During times of rampant food inflation (egg prices in particular are currently causing significant outrage), company commitment to a low price can go a long way for winning over customer loyalty.
Costco (COST)'s $5 rotisserie chicken and $1.50 hot dog and soda combo have spurred numerous discussions about how the retailer "defies inflation" (it's actually raising prices for other things like everyone else) while rival Walmart (WMT) brand Sam's Club tried to one-up its competitor by lowering the cost of its own hot dog combo by 12 cents to $1.38 last November.
"A dime and two pennies might not seem like much and we tend to agree -- when it comes to one transaction on one hot dog combo," Sam's Club said in a blog post announcing the lower price last November. "But there's a bigger story at play here."
Here's How Much You Can Expect to Pay for Your Next Soda
The bigger story at play is that keeping a low price in one area can be a strong marketing strategy at a time of widespread consumer concern. As grocery prices increased by 10.2% between December 2021 and 2022, soft drink and snack giant Pepsi (PEP) raised the prices of its products by 14% from a year ago and 16% in the period between October and December.
The price hike was one of the factors behind revenue that surpassed analyst expectations. In Thursday's fourth-quarter earnings call, Pepsi reported revenue growth of 10% to $28 billion. Expenses related to the floundering SodaStream brand led to a wider 60% revenue drop to $535 million but sales of Pepsi products remained strong -- sales of Pepsi Zero Sugar in particular rose by nearly 26% in the fourth quarter.
For those annoyed at the price of a Pepsi bottle at the corner store, the good news is that the company said that it has largely stopped with price hikes going forward.
As Pepsi Chief Financial Officer Hugh Johnston recently told Reuters, the company is in a "real sweet spot" of strong sales and customers who continue drinking soda even amid inflationary pressures.
"We have most of our price increases for the year already in place," Johnston said.
Pepsi
These Everyday Food Items A re Seeing Some of the Worst Price Hikes In 2023
While food price inflation has been easing somewhat for several consecutive months now, certain everyday foods have seen particularly drastic price hikes due to a combination of both inflation and availability.
Amid bird flu outbreaks in several parts of the country, a crate of 12 eggs at one point cost nearly 60% more than it did a year ago.
While prices taken at a given moment are subject to current availability and may not reflect overall increases, Bureau of Labor Statistics data shows that butter and margarine costs 35.3% more in February 2023 than a year ago. A head of lettuce is 24.9% more expensive while flour and salad dressing rose by a respective 23.4% and 18.3%
"I suspect over the next 12 months we will see improvements in supply, improvements in the conditions that have been challenging across most of our food categories," Tom Bailey, a senior economist with Dutch financial services company Rabobank, recently told CNN. "[...] We'll finally start to see prices, at least upstream, really starting to come off. And then maybe it’s 2024 where we could eventually see some deflation for food.”
