Strategic Movements December 2021

Noodles & Co Testing Higher Prices

Carl Lukach, CFO of Noodles & Co (NDLS), drove an $8 price tag on their new Tortelloni dish into the market.  The price was a little higher than most dishes, but the dish sold well.  With that evidence, they announced a $0.25 price increase across many similar dinners.  Noodles & Co tested a 15% app delivery surcharge in Chicago and Phoenix and saw no reduction in sales.  With that evidence, they announced plans for a 20% app delivery surcharge across the rest of the nation.  Labor, logistics, and ingredient costs are up, and so are the costs of the competing alternatives from other fast food to groceries.

Sometimes, small price tests are the best means to identify opportunities to drive prices higher.  Will other restaurants and food manufactures learn to price experiment as well?

NDLS closed relatively unchanged at $10.54 on 6 December following the news with a P/E ratio reminiscent of high-growth companies at 108.2; 2020 revenue was $384 million.

Bicycle Maker Learns to Raise Prices

Jason Douglas, reporter with the Wall Street Journal, wrote an in-depth article on the challenges facing a small British bicycle manufacturer.  Titled “Is Inflation Sticking Around? Bicycle Makers Offer Some Clues”, the article provides an excellent case study in pricing.  CEO Richard Thorpe of Karbon Kinetics, Ltd didn’t raise prices despite higher input costs and short supply in 2021.  He also didn’t make any money.  Next year, he states he will raise prices by 25%.  We all live and learn, but let’s learn from other people’s mistakes if we can. Use this story if you are having challenges convincing your team that now is the time to raise prices.