Will consumer anger drive down inflation?

Consumers are fed up with escalating inflation, prompting some companies to restrain their price hikes to offset cost pressures.

Conagra Brands saw volume decline 8.4 percent in its latest quarter ended Nov. 27 due to consumers’ resistance to higher prices. On Conagra’s analyst call last week, Dave Marberger, CFO, said previously communicated pricing actions will become effective in the current quarter but the “magnitude of these pricing actions will be smaller and more targeted than previous pricing actions.”

Constellation Brands, the parent of Corona and Modelo, similarly said its pricing actions will be “more muted” in its current fiscal year after recent hikes slowed demand. Constellation CEO Bill Newlands said on a quarterly call last week consumers are “overly sensitive to pricing actions” and that the company needs “to be careful in balancing our growth profile and our pricing profile.”

Reports began arriving last summer that stores were pushing back on supplier price increases as sales began slowing amid four decade-high inflation rates.

Pricing negotiations appear to have become combative. Tesco’s chairman John Allan told the BBC last week, “We have a team who can look at the composition of food, costs of commodities, and work out whether or not these cost increases are legitimate.”

Any hesitancy to raise prices comes as the inflation rate fell to 6.5 percent in December from a peak of 9.1 percent in June but remains well above the Fed’s two percent target rate. Fuel and many input costs have come down but remain above pre-pandemic levels.

A Wall Street Journal article last week, “Shopper Rebellion Against Higher Prices Helps Slow Inflation,” also noted that persistent wage growth and China’s reopening could threaten inflation’s descent.

Among the apparent holdouts is Procter & Gamble, which last week vowed to continue to raise prices to offset higher commodity and transportation cost inflation despite reporting its first quarterly sales decline since mid-2017 as lower volumes offset price hikes.

P&G’s CFO Andre Schulten told analysts that conversations with retailers have not changed. He said, “I think everybody understands that we are still recovering costs.”

• Conagra Brands, Inc. (NYSE:CAG) Q2 2023 Earnings Call Transcript – The Motley Fool
• Constellation Brands (STZ) Q3 2023 Earnings Call Transcript – The Motley Fool
• Shopper Rebellion Against Higher Prices Helps Slow Inflation – The Wall Street Journal
• Food firms raising prices unnecessarily, Tesco’s John Allan says – BBC
• How Much Have Record Corporate Profits Contributed to Recent Inflation? – Federal Reserve Bank of Kansas City
• P&G Announces Fiscal Year 2023 Second Quarter Results – Procter & Gamble
• The Procter & Gamble Company (PG) Q2 2023 Earnings Call Transcript – AlphaStreet