Elasticities and Tariffs

Tariffs are raising the cost of raw materials, packaging and finished goods. Consumer packaged goods companies feel it most: their supply chains are global and their margins are already thin.

So far, shoppers have been shielded from big price increases. Manufacturers and retailers have negotiated, adjusted assortments and accepted lower margins. Most industry watchers expect shelf prices to rise eventually. When they do, not every price increase will work the same way — and executives need to look beyond basic elasticity.

Elasticity: a not-so-simple metric

Basic economics says that raising a price lowers units sold, and lowering it raises them. What non-pricing teams often miss is that there are two different elasticities at work.

Both matter when pricing for tariffs. Own-price elasticity shows how your shoppers react directly; cross-price elasticity shows the risk of them switching. Assuming a tariff hits everyone in a category equally is risky: overestimate loyalty and you lose volume, ignore competitor strength and you lose share.

Evidence from four categories and three retailers

Big Chalk used NorthLight’s Gazelle price and promotion modeling platform to study four CPG categories, with data from three large US retailers — Publix, Target and Walmart.

Across the twelve category–retailer combinations, own-price elasticity was the stronger effect just under half the time (48% on average). Neither one dominates — and the balance changes by category and by retailer.

• Dry cat food: strong own-price dominance at Publix (70%) and Walmart (60%). Pet owners are loyal and rarely switch formulas, even when competitors promote.
• Laundry detergent: mixed. Own-price dominates at Publix (67%), but at Target (25%) and Walmart (29%) competitor moves matter more — typical where products sit side by side and private label is strong.
• Ready-to-eat cereal: split. Below half at Publix and Target, but 70% at Walmart, where shoppers stick more closely to household staples.
• Salad dressing: weak own-price dominance everywhere (33–50%). Shoppers switch flavors or brands for variety, or to chase a deal.

What should CPG leaders do?

Model both elasticities

Because neither elasticity wins everywhere, pricing models need both — shopper response and competitive dynamics interact. The analysis is demanding, so it pays to use a fast, AI-based modeling solution rather than one-off studies.

Know your elasticity zones

Categories behave differently. Pet care has more room to pass costs through because of loyalty. Substitutable categories such as salad dressing and laundry need closer watching of competitor moves.

Customize by retailer — and use it in sell-in

Elasticity shifts significantly by retailer, so one pricing strategy won’t work everywhere. Build account-specific playbooks. The data also gives you leverage with buyers: showing where shoppers are loyal can justify more cost pass-through, while recognizing cross-price risk supports promotion planning, differentiated packs and share conquesting.

Conclusion

The question isn’t “which elasticity matters more?” It’s “in this category, with this retailer, at this moment, how do own-price and cross-price effects combine?”

Tariffs are unavoidable, but their impact depends on how shoppers respond and how competitors move. Answering that question precisely — with data, not assumptions — is how manufacturers protect both margin and share.