Publications
Publications
- March 2022 (Revised August 2022)
- HBS Case Collection
Hometown Foods: Changing Price Amid Inflation
Abstract
During the early part of the 2021 Covid-19 pandemic, Hometown Foods, a large seller of flour-based products, thrived as consumers hoarded baked goods and took up baking to pass the time and find comfort. Then, amid growing shortages in commodities, a vaccine arrived, businesses began to re-open, and consumers benefited from federal relief aid. This perfect storm of high demand amid stock shortages generated the highest inflation in 13 years.
Commodities accounting for a large percentage of its products, Hometown had to decide whether to increase prices, and if so by how much. Although the industry norm was to wait for the number #1 player in each product category to increase price first, with escalating ingredient costs significantly reducing Hometown’s margin and profit, lack of action could result in serious financial distress. A decision to move first would entail several more decisions. Should Hometown price for cost or elasticity, employ component or blended pricing? Given pandemic-induced volatility, how should it prioritize quantitative pricing calculations relative to qualitative considerations? It would also need to anticipate reactions from competitors and stakeholders including its sales force, retailers, and consumers as well as investors and lenders.
Keywords
COVID-19 Pandemic; Consumer Behavior; Supply Chain; Inflation and Deflation; Spending; Price Bubble; Price; Volatility; Food and Beverage Industry
Citation
De Freitas, Julian, Jeremy Yang, and Das Narayandas. "Hometown Foods: Changing Price Amid Inflation." Harvard Business School Case 522-087, March 2022. (Revised August 2022.)