Adjusting, Adjusting, and Adjusting
Courtesy of Michael Panzner of Financial Armageddon
Even though the recession is allegedly "over," Americans continue to adjust their spending habits:
"Consumers to Continue Food, Beverage Thriftiness" (Food Product Design)
After two years of cutting corners, consumers have learned to get by with less and say they will continue to practice thriftiness at least for the next six to 12 months and perhaps well beyond that, according to a food and beverage market research report from the NPD Group.
The “The What’s Next on the Road to Recovery” report, which explores how consumers’ habits related to food and beverage purchasing and usage have been affected by the recession, finds that nearly one in five consumers expect to be worse off 12 months from now than they are today, and half of all consumers expect their financial situation to be the same as it is today. Looking ahead nine out of 10 consumers say they will plan and watch their spending on food and beverages outside the home.
Among the thriftier behaviors consumers say they will do more often than now over the next six months are decreasing spending on groceries, especially those with household incomes under $35,000; using coupons for food and beverage items from newspapers or magazines; stocking up on foods and beverages when they are on sale; searching store circulars for low prices on food or beverages that are on sale; buying less expensive brands of foods and beverages, and searching for manufacturer coupons online.
As a result, manufacturers are doing the same:
"Procter & Gamble Says It Plans to Expand Gain to Dish Washing, Affirms Earlier forecasts" (Bloomberg)
Procter & Gamble Co. said Tuesday that it will expand its Gain brand from the laundry to the kitchen sink, the latest move by the world’s largest consumer products company to market its megabrands in new ways and new places.
At a Jefferies investor conference in Nantucket, Mass., the company also affirmed forecasts on sales and earnings it offered earlier this year.
After slipping during the recession, P&G’s revenue is rising again because the company is offering new versions of its most popular products at lower prices that reach new consumers.
Gain is among 22 P&G brands with $1 billion in annual sales. The new Gain dishwashing liquid will debut within a year, according to the Cincinnati-based company’s chief financial officer, Jon Moeller.
Gain is usually priced below P&G’s best-selling Tide laundry detergent. P&G officials said they’re still working out details of plans for the Gain liquid, which would join P&G brands such as Dawn and Joy used for washing dishes by hand.
Moeller also said P&G plans major overseas expansion of the premium-priced Gillette ProGlide shavers launched this month in the United States.
He said new, lower-priced versions of Tide detergent and Gillette Mach3 shavers are off to good starts in India.
And so are retailers:
"Wal-Mart’s Price Cuts Leave Soda Makers Flat" (Atlanta Journal-Constitution)
A soda price war started by Wal-Mart is catching beverage companies in the middle.
Soda sales are reportedly jumping as the world’s biggest retailer continues price cuts it started in April and deepened over the Memorial Day weekend. But executives at beverage companies such as Coca-Cola, PepsiCo, Dr Pepper Snapple Group and Coca-Cola Enterprises worry the aggressive discounting could harm the industry’s long-term prospects.
Packs of 24 cans of Dr Pepper, Coca-Cola and Pepsi for $5 are now common in Wal-Mart stores, and in some outlets shoppers have spotted them for as little as $3.99. A year ago, the average price for a 24-pack in grocery stores was $6.12, according to Beverage Digest. Grocery stores near Wal-Mart stores are slashing prices to try to remain competitive.
It’s unclear how long Wal-Mart’s soda promotions will last. Industry insiders say it could be months.
The cuts could put the retailer in a fundamental conflict with big beverage companies, which worry that ultra-low prices could jeopardize eight or nine years of work to get consumers to accept higher prices. That effort was meant in part to produce gains for the bottlers who make and distribute soft drinks.
Analysts say the new low prices could train shoppers to look for deep discounts before parting with their money.
I wonder how long it will take investors, who’ve been buying the shares of retailers and other consumer discretionary companies with reckless abandon, to realize the error of their ways?
Based on past history, probably quite a while.
