Will inflation make consumers abandon their favorite brands?
Will inflation make consumers abandon their favorite brands?
Consumer packaged goods, like the ones you buy in the grocery store, have stirred widespread angst over their climbing prices in the last two years.
Take Procter & Gamble, for example. It produces many name brands, like Crest toothpaste, Tide laundry detergent and Pampers diapers. P&G released its quarterly earnings report Friday and did better than analysts expected, with those higher prices helping to drive higher revenue.
But the company was conservative in its outlook for 2024 — worried, like many companies are, about whether consumers will stay loyal to big brands in an uncertain economy.
One thing that helps companies like Procter & Gamble maintain brand loyalty despite raising prices is, basically, habit.
“So many of our behaviors nowadays are particularly amenable to just keeping buying the same things, right? The same thing you ordered online last time,” said Katie Thomas, who leads the Kearney Consumer Institute.
But “at some point, there just feels like there’s going to have to be a correction,” she cautioned. “Prices can’t keep going up at this clip and people continue to absorb them.”
That’s probably why P&G is being cautious about growth forecasts for next year. When prices go up for things consumers have to have, like toilet paper or toothpaste, they usually go to generic or private-label brands, noted Scott Davis with the consulting firm Prophet.
“Or they will look for another brand/price tier from a company or organization that they know and trust,” he said.
This helps out companies like Proctor & Gamble, which has tons of brands at different price tiers under its umbrella.
“Where, if I can’t afford Tide this time around, I’ll go to Gain or I’ll go to Ariel and, you know, to their other brands in the portfolio,” Davis said. “Maybe not what I would have wanted to get with Tide, but I’ll make it work with Gain or Ariel.”
And this still adds to P&G’s bottom line — but not as much.
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