Big brands pass price hikes off to consumers
The Future. Inflation is still high, and major brands are coping with higher production costs by pinning them on consumers through price hikes. Generally, consumers aren’t defecting to it, which suggests that major name brands might weather the looming recession better than smaller companies or the average consumer.
More bucks for your bang
Quarterly earnings reports suggest that big brands haven’t suffered from raising prices on their customers.
- Though PepsiCo raised prices 16% YoY in Q4 2022, the firm’s sales volumes only fell 2%, enabling revenue growth.
- Likewise, Unilever raised their prices by over 13% in the same time frame and only saw a slight decline in sales volumes, beating revenue expectations.
- Chipotle and McDonald’s both also grew profits significantly despite significant price hikes, with McDonald’s reporting increased foot traffic and Chipotle attracting more high-income customers.
Blame it on the gains
A few major companies are getting punished for raising prices — Procter & Gamble recorded their first sales drop in years, following 10% price increases in Q4.
That suggests that each of these firms has a breaking point. And since many major brands have indicated that price hikes are likely to continue throughout the first half of 2023, we may find out exactly how much is too much for companies like PepsiCo and Unilever to charge.