The news: PepsiCo and Coca-Cola are being investigated by the Federal Trade Commission (FTC) for a potential breach of the Robinson-Patman Act, a law that prohibits suppliers from offering better prices to larger retailers to the detriment of smaller competitors, per Politico.
What it means: The central argument behind the Robinson-Patman Act is that smaller retailers are at an inherent disadvantage when it comes to negotiating with suppliers. Large chains like Walmart have the muscle to work out terms directly with suppliers like PepsiCo, but smaller companies often work with a wholesaler to secure access to products, leaving them out of discussions and at the mercy of the supplier’s pricing decisions.
Pricing power: The FTC isn’t the only threat to companies’ pricing power. With real wage growth failing to keep pace with inflation, brands and retailers are rapidly losing their abilities to use price hikes to reinforce their bottom lines.
The big takeaway: The pandemic playbook of raising prices to make up for inflationary cost increases won’t work in 2023, as more consumers actively look to save money by trading down to cheaper brands or reducing consumption.
This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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