Still Fighting the Scourge of High Inflation? You Can Raise Prices, Yes. But That's Not All For most businesses, price increases have been inevitable. But there are other ways smart business owners have compensated for the costs of inflation.
Hiking Prices–and Not Skimping on the Mayo
Curbing Inventory to Keep Cash Flowing
With an average of 25 percent higher year-over-year freight costs, it’s little wonder why Jake Bullock–co-founder of Cann, the Los Angeles-based cannabis social tonic brand–is laser focused on weathering economic uncertainty. Between the pandemic delays and labor shortages–and now interest rate hikes, which have made investing in new equipment and facilities more expensive–costs have been ballooning. But raising prices to accommodate the higher costs is something Bullock has been loath to do. For Cann to compete with alternative drinks, like craft beer, he needs to keep the social tonics priced competitively. Right now, the brand’s sweet spot is about $24 for a six pack.
For this reason, it’s a priority for Cann to keep as much cash on hand as possible–and that means keeping less inventory on hand. “Running leaner allows us to extend our runway,” Bullock says. “We’ve been fortunate to raise money, but today, we’re in a more challenging capital market and we’re not as sure where our next big fundraise will come from.” Cann announced a $27 million Series A in February.
In addition to pulling back on supply, Cann has standardized pricing across markets, which has indeed forced prices higher in some areas. Because the brand considers its tonic a premium product, Bullock says that demand hasn’t been hit particularly hard by inflation–which has helped the company to invest in hiring and retaining employees, particularly in sales and supply chain divisions. “We think that the way that you get through these periods of uncertainty is by really relying on your team,” Bullock says.
Ordering Supplies Far in Advance
Cutting Back on Unnecessary Marketing Tactics
Over the past two years, the cost to produce a case–comprising 12 bags–of Reading, Pennsylvania’s Unique Snacks pretzels increased by about 35 percent thanks to cost increases for sunflower oil and flour. The former went up about 17 percent after the company switched providers, while the latter saw prices double from 16 cents per pound to 32 cents per pound. COO Justin Spannuth says the business raised its own prices by about 17 to 18 percent in that time, through two separate increases.
Because the majority of Unique Snacks’s business comes from distributors, raising prices isn’t as easy as updating a website. The business must propose price increases to its distributors, who need to first accept the changes. It’s a process that can take four to five months, Spannuth says. “When we finally got our first price increase [accepted], our costs went up so much that we had to do another.”
The company also had to make cuts. In particular, it trimmed its social media marketing output and sponsorships. Unique Snacks has seen little impact from this change, but Spannuth admits that it can be hard to measure exactly how much sales those channels previously drove. “It’s been a really good lesson in learning what’s actually necessary for the business,” she says.