n March 2023 and February 2024, up from 15.4 between March 2020 and February 2021.  Many grocery merchants, like Target and Aldi, have been turning to price-reduction strategies to appeal to budget-conscious shoppers, a tactic that one industry expert says is becoming increasingly necessary.  “Within grocery, I think it is very difficult to compete without becoming sharper on price,” Neil Saunders, managing director and retail analyst at GlobalData, told Inside Retail.  “We have been through a few years of increasing prices and consumers are financially constrained. The tide has now turned, and this is becoming a tighter market in which retailers and consumer product goods companies need to invest in keeping prices low.” Saunders pointed out that while “other retailers don’t need to take up that [price-reducing] tune, if they don’t, they risk losing market share.” Sam Vise, the chief executive officer and co-founder of retail intelligence platform Optimum Retailing, noted that low prices can be tough from a margin perspective, but there are upsides, too.  “While retailers like Target and Walmart are lowering prices to help alleviate the pain of inflation, it’s also a strategic move to get more shoppers in stores,” he said. “Raising prices on products is relatively easy; lowering prices eats into grocers’ already low margins, and increases the need to rely on sales of higher-margin non-essential products.” Vise pointed to Target, which doesn’t necessarily make a huge profit off of its grocery category, but will likely get a decent return on investment as consumers will end up discovering and purchasing other non-essential items, like home decor, while they are shopping at Target’s price-reduced items. “It’s a twofold move that benefits consumers looking for price relief on groceries while also creating more opportunities for them to discover and purchase non-essential products that help stores manage their bottom line,” Vise explained.  How are consumer product goods brands handling this cutthroat market? While low prices are great for consumers shopping in an inflated market, and for big-box chains and larger-scale grocery retailers that enjoy the positive consumer feedback, what about the consumer product goods brands that have to rebalance their costs? Vise said that some CPG brands are flexible in situations like this and can change prices accordingly, but others, especially those on the smaller side, may struggle to adapt, which could lead them to exit certain retailers. As Melissa Minkow, director of retail strategy at CI&T, noted, “With more and more retailers reacting to this [price-sensitve consumer market], turning low prices into a sustainable competitive advantage, CPG brands are being forced to re-evaluate their relationships with those retailers. “Since CPG brands only have so much margin they’re willing to erode in order to stay on retailers’ shelves, we can expect them to potentially move in a few ways – by lowering their prices and going DTC, sacrificing reach but protecting profits and brand positioning, limiting how much product they’re willing to sell wholesale, allocating more to retailers who aren’t willing to compete as aggressively on price, and/or spinning up new lower-cost ranges for wholesale distribution among the aggressively price-competitive retailers.”  Instead of focusing solely on lowering prices, which is not a sustainable practice in the long run, Jordan Jewell, analyst in residence at VTEX, recommended that companies look to other ways to drive loyalty. While most consumers are “shifting down” their buying habits to more affordable, or private label, brands, Jewell said it is worth considering unexpected trends and dichotomies. “For instance, data shows that while Temu is known for cheap and more affordable goods, the average Temu buyer is actually in a much higher tax bracket compared to Walmart, for instance,” he said. “Same thing for Amazon, where price is commonly listed as a top deciding factor, but the average Amazon customer is in a relatively high-income bracket. It will be essential for [retailers like] Target to make sure they don’t overlap too much with their competitors in the space, who are also reducing prices.” One way these merchants can make sure they don’t overlap with their competitors is by providing affordable goods, like a private-label brand, that are exclusive to them, such as Walmart’s Bettergoods line or Target’s Dealworthy offerings.  As inflation remains steady, grocery retailers and CPG brands alike have to stay on their toes to keep up with the fickle demands of the hungry consumer.