Shoppers skip the cereal, soda and detergent
Makers of consumer staples are resorting to aggressive discounts as Americans struggle to open their wallets.
Makers of consumer staples are resorting to aggressive discounts to overcome an unexpectedly persistent problem: Their industry is barely growing.
For decades, Americans' purchases of basics like laundry soap and toothpaste roughly kept pace with the rate of growth in the overall economy. But that rule of thumb no longer applies, which is bad news for billion-dollar brands like Tide and Colgate.
For the past three years running, unit sales of consumer products have been largely flat, according to market research firm Nielsen.
Many segments are affected by changing preferences, habits and spending priorities. People are eating less cereal and drinking less soda. Razorblade sales are down as many men shave less or grow beards. Pre-measured laundry soap capsules and higher-efficiency machines require less detergent. And more people are choosing freshly prepared food over packaged fare.
Procter & Gamble (PG), Georgia Pacific Corp., Henkel (HELKF) and other companies have responded with a blitz of deals and coupons in conjunction with retailers. Indeed, over a third of packaged food and household products are now sold with discounts, as retailers and manufacturers struggle to get people to open their wallets. In some categories, such as soda, toilet paper and potato chips, more than 50 percent of consumers' purchases include discounts, said Gary Stibel, chief executive of the New England Consulting Group, a marketing consulting firm.
"When we see some of the promotional pricing out there, it's pretty clear someone has lost their mind," said Bill Schmitz, a Deutsche Bank analyst who follows companies that sell beverages, household and beauty products.
At Target (TGT) stores, shoppers recently could get a $5 gift card for purchases of five Febreze air-freshener products, a discount of more than 30 percent for a $15 purchase of the P&G brand. This week, the chain is giving a $10 gift card to customers who spend $30 on Angel Soft or Quilted Northern toilet paper, made by Georgia Pacific.
Drugstore chains CVS (CVS) and Rite Aid (RAD) last month touted a buy-one, get-two offer for Purex laundry detergent. Henkel, which makes Purex, also distributed coupons for $1.50 off purchases of two bottles. By combining both offers, shoppers could pay a little more than $8 for six jugs of detergent, or $1.35 per 50 oz. bottle, according to Christie Hardcastle, who runs a website that tracks consumer deals.
At Walgreens (WAG) Colgate Optic White toothpaste was on sale for $3 last month, and shoppers could apply a $1.50 coupon to get it at half that price, and also receive a $2 store coupon for their next purchase.
Some manufacturers, like Chuch & Dwight (CHD), bemoan the trend, and worry that the discounts will train consumers to wait for the sale price.
"Price wars don't help growth and are not good for the industry," said Jim Craigie, chief executive of Church & Dwight, which owns the Arm & Hammer brands and produces other household products. "They are the easiest things to start, and the hardest to finish."
P&G and Henkel declined to comment, and Georgia Pacific had no immediate comment. Colgate-Palmolive Co. didn't respond to requests for comment.
Sales of many essentials have suffered in the wake of the financial crisis. Consumers cut spending and shifted to cheaper store brands. The average American spent $2,515 on packaged consumer goods last year, up just 0.6 percent from 2012, according to Nielsen. The previous year, the increase was 2 percent, due largely to inflation.
Americans now devote about 10.8 percent of their personal expenditures to packaged consumer goods, down from 11.2 percent in 2000 and 13.7 percent in 1990, according to Ali Dibadj of Bernstein Research, who examined data from the U.S. Bureau of Economic Analysis.
"It's still a tough time for the average American," said Church & Dwight's Craigie. "There's nothing wrong with the industry. You just have an economy that's stagnant and people are having to trade down."
To be sure, not all categories in the roughly $770 billion-a-year industry are stagnant or shrinking. Sales of things like pet food, energy drinks, and Greek yogurt are seeing growth.
Discounts are in the standard tool kit for consumer-products makers. Still, the current level of activity is particularly high. All told, some 33.7 percent of consumer packaged goods -- from soda and razors to shampoo, shaving cream and paper towels -- were sold on promotion in the 12 months through February 2014, according to data from Nielsen. That's the highest level since the U.S. recession ended in mid-2009. The numbers exclude alcohol, tobacco, fruits and vegetables.
The problem for makers of household basics is that consumers are devoting a shrinking share of their wallets to packaged goods as other costs of living rise more sharply, such as health care and education.
Prices of consumer goods last year rose by 1.1 percent, on average, in part because retailers -- wary of moderating commodity prices -- were reluctant to let manufacturers raise prices as much as in previous years.
Shoppers are visiting stores less often, partly because of the Internet. Unemployment remains high, meaning pennies are pinched. The U.S. population is aging, and research shows older people tend to consume and spend less. Americans, meanwhile, have been feeling more strains on their wallet from last year's expiration of the payroll tax break.
And even some cash-strapped consumers would rather spend money on their cellphone bills than shell out more money for everyday items.
Stacia Braun, a fourth-grade teacher from Shumway, Ill., recently forked out $30 for toothpaste, makeup, candy and dozens of other everyday items that would have added up to $200 without various discounts and coupons.
"I never pay full price for a lot of things," said the 39-year-old mother of three, who said she often finds generous deals at a Walgreens store 13 miles from her home.
The discounts may give some brands a temporary boost, but they aren't reversing the industry's malaise and they erode the value of sales that do happen. Sales of household products grew just 0.6 percent in 2013 in dollar terms, below the 1.9 percent growth in U.S. GDP and well below last year's 4.2 percent growth in retail sales. Dollar sales of laundry detergent and razors actually fell, according to Nielsen's data.
Packaged-goods makers typically try to raise prices by 2 percent to 3 percent each year, and more if raw-materials costs have risen, said Krishnakumar Davey, a managing director at market research firm IRI.
Last year, however, 98 product categories out of 309 tracked by IRI recorded price decreases, up from 57 in 2012. Shoppers on average paid less for shaving lotions, fragrances, peanut butter, laundry detergent, pasta and mayonnaise.
Price cuts and discounts can be used effectively to encourage consumers to try a new product, or buy something on impulse, said Doug Bennett, who analyzes companies' promotional strategies at Nielsen. Now, however, they may just be training shoppers to hold out for deals.
This article seems to imply that the consumers aren't buying these items.....but I believe the reality is that they just aren't buying these items in "brand names". 5 years ago you could throw a bowling ball down the isles in Aldi and not hit anyone...today the place is crowded almost all the time.
Most people, myself included, have come to the realization that less expensive products serve the same purpose as the higher priced items we usually buy. We have changed our buying habits and have become more knowledgeable about certain brands and manufacturers. For instance, Georgia Pacific, the Koch brothers' conglomerate. I refuse to purchase their products. I check the manufacturer of every paper product before I buy. Their items have become so cheap, they should simply give them away.
There is no healthy cereal, none. Modern wheat and similar grains have been hybridized into diabetes-making starch bombs. Other grains are GMO poison.(genetic modified)
Soda is an Illuminati population control mechanism by destroying human fertility. HFCS, aspartame, sucrolose, and food colorings are glandular destroyers.
Detergents, cleaners, soaps, lotions, toothpastes, scents and body sprays contain...
Parabens, Phthalates, VOC, Triclosan, Sodium Lauryl Sulfate, Bisphanol-A, petroleum
All of the above are intentional poisons to make us sick and reduce human fertility.
It works. As fertility and birth rates in America have fallen to all-time record lows.
Outsourcing for CAPITALISM, low wages, capitalist poisoning, unaffordable greed-based for-profit CAPITALIST healthcare, CAPITALIST gasoline and soaring energy costs have made children unaffordable.
Hence, record low birth rates in America.
See how CAPITALISM is killing us and is unsustainable?
Capitalism is societal castration and Illuminati poisoning.
yes I do believe they are buying cereal and soap but cheaper products as everything is costly these days and so many make poverty wages any more if you have a job, with car costs and housing costs , oh and do not forget cell phone costs and internet and tv too some thing has to give, we now have antenna tv np more cable or satilite high costs any more they just raise prices every year , groceries at the store have risen in price do not know how people feed families no more where I live a company started a back pack program for kids to take home on Friday of food donated because kids were coming to school hungry on Mondays,,, The greed in this country is appalling any more , So I shop cheap as do many others no tide evr for me way over priced..
OH YOU MIGHT THINK CHEAP DETERGENT IS CHEAP BUT ADD UP ALL THE MONEY YOU SPEND AT THE DRUG STORE ON ALLERGY MEDICINE HEADACHE MEDICINE COUGH SYRUP ETC. ETC. NOT SO CHEAP THEN ?? THAT MEDICINE IS EXPENSIVE SO IS THE CANCER YOU WILL GET FROM DOUSING YOURSELF IN BUG SPRAY EVERYDAY!! DITCH THE COLOGNES AND FRAGRANCE YOU WILL FEEL SO MUCH BETTER! ALL THESE NEW DIEASES ARE COMING FROM SOMEWHERE! THE MORE THEY MAKE YOU SICK THE MORE PHARMECEUTICALS THEY CAN SELL YOU!! IF YOUR CHILD HAS ADD CHECK THE LAUNDRY SOAP!!
The Dollar Tree stores apparently change retail/wholesale reality. The stores are headquartered in Chesapeake, Virginia. There must be thousands of these stores. Most of their merchandise is seemingly of Chinese origin. But there are also many items marked as being manufactured in the USA too. I presume everybody is aware the Dollar Tree is under-pricing, and causes mucho consternation. "Evergreen" is apparently their trade name too.
Well I guess the number one thing....Is be a Smarter Shopper...Sales or loss leaders.
Make one trip to cover most of your shopping for the week/month...Saves a lot on gas or travel..
Or shop in pairs or more with a neighbor/s...
If you use 1 can or box a week of something, and it goes on a cheap sale, buy 6-8 of them..
Most items can be stored for months in pantry or freezer..
Many Generics are made by the same company making the real deal...Learn to make use of.
Garden, raise your own, go to Farmers etc.....Can and freeze, last for months or year...
Last thing....Be innovative..
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