Analysis: Colgate and tide-maker P&G revamp pricing tactics to keep shoppers strapped for cash

People shop at a supermarket as rising inflation hits consumer prices in Los Angeles, California, U.S., June 13, 2022. REUTERS/Lucy Nicholson/File Photo

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NEW YORK, July 25 (Reuters) – Makers of staples such as Colgate toothpaste and Charmin toilet paper are plotting new strategies to entice cash-strapped consumers to buy more expensive products as the threat of the recession looms, executives told investors.

Staple homeware makers are also spending more on discounts and promotions on products such as sodas and paper towels to keep shoppers in high-end stores and buying branded goods, according to data prepared for Reuters. by the research company IRI.

The moves come as U.S. consumers — who so far have continued to buy more expensive products from diapers to shampoos — show signs of faltering under fresh rounds of price hikes.

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Some rides are hitting shelves this month, including those from cleaning company Clorox Co (CLX.N) and Church & Dwight Co Inc (CHD.N), the maker of Arm & Hammer products. Read more

Church & Dwight raised prices for laundry detergent and cat litter for the second time on July 1, while Clorox said its “broadest and deepest” hikes took effect this month.

The growing risk of reduced consumer spending is forcing manufacturers to reconsider their pricing rules by targeting buyers during certain times and offering more discounts.

Oral care company Colgate-Palmolive Co (CL.N) will work with retailers to see if shoppers are spending more when paychecks are clear, usually in the first and third weeks of the month, the official said. Investor Relations, John Faucher.

This suggests consumers are facing more financial stress and living paycheck to paycheck.

“You want to make sure your merchandising strategy is aligned with these weeks where consumers are a little bit more short,” Faucher said at a retail conference last month.

Colgate would prioritize high-end products, such as its $10 Optic White Pro Series toothpaste, at the start of the month when paychecks are clear, then focus on budget items later in the month when cash flow is low. buyers would run out, he said.

Colgate may also raise prices on some, but not all, of its lower-priced products to keep some within reach of consumers who “struggle a little more,” preventing those shoppers from looking for budget options. elsewhere, Faucher said.

Consumer products companies are strategizing as foot traffic at U.S. dollar stores, which sell off-brand homewares and groceries, outpaces competitors. The Dollar Family of Dollar Tree Inc (DLTR.O) saw foot traffic jump 16% in the second quarter, according to Placer.ai, which provides consumer movement data.

“Manufacturers are starting to promote more at the request of retailers,” said Krishnakumar Davey, president of customer engagement at market research firm IRI.

“They don’t want to lose customers to value channels,” such as dollar stores or other discounters, he said.

According to IRI data, 47% of breakfast meats like bacon were purchased using a coupon or other discount in the four weeks ending July 10, the highest in six months. Half of the crackers were purchased with promotions, according to IRI data.

In the four weeks ending July 10, 39% of toilet paper and paper towels were purchased with discounts, the highest since the start of the year. Toilet paper and paper towels face strong competition from private labels.

PREMIUM TUNING

Homeware and food producers are also looking at the pricing tactics used during the 2008-2009 financial crisis.

According to a research note from Evercore ISI, some beer brewers then hiked the prices of economy brands more than mainstream offerings, to prevent consumers from swapping a more expensive Budweiser for natural ice.

Makers of home staples, including packaged foods and candy, have also reduced portion sizes, keeping prices the same or higher.

“We and others are more likely to resort to packaging size changes,” Church & Dwight chief executive Matthew Farrell told the Deutsche Bank dbAccess Global Consumer Conference last month.

Detergent maker Xtra has already reduced its laundry detergent by 10% by eliminating water, Michael Read, the company’s executive vice president, told the conference. The dosage for wash loads is the same, he said.

National brands are for now trying to convince shoppers they’re getting more for their money with premium products like Dawn dish soap and Clorox wipes – rather than cheaper store-brand alternatives.

Procter & Gamble Co (PG.N) executives told a conference last month they expect further price increases as maker Tide doubles down on its “one-up” strategy – offering detergents, diapers and razors that promise to work better in better packaging.

Paper towel maker Bounty has also established a pricing tier for customers who only care about “cash spend” over the past five to six years, chief executive Jon Moeller told the conference. Only about 15% of P&G customers have lower incomes, said chief financial officer Andre Schulten.

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Reporting by Jessica DiNapoli in New York; Editing by Sam Holmes

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