“Despite the price increases, we are seeing good volume performance. So I’d love to see that our elasticity assumptions are a little conservative. Potentially there could be a little upside. Generally, in our categories if the market moves in a direction elasticities are a little lower.” - Michael Hsu CEO of Kimberly-Clark 1/26/22
Rising prices (KR)
The USDA’s latest Food Price report shows that food prices in December 2021 were 6.3% higher than the previous year. Restaurant food prices were 0.6% higher in December MoM and 6% higher YoY. Grocery prices were up 0.4% in December MoM and 6.5% higher YoY. Beef and veal had the largest price increase of 9.3% than any other category tracked by the USDA while fresh vegetables had the smallest increase at 1.1%. For 2022 the USDA projects grocery prices will increase 1.5% to 2.5% while restaurant prices will increase 3.5% to 4.5%. It’s a good thing it’s not the USDA’s role to project food price changes, well not its only role.
Price elasticity (GIS)
Rising prices are starting to impact consumer purchasing decisions, but product shortages make it challenging for consumers to choose alternate products. CPG companies have said they have seen lower levels of elasticity in the most recent price increases. A recent survey showed that more consumers have not changed brands than have changed brands due to price increases as seen below:
Meat, particularly beef has seen the highest rate of substitution due to inflation or stock-outs. The survey ranked meat as the top product consumers are purchasing less. Non-alcoholic and alcoholic beverages are near the bottom for products that consumers are reducing as seen in the following chart:
Super Bowl return (BUD TAP SAM)
Anheuser Busch InBev announced its return to advertising during the Super Bowl. Last year was the first year in 37 years the company did not have a commercial during the preeminent TV event of the year. Budweiser will have a total of four minutes of air time which it will use for Budweiser, Bud Light Next, Bud Light Seltzer Hard Soda, Cutwater Spirits, Michelob Ultra Organic Hard Seltzer, and Michelob Ultra. Busch Light and Michelob Ultra Pure Gold will be featured in certain local markets while Stella Artois will be in a pre-game slot. With the focus not on the company’s core beer products, the returns on the spending will be lower. So will the chances of an iconic ad like the Clydesdales (making a return this year), Whassup frogs, or the Bud Bowl as the commercials introduce the lesser-known products to a larger audience.
Anheuser Busch InBev has been one of the largest spenders on the Super Bowl in the past. It is estimated that the company’s ads in the Super Bowl two years ago represented 11% of overall revenue for the broadcast. There is speculation that Bud Light will include an NFT in a Super Bowl ad. Miller Lite has confirmed that its ad will be aired at its bar in the metaverse. (Stephen Colbert had a humorous take on the idea https://www.youtube.com/watch?v=tSdWz6CvpIc at 3:43 into the clip. No word yet if there are hangovers in the metaverse.) Boston Beer will return with a 13 market regional purchase that represents 15% of the brand’s total media spend for the year.
