ECRM Q&A: CPR's Glenwood Davis on the Impact of List Price Swings 8/16/2018
Glenwood Davis is the President and Chief Executive Officer of Marietta, GA-based Competitive Promotion Report, LLC, which provides competitive market intelligence and insights to the health, beauty, wellness and general merchandise sectors of the consumer packaged goods industry. This competitive intelligence includes proprietary trade pricing and promotions data, retail pricing, new product introductions, and package and ingredient changes.
In this Q&A with Davis, we explore which categories and brands saw the largest swings in list prices, and what that means to the CPG retail industry.
ECRM: What have you seen as far as list price increases in the health, beauty and wellness (HBW) sectors in the last few years?
Davis: On average, all HBW categories saw a total list price increase of +0.5 percent for 2016, and +0.2 percent for 2017. However, some popular categories have outpaced the average. For instance, Upper Respiratory Drops/Lozenges saw the largest list price increase with a +3.1 percent increase last year, which was led by Mondelez International, maker of the Halls brand, with the largest increase in the category ( +13.5 percent).
ECRM: Which categories saw list price decreases in 2017?
Davis: Shave - Blades (Non-Razor) saw the largest list price decrease with a -3.1 percent decrease in 2017. P&G, maker of the Gillette brand, was the manufacturer with the largest decrease in the category (-4.1 percent).
ECRM: Which brands increased or decreased list pricing significantly last year?
Davis: Looking at all brands, the Pronto brand (First Aid Treatments) had the largest List Price increase in 2017 with a +43.8% increase, followed by Diva Cup (Sanitary Napkins/Tampons) with a +33.3% List Price increase in 2017. At the other end of List Price changes, the HR brand (Sexual Wellness) saw the largest List Price decrease in 2017 with a - 30.3% decrease, followed by the Scandinavian brand (Oral Hygiene) with a - 30% List Price decrease in 2017.
ECRM: What are you seeing regarding price trends?
Davis: The Consumer Price Index (CPI) has averaged 1.3 percent increases each of the past five years, but jumped 0.5 percent in January, and has risen for all items at 2.8 percent for the 12-months ending in May 2018 (fueling fears of inflation). Excluding Food and Energy, the CPI has increased 2.2 percent for the same period. Along with inflationary fears in the US, the cost of money is rising further. Yet, a growing economy (GDP), coupled with recent Federal tax cuts, should increase disposable income and increase overall household spending for OTC/CPG products. Emerging markets continue to represent growth opportunities for OTC/CPG retailers, while, on the supply chain side, manufacturers continue to optimize efficiencies, but raw materials and commodities prices may rise in 2018.
ECRM: Are you seeing any list price trends in 2018 that HBW manufacturers need to be paying attention to?
Davis: This year, Triderma, a manufacturer of Diabetic Products, First Aid Treatments and Skin Care – Hand & Body categories, had price increases on many products ranging from 60 – 97 percent. At the same time, Dome, a manufacturer of products in the First Aid – Accessories category adjusted prices up from 37 – 80 percent depending on the SKU. On the other hand, Johnson & Johnson adjusted list prices down between 37 – 47 percent on certain SKUs in the Skin Care – Facial category while at the same time several manufacturers in the Vitamins category adjusted prices down 30 – 50 percent
ECRM: What generally causes the list prices of categories and brands to fluctuate as they have in the examples above, and what does this mean for retailers and brands?
Davis: While manufacturers are ultimately faced with optimizing ROI, they also must consider fluctuating raw material costs, competitive market pressures and the need to increase market share. As a result, as manufacturers adjust their strategy to compete more effectively in the marketplace, they periodically make list price adjustments (increases and/or decreases).
Depending on brand roles, competitive brands often follow with similar list price increases or decreases. In a recent study which tracked multiple categories across multiple retailers over a 5 year period found that almost 40 percent of all list price changes were not responded to. Retailers in this study did make adjustments to their everyday retail price when the list price change was greater than 5 percent depending on the category. When retailers did respond to the manufacturer’s list price changes, most changes occurred within a 30 to 60 day time period.
ECRM: Why does real-time price analysis matter?
Davis: A full list price analysis, combined with real-time tracking in the categories your brands compete in, is a strategic and simple way to maximize margins using the available data. It allows you to understand how your brand(s) contributes to a retailer’s bottom line versus your competitors, which also makes you an informed and ideal manufacturer partner. Even a few percentage points to increase list price can mean significant revenue increases without any change or expense in how the brand is packaged, marketed or distributed.
If you have specific questions regarding list pricing you'd like to ask Glenwood, you can reach him by email at: GLEND@COMPETITIVEPROMOTION.COM