Putting through a cost price increase (CPI) is never an easy conversation, particularly when you're a challenger brand trying to build relationships with buyers, prove your place on shelf and grow distribution.
But absorbing every cost increase isn’t a sustainable strategy either.
The common mistake? Brands focus entirely on explaining why their costs have risen, without thinking about what that increase means for the buyer, the shopper, and where there might be room for negotiation.
Here's how we'd approach it.
1. Know your numbers, but don’t show your whole hand
Before you approach your buyer, work out exactly what’s changed in your cost base and what increase you actually need.
Understand the impact of ingredients, packaging, manufacturing and logistics, and what you've already done to absorb or mitigate those increases. Your buyer will want to know you've explored your options before passing costs on to them.
But that doesn't mean handing over your full cost breakdown. Your supplier prices and margins are commercially sensitive, and sharing too much can leave you with less room to negotiate.
You need to build a credible case for the increase, supported by relevant evidence, without necessarily opening up your entire P&L.
2. Look at it from the buyer's side
This is probably the most important bit.
A 5% increase in your cost price doesn't automatically mean the retailer can pass that increase on to shoppers. And if the shelf price stays the same, the retailer takes the hit on its margin.
Here's a simple example:
Imagine your product currently sells for £3.00 excluding VAT, and the retailer cost price is £1.80.
Illustrative example, excluding VAT.
Your 5% CPI has taken the retailer's margin from 40% down to 37%. That's a 3 percentage point drop.
To maintain its original 40% margin, the retailer would need to increase the selling price from £3.00 to £3.15.
This is where you need to think like the buyer. Is £3.00 a key price point in the category? Could a higher shelf price change your positioning against competitors? How might it affect your promotional competitiveness? And what happens to sales and shopper behaviour if the price goes up?
These are all things your buyer will be thinking about.
The play: Work out what your proposed increase means for the retailer's cash margin, percentage margin and potential shelf price before you have the conversation. Don't wait for the buyer to do the maths for you.
3. Don't always apply the same increase to everything
It's tempting to put through a blanket 5% increase across your whole range. It seems easier, but it can actually make the negotiation harder.
Your costs probably haven't increased by exactly the same amount on every product. And your best-selling SKU might need a different approach from a slower-moving product.
Looking at each SKU individually helps you understand the role it plays in your range, your margin mix and where you have flexibility to negotiate. You might be able to take a smaller increase on a key product while pushing for more on another, depending on the costs and commercial impact.
Any increase still needs to be justified. But knowing where you have room to move, and what options you can offer if the buyer pushes back, puts you in a much stronger position.
The play: Model the increase SKU by SKU before submitting your proposal, so you know where you need to hold firm and where you have flexibility.
4. Go into the negotiation with a plan
What's your ideal outcome, and what's the minimum increase you can realistically accept? Could you phase the increase, adjust the start date or take a different approach across certain SKUs?
And importantly, what happens if the buyer says no? How long can you afford to absorb the additional costs, and what does that mean for the profitability of the account?
If you do need to offer concessions, think carefully about what you're giving away. Additional promotional funding or changes to trading terms could quickly eat into the margin you're trying to recover. It's not just about getting the CPI agreed, but making sure you're actually better off.
It's also worth putting yourself in the buyer's shoes. Are they under pressure to protect category margin, maintain key price points, gain market share or attract a particular shopper demographic? Understanding their priorities can help you find areas to negotiate that work for both sides.
The play: Go in knowing your ideal outcome, your minimum acceptable position and where you have room to move. And before offering any concessions, work out the impact on your overall account profitability.
5. Get the process and follow-up right
Before submitting anything, check the retailer's CPI process. Some retailers have specific templates, supporting documentation requirements and notice periods. Your supply agreement may also set out what you need to do.
Give your buyer enough time to review the proposal and work through the implications. A last-minute surprise isn't going to help the conversation.
And once you've got an agreement, get the new prices and implementation dates confirmed in writing, then check they've actually been updated in the retailer's systems.
The play: Keep a simple CPI tracker covering each retailer, the agreed prices, implementation dates and whether the changes have gone live. Check the first orders and payments too, so you can catch any discrepancies early.
The bottom line
A CPI isn't just about proving your costs have gone up. It's about understanding what the increase means for both businesses and finding a way forward.
Do your homework, know your numbers and be ready for a proper negotiation.
And don't leave it until your margins are under serious pressure. Keep reviewing your costs throughout the year so you can spot problems early, rather than having to negotiate when you're already running out of room.