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Reiser’s Pieces: Taming the inflationary tiger

I saw a report from Bloomberg a little while ago that the Federal Reserve has a new plan to end high inflation — through a “growth recession” strategy. Worrisome, huh? The economist who first thought up “growth recession” likened it to a contained tiger – not a tiger running loose, but not a paper tiger to be ignored. We need to figure out how to carefully tame, or manage, this inflationary tiger, to prevent havoc within our businesses over what could be an extended period of below-trend economic growth and rising unemployment.

I don’t need to tell you that continuing impacts of inflation on retail and consumer shopping behaviors, supply chain disruptions, and ever-increasing profit pressures are already making for an uncertain business climate and highly complex planning season. Inflation combined with higher commodities prices and continuing supply chain issues has led to intensified profit pressure not seen in decades. We’re all wrestling with decisions on what percentage of costs to absorb without eroding margins, and how much to pass on to the consumer without damaging revenue and market share.

And we’re dealing with the new, post-pandemic consumer. Recession or not, eight out of ten consumers believe we are already in a recession, and the economic pressures of the day are already eroding consumer confidence.

Within CPG, inflation is impacting all demographic groups. Given high price increases and less frequent and lower depth of promotions, consumers are spending more across outlets but getting less. They’re purchasing fewer items per shopping trip. And they’re searching for deals and switching brands and packs that provide greater value and better price. In this quest, they continue to shift to Private Label in all major categories — except Baby, Pet and Health & Wellness, where they’re sticking with the brands they connect to and trust.

While market uncertainties and changes present so many challenges, I don’t understand how so many companies who are seeing profits erode continue with the knee-jerk, reactive strategies born of the constant twists and turns of the pandemic. It’s so crucial now to take the long view — and a careful, proactive strategic approach to revenue growth management that protects the top and bottom line. Look at how you can strengthen your commercial programs while optimizing marketing spend to increase profitability, market share and ROI over the long haul.

When taking price, make sure you’re developing strong strategies that not only address short-term cost pressures but also present longer-term margin opportunities. It’s worth taking the time and effort to optimize your Price Pack Architecture with the goal of maximizing category penetration and profitability. At the same time, don’t lose sight of your consumers’ “stress-flation” and make sure you’re meeting them where they are. Ensure that you have the needed analytics to truly understand your customer, what they want and what they’re willing to pay for what you’re offering.

As we’re seeing, brands that differentiate and maintain a strong, emotional connection with consumers have the best chance of growing profitability during an economic downturn. In fact, purpose-driven marketing can be a critical strategy in fending off Private Label switching. Now is the time to double down on omnichannel/eCommerce promotional and advertising strategies that build loyalty and focus on the connection and value only your brand can provide.

And prioritize your focus on Supply Chain. Without consistent supply, nothing else matters. Consistent supply secures promotions, distribution and sales. I’ve talked about this before and can’t stress it enough: We must overhaul and prioritize Supply Chain strategies in order to deliver on the constantly changing and emerging needs of different consumer segments across all channels. This requires transparency from end-to-end to ensure business continuity, data for improved demand forecasting and modernized capabilities to adapt to market volatility.

Economists don’t expect to see inflation back at the 2% target in the foreseeable future. But you can turn today’s challenges into opportunities by tackling market shifts with actionable strategies that protect and grow your brands. Before the inflationary tiger gets loose and you find yourself chasing your own tail, now is the time to ask: Does my organization have the right strategies in place to insulate our brands from inflationary impacts and deliver value?


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