The pinch at the checkout is about to enter a year of pain as brand owners pass on increased costs. Multinationals are already signalling that elevated pricing will continue this year.
Usually, brands raise prices gradually, but the volatility caused by the pandemic means that prices are rising, some more quickly and higher than previously seen. Brand owners face the perfect storm of staff shortages, supply-chain challenges, and higher costs for energy, raw materials, packaging, warehousing, and distribution. The timing of consumers taking the hit at the checkout will depend in some cases on retailer contracts, but price rises will cut across all categories.
Most brands are reporting that they’ll be able to limit the long-term hit to profitability, but only if the pain is passed onto consumers. Putting the squeeze on at checkout in a year where the Omicron variant, unlike Delta, is being let in as a "managed" variant, is a tough call.
Add to this the inflationary pressures coming on and interest rates rising, the cost of food the checkout just got a lot more expensive. The challenge this year for brand owners will be how to keep customers brand loyal when price comparisons start to widen.