With the announcement of the customs duties rise, and Value Added Taxes (VAT) to be applied soon on many more goods and services such as food, beverages, and electricity, is pressuring brand decision makers to make extensive strategic decisions regarding price management.
The pressure is even greater on manufacturers where the majority, if not all, of the raw materials are imported.
To get a sense of the effect, we asked a sample of household shopping decision makers about their reaction regarding the expected price increases (with the same income), and the highlight of the findings was as follows:
53% of respondents have said that their expenditure will stay the same, meaning that if they are allocating 100 EGP for household food & beverages, the 100 EGP budget will NOT increase with price increases.
The obvious consequence is one of only two options: consumers will buy less quantity or buy cheaper substitutes.
The implication we fear to admit on the other hand, is how this decrease in consumption will reflect on a decrease in the overall market size.
Hence, competition will become much more intense within the category, and not even brand loyalty can save a profitability drop.
So brand managers, if “how to manage price increases” is not your priority research question yet, make sure it is now.
More articles about the effect of price increases coming soon.