Downward price pressure at ‘unprecedented’ levels

Brands’ attempts to premiumise by pushing up prices are failing with only a third achieving their increase objective, according to a new study. 

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Study finds just a third planned price increases are implemented.

According to a global poll of executives by strategy consultancy Simon-Kutcher and Partners, the desire to raise prices is being hampered by downward pressure brought by customers’ heightened expectations of lower prices and resulting price wars between manufacturers and retailers.

Those surveyed achieved just 37 per cent of the price increases they were aiming for, down from 50 per cent in 2012. On average, companies attempting to increase prices by 5 per cent achieved just 1.9 per cent, the survey found.

Global FMCG giants including Unilever and Procter and Gamble have been quick to bemoan downward pressure and its impact on profit margin and brand equity. P&G recently talked about stepping up efforts to reduce its reliance on “unsustainable” value giveaways, which became popular during the economic downturn.

Manufacturers are working with retail partners to push value over price but many supermarkets are involved in price wars of their own. In the UK, the big four supermarkets have responded to the increasing popularity of discounters Aldi and Lidl by slashing base prices.

An overwhelming majority (83 per cent) of executives surveyed reported they are facing increasing price pressure with most (58 per cent) stating they were currently engaged in a “price war” with rivals.

Most believe the antidote to downward price pressure is growing category value through innovation. More than three-quarters (77 per cent) see innovation as the best answer to falling prices.

The study was based on the results of an online survey of 1,600 C-Suite and management executives in 40 countries across Europe, Asia and the Americas. 

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