Reuters reports that Kroger CEO David Dillon has weighed in on the pricing tensions that have emerged between retailers and wholesalers, saying that while he has seen some price reductions, there are not in synch with commodity cost decreases.
Retailers have been calling for manufacturers to lower their prices because commodity costs have been coming down and because the recession has had such an impact on consumer shopping behavior. Manufacturers, however, have been resisting because they say that they are locked into commodity contracts that remain high.
Dillon said that private label sales have hit “historic highs,” and that this is likely to continue as long as manufacturers don't toe the line on price …and that he is perfectly happy with this scenario, especially since the retailer makes more margin on own-label products.
According to the company, private label sales registered a record 35 percent of unit sales during the fourth quarter.
Retailers have been calling for manufacturers to lower their prices because commodity costs have been coming down and because the recession has had such an impact on consumer shopping behavior. Manufacturers, however, have been resisting because they say that they are locked into commodity contracts that remain high.
Dillon said that private label sales have hit “historic highs,” and that this is likely to continue as long as manufacturers don't toe the line on price …and that he is perfectly happy with this scenario, especially since the retailer makes more margin on own-label products.
According to the company, private label sales registered a record 35 percent of unit sales during the fourth quarter.
- KC's View:
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The question that needs to be considered – both by retailers and manufacturers – is whether the expansion of private label sales is a long-term shift, or just a reaction to the current economic situation that will go back to “normal” when the recession recedes.
Ultimately, this will be up to retailers, and whether they want to put the branding and marketing muscle behind these products to make them viable alternatives long-term.
