In multiple Q1 earnings calls on Tuesday, executives highlighted that US consumers are prioritizing affordability, seeking deals, and trading down when possible.
As Amazon CEO Andy Jassy told shareholders, “Customers are shopping, but remain cautious.”
Everyday low pricing
To accommodate this more cautious consumer, Jassy stressed the importance of “offering everyday low prices in this uncertain economic environment.”
“Everyday low prices” is a common industry term for a pricing strategy that promises consistently low prices outside of any promotional activity—and it showed up in another major company’s earnings call as well.
McDonald’s CEO Chris Kempczinski said, “In the context of a difficult macro environment for the industry, we know our customers are looking for reliable everyday value now more than ever.”
He added that McDonald’s is “working closely with our local franchisees to balance menu pricing decisions with the right affordability strategy in place.”
Less snack in their pack
Mondelez International, the company behind Oreo, Ritz, and Clif, highlighted another consumer trend: trading down to smaller package sizes.
“Shoppers in many markets are becoming increasingly sensitive to the absolute price point, driving them to choose smaller pack sizes in both Biscuits and Chocolates,” CEO Dirk Van De Put said during an earnings call.
The snack giant is also seeing a “significant shift in sales” to “club stores, dollar stores, and emerging e-commerce platforms,” he said, adding that “lower-income consumers feel pressured and we see that pressure weighing on their frequency in the category.”
Homebodies
Coca-Cola CEO James Quincey also pointed out that the company is seeing “purchasing power compression in the lower income echelons, and I think it’s quite clear that there’s some behavioral shift there looking for value.”
One way this is manifesting is in a shift toward at-home purchases.
“I think that has led to a marginal channel weighting or shift, if you like, with slightly more at-home volume versus away from home,” he said.
“Occasional customers” pull back
Even coffee drinkers are feeling the pressure, and less frequent customers appear to be pulling back the most, according to Starbucks.
CEO Laxman Narasimhan said, “We continue to feel the impact of a more cautious consumer, particularly with our more occasional customer,” who tends to drop off in the afternoons and evenings.
In the coming months, Starbucks plans to appeal to these customers by offering a greater variety of items, improving the Starbucks app, and investing in omnichannel marketing to highlight that the best deals are available through the app.
This report was initially published by Retail Brew.
