Many consumers are trading down: CPG brands’ mediocre sales volume results reflect many people’s uneasiness about the economic climate. For example, 79% of consumers 55 to 74 years old are extremely concerned about inflation, per a survey by Kroger-owned 84.51°.
- That’s reflected in the data. For example, 50% of respondents to the survey said they’d be willing to switch to lower-priced brands in shelf-stable, household cleaning, and paper products.
- Consumers also don’t like paying more (or the same) for less. Forty-five percent of shoppers will buy a different brand that hasn’t reduced its size or quantity if they notice shrinkflation, 42% will only buy the item if they have a coupon, and 17% won’t buy the item at all, per 84.51°.
- That’s forcing CPG brands to be mindful of consumer sentiment as they adjust their pricing strategies. “The name of the game is to optimize our revenue equation over the next 12 to 18 months,” said John Murphy, Coca-Cola’s president and chief financial officer, during the company’s earnings call. “That's going to be a combination of smart pricing, understanding the mix, both from a channel and package perspective, and being able to utilize the many levers that we have.”
The big takeaway: While price hikes and shrinkflation have helped CPG brands paper over declining sales, there are limits to how long those tactics will last before they push too many consumers to trade down to other brands.
- That helps explain why fewer than 40% of CPG brands plan to increase list prices in the first half of 2023, and 25% expect to keep prices consistent, per a recent Advantage Solutions survey.
This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.