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Advertising Age reports that rising commodity prices likely will cause CPG manufacturers to do three things - increase their prices to compensate, reduce their dependence on price-oriented promotions, and increase their marketing and ad dollars in order to make the sale to money-conscious consumers.

According to the story, “Food companies, hit by the first wave of agricultural commodity cost increases, are already taking price increases, while household and personal-care players, more affected by oil prices, are preparing to do so soon. The U.S. Department of Agriculture last week projected food prices will rise 3.5% in the U.S. this year and possibly as much as 5%, as retailers appear to be open to passing along price hikes.”

Among the companies saying that they plan to take price increases are Procter & Gamble, Colgate-Palmolive, Clorox, Campbell’s, and Heinz.
KC's View:
Michael Sansolo and I have been making this point a lot over the past year - that at a time when it is increasingly hard to differentiate oneself in terms of price (either because the competition is too tight, or you simply don’t want to play the price game), the ability to tell a story is paramount. And that’s what effective marketing and ad dollars do ... they tell a story, they establish a narrative, and they paint a picture that resonates for the shopper.