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The recession has had a major impact on how consumers shop but also how retailers draw them in and a major factor has been price. Food companies and grocers have tried to compete with lower prices, which has been complicated by massive fluctuations in the commodity prices for the ingredients that go into food. Striking the right balance of pricing for sales versus hurting revenue has been a struggle for the food makers and retailers. Sara Lee Corp. Chairman and CEO Brenda Barnes discusses the issue with investors on a conference call Thursday:
QUESTION: Are you kind of surprised that you're having to put money back in terms of pricing into the business? I mean, the industry has been very rational for a long period of time ... I think the market is worried given where the group is trading that we're now kind of moving towards having to put back price or promotion or heavy promotion, whatever you want to call it, back into the business.
RESPONSE: I am really not surprised ... we just came out of the worst recession since who knows when, and you have got lots of people fighting for the consumer dollar right now. So it is the competitive aspect of both retailers and manufacturers trying to capture that consumer dollar. So I think maybe we had the benefit of commodities coming down and I don't think any of us would have expected that you could hold onto all of it. I don't think that really ever happens in consumer goods over history. But I think what is maybe making it a little bit worse is that competitive dynamic of trying to grab those dollars. So you see on both ends, you have retailers trying to build the traffic through their stores and you have the manufacturers just trying to say, 'Okay, when they're in that store I want it to be my product and not the competitive one'. So I think it is a little more intense right now. I think it will balance out some. I don't think it will stay this intense.
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