and Activia, warned that prices may continue to rise, however, due to rising labor and transportation costs. Still, Antoine de Saint-Affrique, CEO, Danone, said the world is entering a phase of slowing inflation. "North America is the place where we took the first price increases, and this is where we see the fastest normalization,” he said during a company earnings call.

The packaged goods industry has consistently attributed the surge in prices to increased input costs, initiated by the disruptions caused by the COVID-19 pandemic and exacerbated by Russia's invasion of Ukraine two years ago. 

Mark Schneider, CEO, Nestlé, emphasized the unprecedented nature of inflation, likening it to levels not seen since 1973-1974. Meanwhile, Hein Schumacher, CEO, Unilever, acknowledged earlier this month that the company's competitiveness is “disappointing,” as consumers opt for more budget-friendly alternatives over costly branded goods. 

As the costs of commodities, such as sunflower seed oil, continue to rise, conflicts between retailers and consumer goods companies have intensified. Concerns arise as companies might be pushing price increases too far, especially amid the ongoing cost of living crisis, which has boosted the market share for retailers' white-label brands. Some investors and analysts are urging a shift toward marketing and innovation to maintain competitiveness.