Albertsons, a major grocery chain, is facing challenges with rising ingredient costs that are impacting the cost of goods from vendors. CEO and Director Susan Morris discussed the company’s strategy during a recent earnings call on July 15.
To combat the increase in costs, Albertsons is deconstructing the reasons behind the price hikes to ensure alignment between the two parties. While more than 90% of the company’s goods are domestically sourced, they are open to considering alternative suppliers if tariffs become too burdensome.
Morris emphasized the importance of efficient supplier relationships and a meticulous pricing process within the company. Albertsons aims to remain competitive in pricing and only pass on the higher costs to customers when absolutely necessary. The company is focused on maintaining a close relationship with the competitive market, particularly on key items.
As a response to higher supply costs, Albertsons is also reviewing its own brand offerings, which currently represent nearly 26% of brand sales. The company sees opportunities for growth in private label goods and aims to increase the penetration of own brands to at least 30%.
The impact of the Trump administration’s tariff-heavy trade policy on imported ingredients used in food manufacturing is also a concern for Albertsons. Items such as cocoa, spices, and seasonings are expected to see higher prices due to the rising duties. McCormick, a spice giant, anticipates facing up to $90 million in added costs per year due to tariff-driven charges and plans to raise prices in Q4.
In response to these challenges, Albertsons is focused on maintaining strong supplier relationships, strategic pricing processes, and exploring opportunities to expand its own brand offerings to mitigate the impact of rising ingredient costs on the company and its customers.
