CINCINNATI — Kroger Co. says it has no problem passing along food manufacturer price increases to consumers because it is confident that its private label products will keep sales strong.
Kroger Co. says it has no problem passing along food manufacturer price increases to consumers because it is confident that its private label products will keep sales strong.
In recent months several of the industry’s largest food makers have hinted that rising commodity costs may lead to increased wholesale prices, but few have actually increased what they charge retailers.
Kroger chief executive officer David Dillon recently told the Wall Street Journal that he felt food makers risk losing market share to less expensive private label items if they opt to pass along their rising costs to retailers.
“I don’t see [rising manufacturers’ prices] as a problem for us. It is a problem for them,” Dillon said. “Each national vendor must make a choice.”
As the economic downturn drags on, supermarkets continue to increase their sales of private label products.
At the same time, brand name food makers have raised prices on many items.
While food makers have tried to offset some of their price increases by offering promotional discounts and tightening operational costs, the consensus is most of these moves have not worked as well as executives had hoped they would.
Dillon says shoppers remain price sensitive and discount hungry and are more willing than ever to try lower-price national products or private label items.
“Clearly, the customer is in kind of a funk,” he said at a recent Kroger conference for investors, noting that while he sees signs that the economy is improving slightly, it remains far from robust.
Some say that Dillon’s bleak economic outlook may behind Kroger’s recent announcement that it is interested in acquiring private label manufacturers.
However, Dillon said at the investors meeting that the asking prices for these business have so far been too high and that Kroger has been unable to reach any agreements.