A quarter of French companies threatened by rising inflation and lack of effective price management

The recent inflation study* conducted by international consultancy Simon-Kucher & Partners revealed that 21% of French companies surveyed expect costs to rise by more than 6% over the course of the year. to come, due to the sharp rise in labor and production costs. At the same time, one in three businesses (29%) have not raised or plan to raise prices in response to rising costs and inflation rates.

Pricing pressures continue to mount

More than half of French companies surveyed (56%) recognize the importance of raising prices to counter rising costs. However, they are hesitant about the best approaches to take, with excessive loss of volume due to price increases being a major concern for 38% of them. These price pressures will have repercussions not only on companies, but also more generally, notably on end consumers and stock markets.

David Vidal, Managing Partner France and Director of the Europe and Latin America division, comments: “We are seeing a lack of confidence from companies in how and when to implement their price increases. Given the generally low levels of inflation in recent years, this is a new issue for many businesses to manage. However, the lack of effective price management poses a real threat to businesses. The inability to pass on costs risks leading to a significant reduction in margins and jeopardizing their long-term viability. »

Price increases will have a widespread impact

The study reveals that more than half of the French companies questioned (56%) have a current or future price increase. The effectiveness of these increases as a fight against rising costs, however, is unclear. When asked how much of the projected cost increase they think they can pass on to prices, French respondents put it at just 12%. Based on a 6% cost increase, this represents 5,3% additional costs that impact their bottom line.

“Many companies have yet to pass on their cost increases. This suggests that when they do, consumers will feel a significant additional inflationary impact,” adds Martin Crépy, Partner and Head of Consumer Goods Industry.

Current inflation rates call for price management skills

When companies apply price increases, one in four (27%) of those surveyed in France apply them uniformly to all of their customers, without differentiation based on customers' willingness to pay, or profitability. performed with different customer segments. This lack of differentiation represents an additional lost opportunity to maximize the effectiveness of their price increase programs.

“Price increases are a very sensitive subject, especially for companies that have long-standing relationships with their customers. Many current management teams have never seen inflation at such high levels, which means companies need to quickly implement pricing action capabilities that have been on the back burner for too long.”, says Franck Brault, Senior Partner and in charge of the 'Chemicals' industry. “Nowadays, a well-thought-out communication and pricing strategy is of paramount importance for companies to survive competition. »

*About the study: The Inflation Pricing Study was conducted online between December 2021 and March 2022 by global consultancy Simon-Kucher & Partners (via YouGov). Over 3000 companies from 20 countries were surveyed on the topics of inflation and rising prices.