These are some of the strategies Chipotle, Disney, and P&G are using to retain pricing power

“Companies have to think very carefully and very strategically about how they approach pricing strategy,” EY Parthenon Chief Economist Gregory Daco tells me. “We’re no longer in the 2021 or 2022 environment where demand was quite robust and companies were being rewarded for exercising pricing power because everybody was doing so.”

Procter & Gamble (P&G), the maker of consumer goods like Tide, Pampers, and Charmin, has a strategy to offset higher material costs and supplier inflation by continuing price hikes and showing product innovation. Prices across categories increased by 10%, but sales volume decreased by 6% from the year prior, according to the latest earnings report for the period ending Dec. 31. More price increases will go into effect in February, Andre Schulten, CFO at P&G, said on the Jan. 19 earnings call. The drop in sales volume was consumption-driven, and the other half was due to inventory reductions in China and Russia, Schulten said. P&G net sales for the quarter ($20.77 billion) were down 1%, but surpassing analysts’ projections of $20.73 billion. The higher pricing resulted in organic revenues increasing by 5%.

Regarding product innovation, P&G chairman, president, and CEO Jon Moeller pointed to Dawn Powerwash dish spray. The product creates suds inside the spray chamber, letting you apply those directly to the dishes. Compared to non-ultra Dawn, the company claims Powerwash is five times faster at cutting through grease. Powerwash hit the market in January 2020. It was at a premium price, Moeller said on the earnings call. “The brand has grown at 50% since that introduction, and Dawn has driven 90% of category growth in that situation,” he said. “We’ve got a lot of innovation coming.”

Meanwhile, in 2022, Chipotle Mexican Grill, Inc. (CMG) increased menu prices three times. That’s due to factors such as inflation in ingredient costs, wage inflation, and energy prices, CFO Jack Hartung told me late last year. “When we look at our menu prices compared to competitors, we’re still a terrific value,” Hartung said. “Our food cost and our people cost are by far the largest items on the P&L,” he said. “We don’t want to cut back on our food. We’ve never tried to reduce the quality of our fresh ingredients. We want to invest more in food and our people.”

Chipotle’s total revenue increased 13.7% to $2.2 billion in Q3 2022. In-restaurant sales rose 22.1% year-over-year. However,…