Last week three major CPG brands (Unilever, Nestle and Heinz) reported big jump in their profits fueled by price increases. Now another big brand, Del Monte reported its quarterly profit increased by 14% due to its price increases. Their sales revenue increased despite the weakness in volume due to the price increase. Once again another marketer is giving up its quest for market share and “stomach share” and going for the core business objective, “profit”.
It shows again that they were pricing lower than they should have and that their brand does command a premium. The customer mix also changed with the price sensitive customers switching to private labels but the rest remaining loyal to the brand. Another factor is the sustained revenues at higher profit from Del Monte’s pet food division.
Price increases in the company’s pet-food segment will likely remain a good business choice for Del Monte, according to Morningstar analyst Ann Gilpin, because consumers tend not to trade down to private-label products when it comes to their pets.
“I don’t think anybody wants to buy private-label dog food, just because there were so many issues with recalls,” she said.
Is this the begining of the end of the quest for Market Share at all costs mantra?