PepsiCo is seeing consumers comparison shop between different grocery merchants to find the lowest prices on their favorite brands’ products.
“We’ve been able to raise prices, and consumers stay within our brands,” PepsiCo Chairman and CEO Ramon Laguarta said on a call with analysts Thursday (July 13) discussing the company’s second-quarter 2023 earnings results. “Now, we’re seeing consumers making some adjustments. We’re seeing consumers shopping more stores than before. They’re looking for better deals. They’re starting to look for optimization. They’re going to channels that have better perceived value. They’re buying more in dollar stores or more in [warehouse] clubs. So, every segment of the consumer is making adjustments.”
Indeed, PYMNTS research revealed similar trends. Findings from PYMNTS’ study “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which drew from an April survey of more than 2,000 U.S. consumers, found that 47% have switched to merchants that offer better prices for at least one grocery product.
Plus, PYMNTS data from last year, which revealed similar trade-down trends in terms of merchants, showed significantly fewer consumers making sacrifices on product quality. The study “Consumer Inflation Sentiment: Consumers Buckle Down on Belt-Tightening,” for which we surveyed more than 2,600 U.S. consumers in September, found that, while 47% of grocery shoppers were switching to cheaper merchants, only 37% reported buying lower quality products.
Part of the reason that consumers have continued to be loyal to snack and beverage brands around the world is that they continue to have paychecks coming in, Laguarta said.
“We’re seeing very positive [results], and I think it has to do with the levels of unemployment that we’re seeing all around the world,” Laguarta said. “We’re seeing overall very good consumer behavior, especially when it refers to our categories.”
Many consumers have cut down on indulgences such as chips and soft drinks, however. Research from the same “Consumers Cut Back by Trading Down” study revealed that 57% of grocery shoppers have been reining in their nonessential grocery spending.
Food and beverage brands are helped in the U.S. by the fact that grocery inflation is leveling off, at least for now. The most recent Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics (BLS), released Wednesday (July 12), revealed that, in June, food at home prices stayed steady relative to the month before, while year-over-year price inflation amounted to 4.7%. Meanwhile, food away from home prices continued to rise, increasing 0.4% month over month and 7.7% year over year.
Additionally, PepsiCo has also been investing in its data capabilities to target consumers’ changing habits and preferences.
The company has been “responsibly implementing and utilizing artificial intelligence for predictive analytics, which can benefit our forecasting and planning processes, advance our consumer communication activities with more precise marketing activity and enhance our maintenance and safety measures to limit disruptions at our worksites,” according to joint prepared remarks from Laguarta and PepsiCo Vice Chairman and Chief Financial Officer Hugh Johnston.