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Analysis: Wal-Mart's price push tests manufacturers' prowess
yahoo Finance ^ | March 6, 2012 | Martinne Geller and Jessica Wohl

Posted on 03/06/2012 9:43:37 AM PST by Hojczyk

Consumer staples companies have a problem. It costs more to make everything from soup to soap to soda, but when they raise prices they turn off consumers and strain their relationships with Wal-Mart Stores Inc, their biggest customer.

For some companies, like Clorox Co and Kraft Foods Inc, the problem can be comparatively easy to handle. They either have brands that consumers like, and therefore Wal-Mart needs, or they are big enough to have significant negotiating power.

"I think we reached the wall in terms of raising price. Consumers can't take any more," said Edward Jones analyst Jack Russo, citing recent Nielsen data showing correlations between price increases and declines in sales volume.

"A lot of these companies are going to have to get back to basics and not raise prices much, and if they want to grow sales they're going to have to do it through innovation, or being razor-sharp on pricing."

For example, General Mills' sales volume fell 11.3 percent in the 12 weeks ended February 18 after the cereal maker raised its average selling price by 11.5 percent with a combination of price hikes and a mix of higher-priced goods, Russo said, citing Nielsen.

One silver lining is that cost pressures are abating, as prices of many commodities, among them corn and wheat, have eased in recent months. Among packaged food stocks, Edward Jones recommends General Mills, Kellogg Co and McCormick & Co. It has a "Hold" rating on Hormel Foods, ConAgra, Hershey Co, Campbell Soup and Kraft Foods Inc.

(Excerpt) Read more at finance.yahoo.com ...


TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: retail; walmart

1 posted on 03/06/2012 9:43:41 AM PST by Hojczyk
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To: Hojczyk

They will put less in the box....


2 posted on 03/06/2012 9:45:34 AM PST by Hojczyk
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To: Hojczyk

They will put less in the box....
++++++++++++

Shhhhhh. You’re not supposed to notice that.


3 posted on 03/06/2012 9:51:03 AM PST by InterceptPoint (TIN)
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To: Hojczyk

” citing recent Nielsen data showing correlations between price increases and declines in sales volume “

Wow - Nielsen discovers something that we learned on the second day of ECON 101...

I despair for our education system...


4 posted on 03/06/2012 9:53:04 AM PST by Uncle Ike (Rope is cheap, and there are lots of trees...)
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To: Hojczyk
We have found that many, many store brands - which are much cheaper - taste or perform just as well as their National brand counterparts.

Shopping mainly at Kroger, for instance, I have switched to "Big K" colas, which taste (to me) just as good if not better than the more famous brands. I stopped buying cokes when they went to $4 for a 12-pack, the "Big K"'s are only like $2 for 12-packs.

We follow suit on things like plastic trash bags, paper towels/TP, cookies, pickles, ice cream, and many other Kroger brands.

I haven't been to our Wal-Mart in about a year, it's dirty, lousy service, and I'm tired of hearing Spanish right here in the town where I grew up.

The National brands will charge whatever the market will bear, and the more people who pay their prices, the more they will creep the prices up.

As one who is not going to spend half my free time souring sales papers and clipping coupons, the store brands are my way of fighting back, and saving money.
5 posted on 03/06/2012 9:55:36 AM PST by FrankR (You are only enslaved to the extent of the entitlements you receive.)
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To: Hojczyk

That’s really not a new concept, been going on for years. The problem is they’re at the point now where putting any less in the box will result in an empty box.


6 posted on 03/06/2012 9:55:52 AM PST by WinMod70
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To: Hojczyk

I wonder how many of those idyllic “mom and pop” stores that I keep seeing people post about have the clout to drive suppliers to become more and more efficient, the way Walmart does?

Yes, we may not like some of the shoppers and workers at our local Walmart, but they’re doing more to raise the standard of living in this country, for the masses, than anyone is. Put another way, they are helping to level the playing field by forcing companies to stay trim if they want to supply Walmart...rather than those companies having the capability to raise prices at will.


7 posted on 03/06/2012 10:00:41 AM PST by BobL (I don't care about his past - Santorum will BRING THE FIGHT to Obama)
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To: WinMod70
The problem is they’re at the point now where putting any less in the box will result in an empty box.

That line made me think of the current packs of potato chips.

8 posted on 03/06/2012 10:02:39 AM PST by houeto (Mitt Romney - A Whiter Shade of FAIL)
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To: Hojczyk

Have three grocery stores in a reasonable driving distance from my home. One is slightly cheaper on some of their items but they cater to the family size packaging. SinceI am single I go to another one, slightly higher but I can purchase fresh produce and meats in a small quantity and food isn’t wasted by loosing its freshness. Never grocery shop at big box stores-Walmart or their equal


9 posted on 03/06/2012 10:06:36 AM PST by YukonGreen
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To: All
I don't believe this “contents may have settled during shipping” crap.

we've been screwed and tattooed!

10 posted on 03/06/2012 10:06:56 AM PST by 4yearlurker (Sorry,no tag line today.)
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To: FrankR
We have found that many, many store brands - which are much cheaper - taste or perform just as well as their National brand counterparts.

National brands keep it very hush-hush if they put the same product with their name on it, into a store-brand or generic box / bag / can as well. Sometimes a quick comparison of the list of ingredients and the nutrition label between a store brand and a name brand will show them to be identical.

11 posted on 03/06/2012 10:16:59 AM PST by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: FrankR
I'm noticing that the prices of store brands are rising at a faster rate than those of the national brands. In some cases they are nearing parity (Target comes to mind). As a result I'm buying fewer packaged foods and more raw foods, and I've eliminated convenience foods altogether. What little packaged food I buy comes from Dollar General.

It turns out that it is possible to live without all that fufu stuff. And making your own meals from raw ingredients is enjoyable and is far easier and faster than we have been led to believe by the ad agencies.

12 posted on 03/06/2012 10:19:26 AM PST by jboot
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To: jiggyboy

I don’t much care who actually makes it, as long as the quality is there, and the price is low.


13 posted on 03/06/2012 10:21:58 AM PST by FrankR (You are only enslaved to the extent of the entitlements you receive.)
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To: FrankR
I have switched to "Big K" colas

That's the only brand I can't stand (The diet ones) lol. Taste is in the tastebuds of the beholder. But I do like the Safeway brand. I like Diet Cola with Splenda most of all but it is too expensive. Gotta look for bargains to strech out the food stamps for the whole month.

14 posted on 03/06/2012 10:32:37 AM PST by steve86 (I have Schizoid Personality Disorder and am exercising the privileges thereof)
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To: steve86
I agree with you...my wife likes diet cokes, but does not like the Big K diet drinks...so she still buys the real thing, however, she doesn't drink near as many sodas as me.


15 posted on 03/06/2012 10:35:13 AM PST by FrankR (You are only enslaved to the extent of the entitlements you receive.)
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To: steve86

Diet cola = Diet Coke; strech = stretch


16 posted on 03/06/2012 10:38:47 AM PST by steve86 (I have Schizoid Personality Disorder and am exercising the privileges thereof)
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To: jiggyboy
“Sometimes a quick comparison of the list of ingredients and the nutrition label between a store brand and a name brand will show them to be identical.”

That is because most of them are in fact identical. If you know anyone that works at a national brand food processing company they will confirm that.

A friend worked at Campbell's. He said the only line change was labels, same food, same batch, same cans. Dozens of different labels for the same product.

Most big companies do the same thing.

17 posted on 03/06/2012 10:42:07 AM PST by Beagle8U (Free Republic -- One stop shopping ....... It's the Conservative Super WalMart for news .)
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To: Hojczyk

I shop at Wal-Mart sometimes, but buy most grocery items at the no-name stores like Sav-A-Lot and Aldi, who beat Wal-Mart prices every day of the week on virtually every item.

I’ve read the average consumer is supposedly saving $2000 a year or some such due to Wal-Mart but I’m sure not getting my share.


18 posted on 03/06/2012 10:46:47 AM PST by bigbob
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To: Hojczyk

Yep, pretty soon Campbell’s soup cans will be the size of a thimble...


19 posted on 03/06/2012 10:59:53 AM PST by Amberdawn
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To: FrankR
I haven't been to our Wal-Mart in about a year, it's dirty, lousy service, and I'm tired of hearing Spanish right here in the town where I grew up.

Yep. I've noticed the same issue. I usually go to Target. Prices are usually the same or better there, too. Though WalMart would rather you didn't notice such things.

We follow suit on things like plastic trash bags, paper towels/TP, cookies, pickles, ice cream, and many other Kroger brands.

Yep. We did the same thing. Especially on dry goods. The Target brand stuff is often the same thing as the name brand (wife noticed this with their paper towels). Only thing that I've not liked of theirs was the store brand shaving cream. It just didn't foam up. Not too bad, one thing out of several dozen.

One last thing on coupons. I'm NOT one of those extreme couponer zealots who lives off of whatever they can get for free. However, I've found that taking a couple of minutes to look at what's in the paper, and a couple more min to look at Target's website for coupons (you can double up....use the manufacturer's coupon AND the Target one) .... equals a whole lot of money for very little effort. No idea what Koger's policy is.

Your mileage may vary. But it might be worth a look. With this economy, I can't afford to leave money on the table.

20 posted on 03/06/2012 11:36:02 AM PST by wbill
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To: Beagle8U
Most big companies do the same thing.

I used to work for a garment manufacturer that made (among other things) women's underwear.

You know the fancy $20-or-more-a-pair lacy underthings that are sold by, erm, that company who has a Secret? They come off the exact same line as the 3-for-a-buck ones in the bargain bin at Wal-Mart. Only difference is the material they're made from.

21 posted on 03/06/2012 11:41:59 AM PST by wbill
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To: WinMod70; Hojczyk
The problem is they’re at the point now where putting any less in the box will result in an empty box.

If you're talking cereal boxes, all is not lost. Take a pair of scissors, cut the box into little squares, soak them in milk, add sugar and eat. Same nutritional value too!

22 posted on 03/06/2012 1:26:06 PM PST by Graybeard58 (Eccl 10 v. 19 A feast is made for laughter, and wine maketh merry: but money answereth all things.)
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