Facing Inflation-weary Shoppers, Grocers Fight Price Increases

Kroger Co. and other grocery chains said they are asking brands to prove why higher prices are necessary before accepting them, and warning manufacturers that they will stop carrying products if food companies won’t negotiate prices. Some companies said they are switching to new meat suppliers with cheaper products, and are delaying price changes for items like canned goods.

“We don’t just accept cost increases,” said Don Clark, chief merchandising officer of Giant Eagle Inc. The Pennsylvania-based grocer has been warning some manufacturers looking to impose price changes that higher price tags could push consumers to skip purchases. other situations, the company paused stocking new items because of cost increases.

US inflation increased 8.3% in April from a year ago, according to the Labor Department, and remains near a four-decade high. Retailers have generally been passing price increases along to consumers, and executives have said that for months shopper demand has remained strong.

Industry executives said that is starting to change, as consumers increasingly look for ways to stretch their dollars. Big retailers, including Walmart Inc. and Target Corp., said in recent weeks that their profits are taking a hit, too, as some consumers move away from big-ticket purchases. Food makers including Kellogg Co. have said they need to protect their margins as transportation, ingredients and other costs rise.

Cincinnati-based Kroger is checking prices of every commodity, as well as packaging costs, to make sure suppliers’ price increases are warranted, and is devoting more resources to run pricing analyzes, said Stuart Aitken, chief merchant and marketing officer at the nation’s biggest grocer.

“We want a justification for it, and what we then do is validate,” Mr. Aitken said. Recently, he said, Kroger told a vendor that the company would not sell the vendor’s products at higher prices. vendor agreed to negotiate, he said.

Kroger said it regularly negotiates with suppliers to make sure prices are affordable.

Rising costs in labor, raw materials and transportation have been pushing up prices of food and other goods. Grocery prices increased 10.8% last month, with meat and egg prices climbing at double-digit rates, compared to April 2021, according to Labor Department figures. Food prices continue to rise, retailers said, as items from sunflower oil to cardboard boxes grow more expensive.

Consumers have been reacting to higher prices, trading down to cheaper options in meat and cooking oil, and looking for discounts, retailers said. People are increasingly buying more store brands and larger packs that are cheaper on a unit basis, in addition to consolidating shopping trips to save money on fuel, industry executives said.

As food companies and supermarkets try to adjust, their discussions are becoming more tense. Switching brands or products also carries risk for retailers, because some shoppers might look elsewhere for specific items.

In New York, Morton Williams Supermarket recently notified its number-one pasta sauce maker that it won’t be accepting the company’s sauce second price increase of the year when the number-two brand is selling well, said Steve Schwartz, who oversees pricing and buying at the company. The companies are still negotiating, he said.

Some manufacturers are pushing back against retailer customers. Hain Celestial Group Inc. said recently that it stopped shipping products to European retailers that resisted its price increases, losing four to five weeks of sales on several brands. The maker of Celestial seasonings said the retailers eventually accepted new prices.

“Retailers’ job is to protect the consumer,” Kellogg Chief Executive Steve Cahillane said, adding that retailers are starting to push back on higher prices. “Our job is to protect our margins.”

Other companies are looking for new suppliers that can offer better prices. Gordon Food Service Inc., one of the largest food-service distributors in the country, is seeking new suppliers for some fruits, vegetables, seafood and poultry both domestically and internationally, said Jagtar Nijjar, the company’s director of imports and commodities.

“We are watching the consumer behavior very carefully,” Mr. Nijjar said. The company is planning to sell lower quantities of expensive food like chicken wings, as people buy less of them, he said.

Some grocery companies are trying to offset higher prices by pushing vendors for more funding for coupons or giving out samples in stores. Associated Wholesale Grocers Inc., the largest U.S. wholesaler that serves more than 3,000 grocery stores, is negotiating “backhaul allowances,” or additional payments from manufacturers when inventory is picked up at warehouses, said CEO David Smith. price increases, he said.

When suppliers won’t budge on price, some retailers are turning to other tactics. Pennsylvania-based Weis Markets Inc. has been getting some suppliers to delay price increases for canned and frozen goods, said Jonathan Weis, the company’s chief executive. He said that the grocer has also been stockpiling inventories of frozen meat and other items before they get more pricey.

“We do what everyone else does. We shout and rattle our desks, “Mr. Weis said.

This story has been published from a wire agency feed without modifications to the text

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