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Unilever shows pricing power as Sainsbury’s profit falls

by LLB Editor
27th Apr 23 10:50 am

Big brand owners are testing the limits of how much they can put up prices before consumers stop buying their products.

Unilever has once again charged more for its products and there has been very little volume erosion which means its bold move has paid off.

Whether this can continue is another matter.

AJ Bell’s Russ Mould said: “We’ve seen mixed success from other big brand owners – Reckitt has just reported a decline in volumes for its latest results after pushing up prices, Coca-Cola charged more for its drinks and grew volumes in most of its territories but Procter & Gamble’s recent price increases have resulted in a decline in sales volumes.

“Certain brands are deemed irreplaceable, with supermarket own-label alternatives just failing to give the same satisfaction. But there will be some items where the customer isn’t that fussed about being loyal to a big brand.

“Sainsbury’s is on the other side of the equation. It wants more customers to buy its own-label products as theoretically margins could be better than selling third party branded items.

“Supermarkets have been fighting on price for a long time, and the current cost-of-living crisis means it is even more important to offer good value items. However, this focus on value has meant that Sainsbury’s has suffered a decline in profit as it has been trying to undercut rivals in certain product lines, exacerbated by having higher operating costs.

“Whereas big brand owners have been happy to push up their prices, Sainsbury’s has been holding back from hiking its prices to try and get ahead of the competition. That’s bad for earnings but positive for winning market share. The trick is to now keep hold of any customers it has won from rivals.”

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