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Inflation continues to impact suppliers all over Europe - so much so that many are being forced to plan their second or third price increase this year. Companies are trying to recover from rising costs as quickly as possible, putting other important discussions on hold, resulting in a strain on retailer relationships. Though reactionary pricing moves are important in order to protect margins, consumer goods businesses must avoid losing sight of their long-term vision.
Here we outline 3 ways to overcome inflationary pressures in the European pricing landscape:
Focus on creating a strong collaborative relationship with your retailers
Overcoming the challenges posed by inflation is impossible without considering the needs of the retailers you’re working with. It’s important to plan ahead of any negotiation and structure your proposal in a way that always comes back to a process of value-creation and collaborative discussion. A transactional relationship will only lead to more resistance, so it's important to focus on ensuring both sides can maintain a competitive level of margin.
Don’t let inflation get in the way of trade terms discussions
In the current market, with CPIs taking up most of manufacturers and retailers brain space, trade terms can often be left ignored, but without a consistent structure and conditional terms in place, manufacturers end up giving away money for limited returns. Alongside your price increase negotiations, you need to ensure that your trade terms are working in the right way for your business and that you’re reviewing them at at the right point in your commercial cycle.
Invest in the right pricing strategy
The emergence of new alliances and buying structures at the European level is significantly influencing the way that decisions around pricing and investment are made, demanding structured and targeted approaches to customers to account for different trading models and negotiation tactics.
Amplified by changing consumer behaviours during the pandemic, E-commerce is becoming an integral part of revenue growth. Pricing strategies for E-commerce arms of the business need to account for the increased visibility and lack of adherence to the typical decentralised market models.
Whilst pricing corridors are often set globally, the product is sold at a local level, creating a need for both international and local pricing strategies. For suppliers, maximising the opportunities in terms of their investment in their pricing strategy is crucial and it has to be done in a sustainable and defensible way. Adopting a different approach to pricing in each market locally is more challenging and time and resource intensive, but ultimately a more tailored approach will better meet the needs of consumers and drive better relationships with customers. It is important for suppliers to think about how they can make the best out of the structures formed at a European level and evaluate the right dynamic between local and international pricing levels for their business.
Summary
Combating inflation in the current European landscape is a process that requires input from a cross functional set of teams across the business, at both a global and local level. A strong first step is creating a clear plan with your retailers that benefits both sides.
Then, think about the bigger picture – inflation is the biggest challenge right now, but should it stop you from having trade terms discussions? It’s important to build the framework and start the conversation sooner rather than later.
Lastly, evaluate your current pricing and investment strategy and focus on pricing on both a local and international level to meet the needs of all consumers and customers as best as possible. With clear steps in place, the current inflationary pressures can turn into opportunities for learning and growth for your business.
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