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21.2.2011 Food brands face price test

Some of Europe's biggest food manufacturers are facing tough decisions concerning whether to raise prices, or protect customers from rising commodity costs. Danone, the French group, anticipates products like yoghurt and Evian might become more expensive for shoppers, reflecting fluctuations in the raw materials market. However, Franck Riboud, the company's chief executive, suggested it would adopt a careful approach in this area, based on a recognition that many buyers are still seeking to save money. "The mistake we can't make is to ask for more than consumers are willing to pay," he told the Wall Street Journal. "We have to stay competitive."  While the organisation believes the amount it spends on ingredients and packaging constituents could climb by between 6% and 9% in 2011, the price of goods in France will only grow by an estimated 2% or 2.5%.

Nestlé, headquartered in Switzerland, is confronting similar obstacles, but will avoid sweeping changes to its strategy by prioritising alternative tactics. "Raising prices for the consumer is the last thing you do," said Paul Bulcke, the company's chief executive. "You have to play all your other cards first." Unilever, which owns Hellmann's and Knorr, is pursuing what it calls a "realistic" model, as part of a wider shift observable inside its core sectors. "In our industry, we see a trend towards the more rational approach to moving prices up when cost pressures make it unavoidable, and we're starting to see them already in the marketplace as we talk," Paul Polman, Unilever's ceo, argued.

B.L. 21.2.2011