As we head into the second half of the year, inflation and uncertainty around tariffs continue to shape decision making for executives at companies like PepsiCo, Coca-Cola, Keurig Dr Pepper, and General Mills.
In recent earnings calls, business leaders at top consumer packaged goods companies described cutting products that aren’t selling as well, focusing on value brands, and working to mitigate tariff-related cost increases in a way that keeps prices low on certain items. They also talked about investing in retail media networks and in-store displays to help promote new products and cheaper items consumers are swapping for as budgets remain tight.
Pruning lower-performing SKUs
One way companies are responding to continued inflation and tariffs is by discontinuing less popular products. The J.M. Smucker Company, for example, which owns brands like Folgers, Jif, Milk-Bone, and Hostess Brands, is refocusing on items that are top sellers in their categories, according to a June 10 earnings call.
“We need to focus on the largest brands and related innovation in those brands,” Mark Smucker, CEO and chairman, said during the call. Smucker declined to share which brands might be cut from the roster, but highlighted Donettes and Cupcakes as examples of products that are at the top of their respective categories and will get more innovation focus as a result.
Promoting low-cost items
In other cases, companies aren’t eliminating products, just shifting advertising budgets to support the more popular, lower-priced items that consumers are gravitating toward as they try to mitigate the cost of inflation on their budgets.
Executives from Coca-Cola, Conagra, General Mills, Keurig Dr Pepper, McCormick, and Smucker specifically addressed continued consumer preference for value brands, discussing increased investment in advertising for lower-cost brands, adjusting prices where possible to meet consumer needs at a lower price point, and shifting innovation budgets to prioritize lower-cost items.
Over the past quarter, “consumers became increasingly focused on seeking value, prioritizing affordability and trading down,” said Sean Connolly, president and CEO of Conagra.
At Coca-Cola, CEO James Quincey pointed out that growth in premium categories has slowed, prompting a focus on lower-cost brands.
“Our granular action plans to win back consumers with contextually relevant advertising, more focused value and affordability initiatives, and close customer partnerships are working,” he said during a July 22 earnings call.
Slicing prices
In some instances, companies are cutting prices on certain products to reach value-conscious consumers. General Mills dropped the price of a wet pet food to get within a lower-cost segment of the market that was seeing more traction, CEO and chairman Jeffrey Harmening said during a June 25 earnings call.
The company is taking targeted actions in specific categories, Harmening said, assuring investors that the price cuts haven’t happened in all categories. “[The cuts are] really just to get us back in the zone of where our marketing is going to be effective.”
