Jul 26, 2022 - Economy

Inflation's "main character" energy

Illustration of Benjamin Franklin pulling down a pair of shades and looking over the rim.

Illustration: Aïda Amer/Axios

Inflation has become the new diva that companies must cater to — carefully.

Why it matters: People are getting pickier about what they buy in an environment where everything has gotten more expensive. And businesses will only profit if they size and time their price hikes precisely.

Driving the news: Leaders from three major consumer brands — Coca-Cola, Unilever and McDonald's — fielded numerous questions on earnings calls today about their pricing strategies.

  • Alan Jope, CEO of Unilever, parent of 400 brands like Dove, said the company is being "careful not to push pricing levels to a point where we compromise the long-term health of the business."
  • McDonald's has been "taking smaller, more frequent price increases ... to be able to see how consumers are reacting and then adjust if or when necessary," according to CFO Kevin Ozan.

Threat level: Waiting too long to raise prices might force Coca-Cola to do so during a recession, CEO James Quincey hinted.

  • At the same time, the company doesn't want to "get ahead and anticipate inflation by pricing ahead of it."

The big picture: Shoppers have already turned to generic store brands or turned away from high-priced combo meals in response to higher prices, according to Unilever and McDonald's.

What to watch: Companies aren't done with price hikes.

  • Unilever says it expects inflation for its own cost inputs to peak sometime before the end of this year, and that it will "continue to price responsibly" for consumers.
  • Meanwhile, Coca-Cola says it anticipates that "more cost increases will come through."

The bottom line: For those at home keeping track of past macroeconomic divas —supply chain issues and unprecedented consumer demand have been dethroned.

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