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Insight of the Day: US consumer goods companies are losing upper hand on pricing

Findings:

  • US consumer goods companies are losing their ability to raise prices.

  • Increased discounts, coupons, and strategic product placements are being used.

  • 28.6% of products were sold with promotions in the past year, up from 25.1% three years ago.

  • Companies like General Mills and Mondelez are adjusting prices and promotional strategies.

  • Consumer stocks have driven US equity indices to new highs, but there are concerns about the sustainability of this trend.

Key Takeaway: The power of consumer goods companies to raise prices is diminishing, leading to increased promotional activities to attract price-sensitive consumers.

Trend: There is a growing trend of increased discounting and promotional activities as companies try to maintain market share amid consumer frugality.

Consumer Motivation: Consumers are becoming more price-conscious, driven by inflation and economic pressures. They are seeking value for money and are willing to switch brands or stores if prices rise too much.

Driving Trend: Economic pressure on consumers, particularly lower-income households, is driving the trend of increased discounting and promotional activities by companies.

Description of Consumers:

  • Lower-income households and value-conscious consumers.

  • Consumers are seeking affordable, reliable products, particularly for essential items like food, household goods, and footwear.

  • Age range is broad, encompassing various demographics that shop for consumer goods.

Conclusions: The reduced ability to raise prices signifies a shift towards more competitive pricing strategies to maintain sales and market share. Consumers are prioritizing affordability and value, making them more selective in their purchasing decisions.

Implications for Brands: Brands need to focus on competitive pricing, increased promotions, and maintaining product quality to retain customer loyalty. Investing in marketing and strategic promotions will be crucial.

Implications for Society: As companies engage in more discounting and promotions, consumers benefit from lower prices and better deals, potentially easing some financial burdens. However, the long-term sustainability of such strategies for businesses remains uncertain, which could have broader economic implications.

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