Consumer companies pitch discounts, bargain products as economic malaise
looms
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[October 27, 2020]
By Siddharth Cavale and Martinne Geller
(Reuters) - Unilever, Procter & Gamble and
other major consumer goods manufacturers are touting lower-priced
brands, smaller packages and discounts to woo penny-pinching shoppers
struggling through the most severe global recession since the Great
Depression of the 1930s.
Nestle told Reuters earlier this month that it has recently launched
single-use sachets of Maggi seasonings in Indonesia and smaller sachets
and cooking sauces in the Philippines. The world’s biggest packaged food
company is working on “enhancing the meatiness of its bouillon” for when
meat itself becomes a luxury, Nestle head of culinary products Agnes
Lalanne said.
It also is promoting recipes that call for cheaper proteins like eggs
and canned meat in the Philippines.
"We'll give this (affordable products) more emphasis,” Nestle CEO Mark
Schneider said last week after reporting third-quarter sales,
“because affordability, especially when it comes to the economic
consequences of COVID, will become ever more important."
Unilever, which markets food and consumer products in 190 countries,
said it is making sure every market has low unit-price packages and
cheaper brands.
On a conference call with reporters last week, Chief Financial Officer
Graeme Pitkethly said the maker of Hellmann’s mayonnaise and Lipton tea
launched new variants of its Savital shampoo, which is priced below its
Dove and Tresemme brands, in Latin America.
Consumer product companies usually pass along price and "promotional
allowances" to a retailer, which then uses it to offer limited-time
promotions such as 2 for $5 value deals, or everyday low prices.
Many companies initially pulled back on price-focused promotions, such
as ‘buy one, get one free,’ in March and April when coronavirus-related
shutdowns drove shoppers to hoard everything from hand sanitizer and
cleaners to toilet paper and flour.
The demand spike strained supply chains and all parties just focused on
keeping stores clean and shelves stocked.
PRICE PROMOTIONS
Chef Boyardee pasta maker ConAgra told Reuters it has increased price
promotions, though not to pre-COVID levels, since early spring on
products such as Pam cooking sprays, Bird Eye frozen vegetables and
Marie Callender pies.
PepsiCo said it would spend more on brand advertising and marketing
during the U.S. holiday season.
Unilever said on an earnings call it had reactivated promotion plans
with retailers after effectively suspending them during the first and
second quarters.
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Frank Lee, a striking UAW auto worker, and his son Isiah, shop at a
discount grocery store in Bowling Green, Kentucky, U.S., Oct 1,
2019. REUTERS/Bryan Woolston/File Photo
Tide detergent maker Procter & Gamble brought back promotions in
most categories in the United States, except where demand remains
high, like for its Charmin toilet paper and Microban 24
disinfectants.
As COVID-related costs rose, companies including P&G managed to
raise prices as stimulus in countries such as the United States
kept cash registers ringing. But a $600 weekly U.S. federal aid
program ended in July and prospects for any follow-up government
stimulus look bleak.
“Consumer spending levels are not going to recover until at least
end-2022, so there is going to be a sustained pressure on
consumer-packaged goods companies to offer promotions and
incentives,” said Oliver Wright, Accenture's global industry lead of
consumer goods and services.
By the end of September, about 26% of U.S. grocery items purchased
featured a price promotion, according to Nielsen data, below the 31%
average in the one year to Feb. 29, 2020.
The global economy has weakened with millions out of work.
In the United States, one of the biggest markets for packaged goods,
personal income levels dropped 2.7% in August, according to the
Commerce Department. Consumer spending rose only 1% in August
after rising 1.5% in July, and consumption remains 4% below
pre-pandemic levels.
Per-capita purchasing power in Europe is expected to fall almost
5.3% in 2020 from last year, according to data analytics firm Gfk.
According to a survey by consumer insights firm Reach3, 30% of U.S.
respondents reported buying more in-house, store-brand products in
June compared to March, and 28% were looking for less-expensive
brands overall.
(Additional reporting by Victoria Waldersee in Lisbon; Editing by
Vanessa O'Connell and Nick Zieminski)
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