Massive Manipulation Of Food Prices Alleged Given Steep Drop In Price of Commodities

and it is expensive and a long process for us to change our pricing structure -
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No comprendez. Is the long and expensive process, long and expensive whether you raise or lower the price?


You have a cost of x, a margin of Y and a data entry for the new price.

Oil companies seem to have no trouble with immediate price changes yet the food industry pricing process is long and arduous?
 
I've always just assumed it was a model similar to gas stations -

Thin margins most of the time, and a supply/price shock comes along which allows you to raise prices and thereby increase your margins. Once tasting those sweeter margins, you are loath to let them fall until your sales show a noticable decline as people stop buying the product.

Don't know much about he supermarket/food store industry but wouldn't be surprised to see it saddled with the excessive debt that exists in the rest of corporate america. They can't lower prices - need to service that debt and accounting charges against their owned real estate make those balance sheets look much worse (c.f. Sears Holdings)

Just my pre-caffeinated guess.
 
Fractals 'R Us


Registered: Aug 2008
Posts: 915


01-14-09 10:43 PM

I think food retailers operate on very slim margins, they did back in the day. I recall reading about it in a magazine about 1965. If that's the case they are taking the chance they have to pile up some cash maybe...


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and you believed that ? :D
 
Quote from Ivanovich:

As someone who works in the consumer goods/staples industry, and who is involved in price setting, I can tell you that the reason many CPG companies aren't lowering their prices has nothing to do with conspiracy. It is more based on the belief that these lower prices will not be here to stay, and it is expensive and a long process for us to change our pricing structure - not to mention brand strategies that first have to be understood (in relation to competition).

Incidently, food prices showed a 1.5% drop in the latest reading - the best since 2006.
More...

So you yourself are saying that these brand strategies are used for argument not to drop prices. When I buy my bread or my pasta, I don't care for the brand at all. I only care where it comes from. Food is a commodity and I guess your industry is trying to turn it into a luxury of some sort? That you should never pass down prices to consumers as price is an important part of a brand image?
 
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