Colgate-Palmolive Sees Trade-Down Continuing as Competitors Say Otherwise

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As some CPG companies say private-label growth has stalled or reversed, Colgate sees its continuance.

On a call with analysts Friday (Jan. 27) discussing the company’s fourth-quarter 2022 financial results, consumer-packaged goods (CPG) giant Colgate-Palmolive noted that while trade-down to private label has flatlined in certain categories, it continues to grow in others.

CEO Noel Wallace noted that, as toothpaste sales held strong against competition from lower-priced store brands, many of the company’s home care products still faced increasing competition.

“Oral care private label in the U.S. [is] roughly flat on the quarter in the fourth quarter and flat on the year, [and in Europe] likewise that share is flat,” Wallace said. “We are seeing a little bit of growth in private-label businesses particularly in Europe on some of the home care businesses. Obviously, cleaners, dish and to a certain extent, fabric softener, [but it is] consistent with where we expect it.”

Certainly, many consumers are looking for lower-priced alternatives to their day-to-day purchases. Research from the latest edition of PYMNTS’ Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: Perception Is Reality,” revealed that 35% of consumers have switched to buying lower-quality items at the grocery store in response to rising prices.

Indeed, these price-sensitive consumers acutely feel the impacts of rising household item prices, with the inflation they perceive outstripping the measured rate by a significant margin. The study found that consumers perceive the prices of household items to have risen by 20%, while U.S. Bureau of Labor Statistics (BLS) data show a 12% increase.

Yet, as consumers report trading down, some CPG brands maintain that the worst of this trade-down is in the past. For instance, on an earnings call last week, Procter & Gamble asserted that the belt-tightening changes adopted by many consumers had stabilized.

“If you look back over the past six months, private label’s share in the U.S. has been relatively steady,” P&G Chief Financial Officer Andre Schulten told investors. “There hasn’t been a significant shift in consumer behavior in terms of trade-down.”

Similarly, spices and flavorings giant McCormick also maintained that trade-down is flatlining.

“Regarding private label, we are seeing price gaps narrow right now, and we certainly saw that in the fourth quarter even leading into the first quarter,” CEO Lawrence Kurzius said on a call with analysts Thursday (Jan. 26) discussing the company’s fourth-quarter 2022 financial results. “We’re starting to see that trade-down moderate through the quarter.”

Certainly, consumer anxiety about inflation remains high if the U.S. population is any indication. Research from last month’s edition of the Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: In It for the Long Haul,” found that 72% of consumers are very or extremely worried about the U.S. economic situation, and 69% are cutting back on unnecessary spending.

The study noted that most consumers believe that the U.S. is only halfway through this high inflationary period, and on average, they estimate that inflation will return to normal levels by June 2024.