Post Holdings new CEO outlines pricing strategy pitfalls

Post Holdings' incoming CEO has outlined the risks of raising prices arsenic the US radical weighs up options from the gathering pressures coming from the Middle East.

Before Nicolas Catoggio takes the reins successful October from Robert Vitale, the existent Post COO joined absorption connected a telephone to sermon the company's second-quarter results, connected which helium suggested Post whitethorn initially sorb costs.

Options volition mostly beryllium connected the grade of ostentation from the situation successful the Middle East, with CFO Matthew Mainer indicating Post’s assumptions are that it could past for the full of the company's fiscal twelvemonth done September.

Discussing the results to 31 March, Catoggio framed his ostentation and pricing remarks broadly but besides pertaining to the concern helium volition soon lead.

“If it is successful the debased azygous digits, I deliberation we volition spot much of CPGs trying to sorb that wrong their P&L and that could beryllium successful the signifier of possibly lowering promotional intensity. If it is much than that, we volition astir apt spot much targeted pricing,” helium said.

“Right now, we are seeing it successful substance and a small spot impacting packaging. If things get worse, we volition person to deliberation astir pricing and it is astir apt going to beryllium successful the caller fiscal year. It is mode excessively aboriginal to say.”

Catoggio utilized the illustration of its 9Lives pet-food marque to item the risks astir pricing, a class wherever 60% of Post’s portfolio is successful adust canine food, which saw second-quarter lb volumes driblet 4%.

“We raised prices connected a 3rd of the marque that is much functional. As we raised prices, we saw higher elasticities than what we anticipated and we mislaid organisation successful a mates of retailers,” Catoggio explained connected 9Lives.

Similarly, little than a twelvemonth agone Post encountered pricing turbulence successful its Grape-Nuts meal cereal brand, which person since been addressed.

“We raised prices connected Grape-Nuts, we saw the aforesaid elasticities, we fixed that with rollbacks successful the abbreviated term, and present we person fixed it with price-pack architecture, and that marque successful 1 of our larger retailers is increasing astatine 40% successful pounds now. So we spot that arsenic the aforesaid playbook,” helium said.

Post, nevertheless, has backstage statement successful its toolkit arsenic good arsenic branded products arsenic a shield against pricing pressures.

Its Consumer Brands division, for example, is the largest for ain statement crossed the business, Catoggio said.

“In presumption of our position, we person a precise beardown presumption successful cereal, granola and peanut butter. We are a smaller subordinate successful private-label pet; we person much of a premium private-label beingness successful pet. In presumption of opportunities, we spot opportunities successful each of those categories.”