Every so often, I write a news brief about a company’s quarterly earnings. Lately, I’ve been finding myself using some variation of this formula:
“Megafood reported good results after product price hikes compensated for increased input costs, keeping the company well ahead of inflation.”
Setting prices during a period of inflation has got to be one of the most nerve-wracking processes in business, especially food & beverage. Yes, there are formulas that allow all sorts of factors to be accounted for, but at the end of the day, raising prices is a gamble – an educated one, but a gamble nonetheless. Set them too low and you’ll lose money; too high and you’ll lose business.
Now there’s another thing to worry about: Being called a price-gouger.
As food & beverage companies (among others) raise prices, there’s been a lot of grumbling that some of them are taking advantage of the situation. This has been especially prevalent in the meat & poultry sector. In the most recent quarter, Tyson Foods racked up a 74% increase in profit, despite a 14% drop in sales. This success is attributable almost entirely to Tyson raising prices for their products by an average of 18%.
This hasn’t gone down well in some quarters. Googling “Tyson Foods” together with “ripoff” returns more than 1.5 million hits. And it’s more than just consumers doing the grumbling. The White House and Congress have gotten into the act, holding hearings and issuing statements that draw attention to the high degree of concentration in meat processing.
As I’ve said before, this is a time for Tyson and the rest of the industry to be image-conscious. I’m certainly not suggesting that they set prices below what they feel would bring maximum returns. It’s just that when they do hit that sweet spot, maybe they should cool it with high c-suite bonuses and stock buybacks – at least while a lot of consumers are struggling to afford the new prices.
Pan Demetrakakes is a Senior Editor for Food Processing and has been a business journalist since 1992, mostly covering various aspects of the food production and supply chain, including processing, packaging, distribution and retailing. Learn more about him or contact him
