Consumers are expressing greater concern over increasing prices as a result of rising commodity costs, whether they're material, food, or energy. Companies such as Kraft and Procter & Gamble, among others, have reported that their rising costs won't necessarily deter marketing spend, but commodity organizations are placing greater emphasis on consumer education. Brands are adjusting their messaging accordingly.
Cotton prices have nearly tripled over the past 18 months, a sharp contrast to the 1% to 2% declines each year for the past 10, says Buxton Midyette, marketing and promotions VP at Supima, a promotional organization for American pima cotton growers.
James Pruden, director of business and trade PR at Cotton Inc., attributes recent changes to a number of external agricultural factors that contributed to a hike in demand and a dwindling supply. And, he explains, the recent price spike has led consumers, who were used to paying very little for cotton in 2009, to the misconception that those rising prices will directly reflect increases at retail.Educational effort
As a result, the nonprofit is educating the industry and media, and ultimately consumers, via statistical analyses and surveys that show the likely increase in costs of standard cotton products as it relates to rising commodity prices. Another survey asked consumers how much more they would be willing to pay for items such as a T-shirt or jeans as a result of the hikes, and the organization found they were willing to pay more than necessary.
"We're trying to get statistical data of an economic and consumer attitudinal nature to make the case that prices go up, but it's not all due to cotton and it's not as bad as we might think," says Pruden.
The organization is distributing the information through a new Facebook page - Facebook.com/CottonInc - and podcasts that put the whole cotton pricing situation into context.
On the retail side, consumer-facing apparel companies that haven't necessarily placed as much emphasis on material quality are adjusting their messaging to do so, explains Midyette.
If in this environment, rising prices add relevancy to a luxury brand's message of quality, it's a trend that may anchor the mid- and low-cost brands that feel the hikes the most to incorporate Supima cotton in their products and messaging. It's also an opportunity for luxury retailers looking to refresh.
Brooks Brothers, among others, recently launched additional collections with Supima cotton. In addition, a major home fashion brand with which Midyette recently met plans on featuring its material quality in an upcoming product launch campaign.
"For the past two years, the name of the game was to engineer quality out of a product to get the price lower," he says. "Now we're reaching a point where brands are going to focus more on the product and quality attributes."Supplying the demand
It's not so different in the food commodity scene, where a typical six months of rising milk prices has given way to an atypical boost in prices across most food commodities, such as beef or peanuts, explains Chris Galen, SVP of communications for the National Milk Producers Federation.
"Commodities tend to be cyclical," he says. "The challenge is explaining to retailers, food service companies, and ultimately consumers why that is and why there is a 'new normal' when they go to a supermarket or restaurant."
As with cotton, it's in part due to a rebounding global economy and greater demand for commodities. As a result, he's noticing that big companies are not as inclined to absorb the higher costs so as not to pass them on to consumers. And raising prices is not something they should do quietly, as consumers become increasingly aware that many of the products they purchase contain less for the same price.
"Consumers realize we're reaching a higher level of cost throughout the system," says Galen. "That will have to be explained."