One of the most interesting dynamics of the inflationary spiral seizing the U.S. economy is that, so far anyway, few players are putting up much resistance to significant and sometimes repeated price increases.
B2B customers and consumers alike see that the global supply-chain mess and acute labor shortages in the U.S. are severely bending up business costs these days, but because the economy remains good and incomes flush, they haven’t been squawking much at higher prices.
But some participants in the supply chain don’t necessarily believe that’s a good thing. They also feel some responsibility to holding the line on prices if it’s at all possible, out of principle and stemming from more mundane motivations as well.
Joel Warady is one of those CEOs. He heads Catalina Crunch, a maker of “keto-friendly” cereals and snacks based in Indianapolis. He’s been around the consumer-packaged goods game for decades, most prominently as head of Enjoy Life, a maker of allergen-free snacks that was bought by Mondelez International in 2015.
And Warady said Catalina Crunch has been doing all it can to hold the line on its own prices to retailers and consumers. “I personally have an issue with a lot of CPG companies reporting record earnings and continuing to raise prices,” he told StrategicCFO360. “If you listen to their quarterly earnings calls, they will say, ‘Well, we are raising prices because we can, and we’re finding that the consumer isn’t pushing back.’
“But then the question is: Should you be? We have a responsibility as food companies to feed people with nutritious products as efficiently and economically as possible and still make a profit.
“So, we’re currently seeing price increases coming in from suppliers,” Warady continued. “But what we’re attempting to do is look at how we can be more efficient in manufacturing and in our go-to-market processes. Maybe we can reduce slow-moving SKUs or sizes that don’t make sense on the shelf before we enter into a price increase—which we haven’t done yet.”
Catalina Crunch also has been working with suppliers to help find ways that they might be able to hold the line on their own prices, before inflationary pressures work their way up to the level of Warady’s company.
“Just because they’re coming to us with price increases, we’re not just accepting them, but looking at ways to help them become more efficient,” he said. “Helping them do a better job of forecasting, for instance. Or maybe we can store more inventory on our end. Those are all things we’re taking a look at.”
Still, Warady understands that “it’s unusual to see prices roll back. Nor do I think they’re going to go up a lot. I think we’re going to see current inflation rates level off where they are.”
Supply-chain pressures, for instance, “should ease up a bit in the second half of the year,” he said. “We’re already starting to see some of that, seeing some pricing level off and supplies become more available.”