CPG

Inflation Situation

More than a year from the start of the pandemic, a new toilet paper crisis looms. In response to the rise in the price of commodities, major CPG companies are raising prices on staples like toilet paper, diapers, and soda. 

Procter & Gamble, Coca-Cola, and J.M. Smucker are a few of those suppliers attempting to boost their profit margins after the pandemic increased demand, elevated freight costs, and made the supply chain more volatile, multiple analysts told Retail Brew. Specific price increases are TBD. 

Pass or play? Retailers that sell their products now have two options: pass on those increases to consumers or eat the costs themselves, a calculation that varies between companies. 

• The price increases will disproportionately hurt retailers that rely more heavily on CPG commodities, like grocers and convenience stores, Holden Bale, group vice president and head of commerce at Huge, told Retail Brew. 

Bale believes retailers should innovate in response, particularly with private label brands. Big box retailers like Walmart and Target, for example, will have to rationalize their merchandising or promotional strategy. 

“You will always eat it on the products that drive foot traffic, that drive return engagement—the basic commodities that drive people in the stores. You may say, ‘I have a hundred items that are my halo items and I will try and price match Walmart on them,’” Bale said. But now, due to price hikes, “that list of a hundred might become a list of 50.”

20/20 vision

In hindsight, these price increases were somewhat predictable, given that scarcity and supply chain disruptions like we’ve observed over the last year often lead to price increases, Keith Anderson, SVP of strategy and insights at Profitero, told Retail Brew. While Anderson believes these increases are not permanent, if they balloon in size, retailers will face more trouble.  

• “Inflation of 3% to 4% can be passed on to the consumer, but if inflation goes higher, there will be difficult conversations throughout the supply chain,” Vivek Sankaran, CEO of grocery chain Albertsons, told IRI Strategic Analytics in a report shared with Retail Brew. 

Looking ahead...Unfi, the organic wholesale distributor for Whole Foods, has started seeing increases in fresh departments like beef and chicken, and expects hikes for other categories like CPG.  

“An inflationary environment generally benefits us because most of our pricing arrangements allow for a pass through of cost increases,” an Unfi company spokesperson told us. “A silver lining for consumers is that sustained price increases are often accompanied by more promotional offers, and we’re seeing and hearing of more promotional spend coming from our CPG partners.” — KM

B2B

Split Decision

Breakups are hard, but sometimes they’re for the best. ODP, Office Depot’s parent company, is splitting its retail and B2B divisions and creating a new company dubbed NewCo. 

ODP’s retail operations will include roughly 1,100 Office Depot and OfficeMax stores and the company’s e-comm website. NewCo will operate the office supply distribution units. 

Why the move? ODP’s retail business has struggled as office supply retailers face increased competition from big box stores and e-comm sites, Retail Dive notes. Meanwhile, the B2B unit has evolved and now offers a digital platform technology business for procurement. 

• “We believe creating two focused, pure-play companies will unlock significant opportunities by improving our ability to meet the needs of our customers,” Gerry Smith, ODP CEO, said.

More context: Earlier this year, Office Depot rejected an acquisition offer from Staples, but said it might consider merging their retail operations. Staples had proposed the ODP split and still wants to acquire its competitor. 

Zoom out: The pandemic has forced many B2B businesses to digitize, and NewCo is no different. ODP ramped up its digital tech biz in February by acquiring BuyerQuest, which provides software to streamline procurement. — KM

SPONSORED BY ADOBE

So There’s This Site That Sells Everything

Maybe you’ve heard of it, named after a rainforest. OK, OK, we’re being silly: Of course we’re talking about Amazon!

DYK: 40% of all online purchases are made on Amazon, and more than 50% of digital businesses sell their wares on the platform too. 

So everyone’s making a bunch of money, right? Well, not always, and that’s what Adobe Commerce is here to help you with.

Their new e-book, A Better Way to Sell on Amazon, covers five ways that can help you get more out of your Amazon selling relationship. We’re nice, so here are three of the ways:

• Skip the systems integration and maintenance
• Synchronize inventory and fulfillment data
• Eliminate time-consuming manual processes

You want the other two? You’re gonna have to read Adobe’s e-book. Sorry, but those are the rules.

Download the ultimate guide to selling on Amazon right here.

LAUNCHPAD

New Brands on the Block

Right up there with “synergy” and “innovation,” retail execs love “newness.” Sometimes that’s just a buzzword; today, it’s a marker of the fresh brands you need to know. 

From the incumbents...big box retailers aren’t satisfied with stocking telehealth unicorns. They’re building self care empires of their own. 

• CVS introduced Goodline, a suite of Harry’s lookalikes men’s grooming products spanning beardcare, skincare, and all the other -cares. It’s taking a clean tack found across several DTCs: no animal testing and free of hard-to-pronounce chemicals.
• Walmart added five new fragrance collections to its Unilever-exclusive Find Your Happy Place body and candle brand. Smells like continued success: Personal and home fragrance sales defied expectations during the pandemic, increasing 13% YoY per the NPD Group.

From the up-and-comers...Social Tourist, the first phase of a multi-year collab between Abercrombie & Fitch and Charli and Dixie D’Amelio, arrives online and in Hollister stores later this month. Part of the collection is marketed as gender neutral, a distinction that’s gaining popularity among younger shoppers.

Then there’s Hanni, a shave brand that’s claiming 1) eco-friendliness and 2) faster shaves with water-free, reusable razors.

And if you’re thirsty for clout, try Gen Z water—aka refillable bottles for “people who never owned a flip phone.” — HL 

WHAT ELSE IS BREWING

• Adidas reported growth in China despite a boycott from some Chinese consumers. 
• The Container Store now offers same-day delivery with Instacart. 
• Figs, the DTC scrubs brand, filed for an IPO.
• Peloton’s projected impact from those treadmill recalls: $165 million...and its reputation.
• At Home is going private in a $2.8 billion deal.

SPONSORED BY PILOT

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SWAPPING SKUS

Today’s top longreads (and listens) in retail.

Anything but leggings: We knew times and places for Hard Clothes would return, yet some retailers aren’t stocked appropriately. (The Atlantic)

Must-read investigation: Time and The Fuller Project investigate Hippo Knitting, a garment factory in Lesotho, Africa, where Fabletics sources its $50 leggings and where workers report a rampant culture of abuse. (Time)

Headline hits: Miss a day of Retail Brew, or want to hear about the stories we didn’t have the word count to cover? Catch up with Shopify’s weekly news show, featuring a familiar face—er, voice. (Resilient Retail) 

FRIEND OF FAUX?

We hope this week’s stories will perk up some Mother’s Day calls this weekend...but probably not. Can you spot the fake? 

1. The world’s biggest White Castle opened in Orlando this week, and boasted a record-breaking sales day, with wait times up to four hours.  
2. A bottle of Pétrus 2000 wine that was aged in space is set to auction for $1 million. 
3. Drake is releasing his own scented candles in partnership with Postmates.
4. Balmain’s website crashed Thursday after Newsmax anchor Greg Kelly was photographed with President Trump wearing a pair of their pants. 

Keep scrolling for the answer. 

ICYMI

Revisit the Retail Brew stories you may have missed.

• Brands Get Ready for Summer Spending Bump
• Gap Sells Intermix to Private Equity Firm
• Walgreens Offers Same Day Delivery

FRIEND OR FAUX? ANSWER

No, Balmain’s website did not crash.