How are companies adapting to persistent inflation?

Pricing Strategy Adjustments

Companies are adapting to persistent inflation by employing diverse pricing strategies. Walmart absorbs costs, reduces prices in certain categories, and aligns pricing with competitive gaps. Procter & Gamble avoids hedging, adjusts prices as needed, and respects consumer constraints. Coca-Cola offsets inflation and currency devaluation through strategic pricing actions.

"Those pricing strategies include, but are not limited to: absorbing cost increases instead of passing those cost increases on to our customers and members; reducing prices in certain merchandise categories; focusing on opening price points for certain food categories; and when necessary, passing cost increases on to our customers and members." --- (WMT, sec filing, 2025/Q1)

"And I honestly believe not hedging is actually a big incentive for our businesses to deal with issue ahead of them, which means you can't offset it with productivity, take the pricing when the market needs to take the pricing, which is I think the approach." --- (PG, conference, 2024/05/14)

"Our price mix growth of 13% in the quarter was driven by approximately six points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets, and a couple of points of favorable mix." --- (KO, earning call, 2024/Q1)

"Taking a closer look at margins, as we continue to work closely with our suppliers to lower cost, we're managing our Walmart U.S. pricing aligned to competitive price gaps, and customers are responding favorably, resulting in sustained sales growth and higher gross margins." --- (WMT, earning call, 2025/Q1)

"The strength of the business has been consistent because of the execution of the team, strong innovation pushed out over an extended period of time as we were taking pricing, very strong productivity work in the region across every part of the P&L to limit the amount of pricing we needed to take but brilliant execution of the pricing that was taken, respecting key price points, respecting retailers and consumer constraints, and I think that's playing out." --- (PG, earning call, 2024/Q3)

Cost Management and Efficiency Initiatives

Companies are focusing on cost reduction, operational efficiency, and restructuring to manage inflation. Tesla emphasizes production innovation and lower logistics costs, GE highlights debt reduction and lean operations, 3M benefits from productivity actions and spending discipline, PepsiCo extends its productivity plan, and Caterpillar outlines restructuring and capital expenditures.

"We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors, while our new products will help enable future growth." --- (TSLA, sec filing, 2024/Q1)

"Thanks to the GE team. We significantly improved our financial position, reducing debt by more than $100 billion since 2018 and enhanced our operational execution by embracing lean with a relentless focus on safety, quality, delivery and cost, in that order, to better serve our customers." --- (GE, earning call, 2024/Q1)

"Business segment operating income margins increased year-on-year driven by benefits from productivity actions, restructuring, portfolio initiatives, strong spending discipline and timing of stock-based compensation grants to be incurred in the second quarter of 2024 versus the first quarter of 2023 due to Solventum spin partially offset by decline in organic sales volume and higher restructuring costs." --- (MMM, sec filing, 2024/Q1)

"To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above." --- (PEP, sec filing, 2024/Q1)

"In 2024, we expect restructuring costs to be between $300 million and $450 million and expect capital expenditures to be in the range of $2.0 to $2.5 billion." --- (CAT, sec filing, 2024/Q1)

Supply Chain Resilience Measures

Companies are enhancing supply chain resilience through collaboration with stakeholders, long-term supplier agreements, sustainability initiatives, and integrating end-to-end supply chain services. Additionally, they are leveraging government incentives, flexible capacity build-outs, and strategic use of external foundries to ensure continuity and adaptability in the face of persistent inflation.

"Strengthening supply chain security and enhancing cyber resilience require collaboration with industry partners, supply chain stakeholders, and cybersecurity vendors to implement risk management practices, supply chain transparency measures, and resilience strategies." --- (CSCO, press release, 2024/04/05)

"And so we're really proud of our position from a supply chain standpoint. We worked diligently to provide resilience across the food supply chain over the past couple of years.I'm working on a number of initiatives, Doug, things like long term agreements with our suppliers to make sure that they can make the investments they need to secure future food supply, working diligently in things like sustainability across the key stakeholder groups to equip farmers to make sure that our food supply is steady for years to come." --- (WMT, event transcript, 2024/06/05)

"HIRC is a supply chain trade organization that advocates for transparency, resiliency and business continuity. We are proud to win this award again! https://t.co/s5UYPEP6d9" --- (UPS, twitter, 2024/06/15)

"And then I would say that supply chain with Amazon is really an abstraction on top of those individual building block services I just mentioned that makes it easier for customers to have the whole end-to-end supply chain integrated." --- (AMZN, earning call, 2024/Q1)

"In addition to SCIP, other elements of Smart Capital include: 1) government incentives to provide a level playing field for building a geographically diverse and resilient semiconductor supply chain; 2) build-out of shell space, which gives the company the flexibility to determine how and when to bring additional capacity online; 3) customer participation in internal capacity build-outs as Intel executes its foundry strategy; and 4) strategic and opportunistic use of external foundries." --- (INTC, press release, 2024/06/04)

Labor and Wage Adjustments

Despite persistent inflation, some companies like Walmart are not sufficiently adjusting wages, with their lowest-paid workers earning $12 less than the living wage. In contrast, Starbucks has made meaningful investments in wages, with partners earning between $15 to $23 per hour, averaging around $17.50.

"Its lowest paid workers make $12 less than the average living wage per hour." --- (WMT, event transcript, 2024/06/05)

"And we invested meaningfully in wages. So, I mean, our partners earn between $15 to $23 with the average being around $17.50 or so." --- (SBUX, conference, 2024/06/05)

Technology and Automation Investments

Companies are leveraging technology and automation to adapt to persistent inflation by investing in IT automation (IBM), technical infrastructure and AI (Google), industrial automation solutions (NVIDIA and Siemens), business process automation (Microsoft), and technology and infrastructure to enhance efficiency (Amazon).

"The combination of Apptio acquired mid last year and our IT automation portfolio has delivered strong results, unlocking the full benefits of a FinOps solution for technology investments across hybrid cloud environments." --- (IBM, earning call, 2024/Q1)

"Capital Expenditures Our capital investments in property and equipment consist primarily of the following major categories: • technical infrastructure, which consists of our investments in servers and network equipment for computing, storage, and networking requirements for ongoing business activities, including AI, (collectively referred to as our information technology assets) and data center land and building construction; and • office facilities, ground-up development projects, and building improvements (also referred to as "fit-outs")." --- (GOOG, sec filing, 2024/Q1)

""Together with NVIDIA, Siemens is empowering our customers and partners to use AI to create new innovations, incorporate them as part of their industrial automation solutions and drive efficiency and competitive"" --- (NVDA, press release, 2024/06/02)

"And then moving past that business process automation has gotten cool again." --- (MSFT, conference, 2024/05/29)

"We seek to invest efficiently in numerous areas of technology and infrastructure so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale." --- (AMZN, sec filing, 2024/Q1)

Customer Retention and Loyalty Programs

Starbucks and Apple have successfully retained customers through loyalty programs and high-quality offerings. Starbucks' rewards app and personalized experiences boost customer frequency and spending, while Apple's focus on core values and product satisfaction has driven record customer loyalty and business performance.

"We have loyal customers in the U.S., and they stay truly loyal in terms of frequency, transactions and the level of customization they sought with their purchases." --- (SBUX, earning call, 2024/Q2)

"As always, we are focused on providing the very best products and services for our customers, and doing so while living up to the core values that drive us. Thanks to very high levels of customer satisfaction and loyalty, our active installed base of devices has reached a new all-time high across all products and all geographic segments, and our business performance drove a new EPS record for the March quarter." --- (AAPL, press release, 2024/05/02)

"Even if they're a less frequent customer their frequency and spend still increases when they join the program and then when customers leverage MOP for example they're increasing their spend and frequency increases even further, and it leads to more habituation." --- (SBUX, conference, 2024/06/05)

"If you look at our most loyal customers, they're coming in often, they're seeing the value that we provide in Starbucks rewards in our app." --- (SBUX, earning call, 2024/Q2)

"And so our most loyal customers, like I had just said, you know indicate that they get value for what they get and that's coming from a combination of not only actual price but the product and the overall marketing and the approach to how we create awareness and excitement." --- (SBUX, conference, 2024/06/05)

Financial Hedging and Risk Management

Companies are employing various financial hedging and risk management strategies to adapt to persistent inflation. They are hedging foreign exchange risks, managing credit risk through underwriting and market-making, and using futures in macro hedging strategies. Vigilant risk management and strategic geographic focus are also emphasized to mitigate inflationary impacts.

"By hedging the foreign exchange risk of our foreign operations, the Corporation's market risk exposure in this area is not significant." --- (BAC, sec filing, 2024/Q1)

"WHOLESALE CREDIT PORTFOLIO In its wholesale businesses, the Firm is exposed to credit risk primarily through its underwriting, lending, market-making, and hedging activities with and for clients and counterparties, as well as through various operating services (such as cash management and clearing activities), securities financing activities and cash placed with banks." --- (JPM, sec filing, 2024/Q1)

"The economic impact of investments held pursuant to deferred cash compensation plans is substantially offset by a change in associated compensation expense, and the impact of the portfolio of seed investments is mitigated by futures entered into as part of the Company's macro hedging strategy." --- (BLK, sec filing, 2024/Q1)

"It means we have to really have our risk management heads on a swivel. It means we need to think very almost ruthlessly about where we're spending time geographically." --- (MS, conference, 2024/06/10)

"Managers in revenue-producing units and Treasury are accountable for managing risk within prescribed limits." --- (GS, sec filing, 2024/Q1)

Product and Service Innovation

Companies are leveraging innovation to adapt to persistent inflation by creating must-have products, integrating devices and services, and investing in R&D. Nike, Google, Apple, and Tesla emphasize enhancing consumer experiences, improving operational efficiency, and expanding product offerings to maintain competitive advantage and drive growth.

"Our strategy is to achieve long-term revenue growth by creating innovative, "must-have" products, building deep personal consumer connections with our brands and delivering compelling consumer experiences through digital platforms and at retail." --- (NKE, sec filing, 2024/Q3)

"These are ongoing. And so as an example, the work that Sundar talked about combining devices and services with our platforms and ecosystems, product area is a really good example because unifying the teams not only helps us deliver higher quality products and experiences, but we think it enables us to move with greater velocity and efficiency." --- (GOOG, earning call, 2024/Q1)

"I couldn't be more excited for the future we have ahead of us, driven by the imagination and innovation of our teams and the enduring importance of our products and services in people's lives. With that, I'll turn it over to Luca." --- (AAPL, earning call, 2024/Q2)

"The cash we generate from our core operations enables us to fund ongoing operations and production, our research and development projects for new products and technologies including our proprietary battery cells, additional manufacturing ramps at existing manufacturing facilities, the construction of future factories, and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger, including to support NACS, energy product installation capabilities and autonomy and other artificial intelligence enabled products." --- (TSLA, sec filing, 2024/Q1)

""To maintain its competitive edge and satisfy investors, Google will need to focus on translating its AI innovations into profitable products and services at scale."" --- (AMZN, press release, 2024/06/13)

Market Diversification

Procter & Gamble, Johnson & Johnson, and Amazon are leveraging market diversification to mitigate inflation impacts. PG sees significant growth in Latin America and Europe, JNJ emphasizes global diversification, and Amazon expands in Alberta. These strategies help them adapt to economic changes effectively.

"Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 10% driven by a more than 50% growth in Latin America and double-digit growth in Europe, partially offset by a low single-digit decline in North America. Global market share of the Grooming segment increased 0.7 points." --- (PG, sec filing, 2024/Q3)

"And so I bring that up because I think it really enables us to be able to weather changes better than most because of the diversification of our business, for example, within the United States and then also globally." --- (JNJ, conference, 2024/06/12)

"This is what economic diversification looks like. It's also what the future looks like, and I'm so pleased that Amazon has chosen our province as the stage for its newest innovations." – Honourable Danielle Smith, Premier of Alberta" --- (AMZN, press release, 2024/05/24)

"quarter, our appliance business growing 14%. We are making strong investments in our hair care business with a more streamlined portfolio, and we feel good about our ability to continue to drive market growth, be market constructive in China, and see the upside as we've articulated before on a longer term on participating in the Chinese market." --- (PG, earning call, 2024/Q3)

Future Strategies and Outlook

Companies are focusing on innovation, strategic investments, and leveraging AI to adapt to persistent inflation. Procter & Gamble emphasizes constructive disruption and confidence in their strategy, Johnson & Johnson invests heavily in R&D, Amazon balances specific investments with short-term outlooks, and Microsoft highlights AI's role in democratizing expertise.

"Next, an approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future." --- (PG, conference, 2024/06/04)

"We continued our commitment to driving future innovation by investing more than $15,000,000,000 in R and D during 2023. At our Enterprise business review in December, we provided guidance of our expected 5% to 7% cumulative average growth rate in operational sales in the second half of the decade." --- (JNJ, event transcript, 2024/04/25)

"I think we're at the stage now where we're doing both at the same time continually, so we are more apt to talk about the specific investments that we're making and how that might impact our short-term outlook." --- (AMZN, earning call, 2024/Q1)

"Now on to future of work, we are seeing AI democratize expertise across the workforce." --- (MSFT, earning call, 2024/Q3)

"With that, Andre, I'll turn it back to you. Thank you, Shailesh. In closing, we remain as confident as ever in our strategy and our ability to drive market growth and to deliver balanced growth and value creation to delight consumers, customers, employees, society and shareowners." --- (PG, conference, 2024/06/04)