Nice write up & interesting to note a consumer products repricing decline started with the 1993 “Marlboro Sunday”. Typically you hear that consumer prices caused by inflation “never go down”, but as this article indicated & per the 10/8/1093 Morgan Stanley’s Howard W. Penny statement below, that while rare, apparently it isn’t a 100% truism;
Per Howard W. Penny / Morgan Stanley in 1993:
“As I have said before, the tobacco companies, like other consumer product companies, must correct the excess pricing, of the 1980’s. A new pricing strategy makes sense, given a new competitor: the value conscious consumer. The trend by consumer product companies to go to the value pricing strategy was started by PepsiCo, when it restructured its Frito-Lay division. The company then took this strategy to its Taco Bell division, which touched off a wave of menu changes in the fast food industry. The list of consumer product companies restructuring their business is growing rapidly: Procter & Gamble, Tambrands, Grand Metropolitan and Anheuser-Busch. “
Al, thanks for the comment. If you follow Preferred Shares, I think the two interviews with Mark Purdy are excellent on the subject of pricing power and the fact that very few businesses can price above inflation for too long, especially perhaps in the consumer staples and branded products. If a company like Nestle or Philip Morris or Colgate-Palmolive price too aggressively for too long, it seems inevitable it will come back to haunt them. Everyone reaps what they sow!
Nice write up & interesting to note a consumer products repricing decline started with the 1993 “Marlboro Sunday”. Typically you hear that consumer prices caused by inflation “never go down”, but as this article indicated & per the 10/8/1093 Morgan Stanley’s Howard W. Penny statement below, that while rare, apparently it isn’t a 100% truism;
Per Howard W. Penny / Morgan Stanley in 1993:
“As I have said before, the tobacco companies, like other consumer product companies, must correct the excess pricing, of the 1980’s. A new pricing strategy makes sense, given a new competitor: the value conscious consumer. The trend by consumer product companies to go to the value pricing strategy was started by PepsiCo, when it restructured its Frito-Lay division. The company then took this strategy to its Taco Bell division, which touched off a wave of menu changes in the fast food industry. The list of consumer product companies restructuring their business is growing rapidly: Procter & Gamble, Tambrands, Grand Metropolitan and Anheuser-Busch. “
Al, thanks for the comment. If you follow Preferred Shares, I think the two interviews with Mark Purdy are excellent on the subject of pricing power and the fact that very few businesses can price above inflation for too long, especially perhaps in the consumer staples and branded products. If a company like Nestle or Philip Morris or Colgate-Palmolive price too aggressively for too long, it seems inevitable it will come back to haunt them. Everyone reaps what they sow!