According to RetailDetail, European food brand manufacturers cannot fully pass on the cost increases to retailers, who are, nevertheless, raising consumer prices. Instead, they are investing in promotions to keep their products affordable.

Absorbing Higher Costs

72% of European brand manufacturers are still facing supply issues, forcing them to reduce or adjust production, according to the European brand association AIM in its annual barometer of 900 manufacturers in the fast-moving consumer goods industry across 28 European countries. This percentage is only 3% lower than last year.

Furthermore, the impact of cost inflation remains high: 99% of companies have experienced some form of inflation in the past twelve months, with over half of them experiencing inflation of over 50%.

They had to absorb a significant portion of these higher costs themselves: less than half of the manufacturers were able to pass on 60% or more of their higher production costs to retailers. 22% absorbed over 80% of the higher costs and were therefore able to transfer less than 20% of the increase.

Investing in Promotions

However, 96% of manufacturers say that retailers have increased the consumer price of their products. 28% say that the consumer price of their products has increased more than the increase in the price charged to retailers.

Manufacturers do not set retail prices - retailers do - but they continue to support households by absorbing higher costs and through promotions, says Michelle Gibbons, CEO of AIM:

"This is an important mechanism that we have as manufacturers - paying and delivering promotions to retailers so that households under pressure can continue to enjoy the brands they love."

26% of the brand manufacturers interviewed reported a decrease in sales last year, 55% saw a decline in profits, and 42% lost market share. As a result, these companies are forced to slow down in terms of workforce employment and investments.