Food Retailers Countering Commodity Increases
Talk about getting squeezed! Businesses of all sizes are feeling the pinch of rising commodity costs - from fuel and energy to flour and eggs. Leading retail, CPG, and restaurant companies are employing a variety of different approaches to cope in today’s market, including focusing on supply chain and productivity initiatives, offering drastic price cuts and, conversely, passing costs onto consumers.
Food manufacturer Heinz implemented a “Global Supply Chain Task Force” in 2007 to assist the company in countering commodity cost increases. The task force seeks to “enhance the Company’s competitive advantage by improving coordination and reporting systems across the supply chain, and to harmonize global processes and benefit from Heinz’s scale among suppliers.” Heinz is tracking towards $175M in global supply chain savings as part of the overall task force goals.
Meanwhile another food manufacturer, General Mills, is placing a particularly strong focus on productivity improvements. The company has undertaken several initiatives, including (gasp!) decreasing the number of pretzel varieties in its Chex Mix from 14 to 3 and reducing trips between warehouses.
Aggressively discounting goods and services in an effort to bolster sales is a common tactic, but one that demands an appropriate pricing strategy. Several companies are encountering difficulties with this approach. Last week, both the clothing retailer H&M and the drugstore chain Walgreen Co. announced that their price-cutting efforts did not have as positive an impact on profit and revenue as has had been anticipated.
Many restaurant chains, including Chipotle (CMG), are considering passing the increase in food costs onto consumers by raising its prices. Interestingly, the restaurant industry is increasingly borrowing tactics from the airline industry, such as making price adjustments for peak and slow times and rewarding its best customers with frequent diner programs.
Given all of this news, seafood lovers can take heart. Darden Restaurants (DRI), owner and operator of national seafood restaurant chain Red Lobster, has noted that lobster prices have declined and, in turn, they will be offering more lobster-based promotions at a location near you.
We’re interested in hearing from you on how your company is responding to today’s market. If you have an experience or recommendation t
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Oct 10 07:14 AMMore by Katie Boord