Tuesday, December 8, 2009

Retail Storm, Brand Shipwreck?

The average price of food is down, now to pre-2006 levels. And with this decline will come value compression for food retailers, distributors and brand owners. In past posts I have highlighted some of the drivers behind this fall (low commodity prices and retailer competition), but this is beginning to really signal some big challenges for these businesses. Six months ago beverage businesses were celebrating that their price increases had held despite the state of the economy.

In recent calls, executives have expressed concern that retailers just aren't getting the traffic they used to resulting in an ever more aggressive marketplace. In fact the marketplace is -2.8% so far this year, the fastest deflation since 1959 (WSJ).

Now these business have to really figure out how to compete...

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