Are You Ready For The Coming Consumer Price Protests? Walmart Is.

In parts of Eastern Europe this year, rising prices, particularly on food and utilities, have prompted large scale demonstrations, with police controlling crowds with tear gas and stun grenades. Meanwhile, in the West, price protests have been far more muted. There has been a “benign reaction” to increases as Andre Schulten, CFO at P&G said in a January earnings call, which was reported in Forbes. In the same article, Church & Dwight CMO Barry Bruno commented that “pricing is a muscle we’re going to continue building as we expect a prolonged inflationary environment.” The bet is that consumers will continue to accept the hikes, after being schooled through Covid in “supply chain issues” and labor shortages.

But patience (and pocketbooks) may be wearing thin. In markets the world over, government stimulus is being withdrawn, fuel and grocery prices are going up, and the specter of higher interest rates looms large.

With all that as a backdrop, it was fascinating to listen to Walmart’s Q4 earnings call this week. Results were strong (full year revenue up 2.4%), but that’s not what caught my ear. John Furner (Walmart U.S. CEO) noted that while its consumers are in “good shape with a strong balance sheet”, they are starting to pay closer attention to price. Walmart CFO Brett Biggs told CNBC that “we’ve seen and we heard through our own studies that people are certainly focused on inflation and they’re seeing that in their daily lives.”

Walmart’s strategy is to stick to its knitting, with a contemporary twist.

As Sam Walton once said, “we exist to provide value to our customers, which means that in addition to quality and service, we have to save them money.” Walmart U.S. CEO John Furner echoed that sentiment on the call. “At a time when prices are rising in so many parts of the economy, being able to offer customer value and fight inflation is what we do…we’ll continue to be an everyday-low-price retailer,” he said. Furner went on to state that Walmart has maintained its price Rollback program at the same level as Q1 last year.

Besides “paying close attention to how we manage our opening price point items”, global CEO Doug McMillon also commented on Walmart’s investments in the fintech space. “We can help our customers and Walmart Plus members save money, have an experience with less friction, and help strengthen the financial position for millions of families,” commented McMillon.

The earnings call served as a warning call to retailers (and definitely suppliers) everywhere. We could well be moving into a “new value” era, which plays to the advantage of merchants like Walmart (and the discounters below them). In those circumstances, it will pay to have a clearly defined value strategy and to more cautiously increase prices, with a sound rationale.

We might not see people marching in the streets in the near future, as in Kazakhstan, but be warned, consumer price protests are coming, along with the associated brand switching and trading down.