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Rising Commodity Prices Will Impact PL Competitiveness, Analysts Predict

March 1, 2011
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Rising commodity prices will challenge private label competitiveness in the coming months, says Erin Lash, equity analyst at Chicago-based investment research firm Morningstar. “I don’t think private label is immune to higher costs and even the bigger national brands have begun rising their prices in their portfolios,” says Lash. The standard price gap held by private labels will significantly decrease as commodity costs rise, hurting private label’s ability to attract shoppers looking for lower-cost alternatives, she says.

 

Lash’s prediction comes in response to a report issued by the U.S. Department of Agriculture last week stating that it will take more than two years for world grain supplies to return to levels high enough to bring prices down significantly from today’s levels. Current rising prices are due to a number of factors, including recent storms and droughts that have hit the world’s leading agriculture countries, says the report.

 

“We are seeing some huge raw material prices increases,” says Tom Lonsway, vice president of sales and marketing at the San Dimas, Calif.-based Organic Milling. “Retailers will try to hold prices as we want to maintain psychological price points $X.99 or $Y.49 but if commodity prices stay high for the next 90 days, retailers will be forced to raise their prices as well, he says.

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