{"id":148082,"date":"2025-06-01T00:12:17","date_gmt":"2025-06-01T00:12:17","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/148082\/"},"modified":"2025-06-01T00:12:17","modified_gmt":"2025-06-01T00:12:17","slug":"companies-are-struggling-with-inflation-driven-consumers","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/148082\/","title":{"rendered":"Companies Are Struggling With Inflation-Driven Consumers"},"content":{"rendered":"<p class=\"color-body light-text\" role=\"button\">Inflation has altered consumers&#8217; buying habits<\/p>\n<p>getty<\/p>\n<p>Year-to-year inflation may look low, but prices continue to compound upwards. For example, &#8220;Food at home&#8221; pricing, accounting for 8% of the total CPI basket,<strong> <\/strong>was up 1.8% in 2024. That seemingly low inflation rate nevertheless pushed up the Covid period price inflation to 27.6%, and that is what consumers are contending with.<\/p>\n<p>So, why is that a problem for companies? Because consumers\u2019 actions to reduce the inflationary effects can adversely affect business revenues and profits. Grocery shopping is a good example. Here are examples of what consumers can do:<\/p>\n<ul>\n<li>Switch to lower-priced brands (e.g., store brands)<\/li>\n<li>Substitute alternate products (e.g., chicken for beef)<\/li>\n<li>Reduce consumption (e.g., one scoop of ice cream)<\/li>\n<li>Forgo disposable products (e.g., paper towels)<\/li>\n<\/ul>\n<p>These actions not only affect the grocery stores, but also affect the companies that produce packaged food. The effect is measured by \u201cvolume\/mix\u201d changes caused by consumers\u2019 altered decisions.<\/p>\n<p>A good example is Kraft Heinz<\/p>\n<p>In last year\u2019s <a class=\"color-link\" href=\"https:\/\/ir-api.eqs.com\/media\/document\/2241e72c-8e83-45fb-9596-4603a78c44f8\/assets\/CAGNY%202024%20Press%20Release%20vFinal.pdf?disposition=inline\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/ir-api.eqs.com\/media\/document\/2241e72c-8e83-45fb-9596-4603a78c44f8\/assets\/CAGNY%202024%20Press%20Release%20vFinal.pdf?disposition=inline\" aria-label=\"2023 annual reporting\">2023 annual reporting<\/a>, Kraft\u2019s management anticipated 2024 growth from rises in both sales and prices.<\/p>\n<blockquote><p>\n &#8220;As announced in its fourth quarter and full year 2023 earnings, the Company reiterates its expectation to deliver [in 2024]:\n<\/p><\/blockquote>\n<blockquote><p>\n &#8220;Organic Net Sales growth of 0% to 2% versus the prior year. The Company expects a positive contribution from price throughout the year, with volumes inflecting positive in the second half of the year.&#8221;\n<\/p><\/blockquote>\n<p>However, consumers tripped up the company&#8217;s strategies and expectations. From the <a class=\"color-link\" href=\"https:\/\/ir-api.eqs.com\/media\/document\/5502f791-eec6-4d6f-9072-93a9c4e12eae\/assets\/KHC_Form_10-K_2024_Final.pdf?disposition=inline\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/ir-api.eqs.com\/media\/document\/5502f791-eec6-4d6f-9072-93a9c4e12eae\/assets\/KHC_Form_10-K_2024_Final.pdf?disposition=inline\" aria-label=\"2024 Annual Report\">2024 Annual Report<\/a>:<\/p>\n<blockquote><p>\n &#8220;Organic Net Sales decreased 2.1% to $25.9 billion in 2024 compared to $26.5 billion in 2023, primarily due to the unfavorable volume\/mix (- 3.5%), which more than offset higher pricing (+1.4%).&#8221;\n<\/p><\/blockquote>\n<p>Note the higher pricing was well below the 2024 CPI inflation rate of almost 3%.<\/p>\n<p>Wall Street\u2019s outlook deteriorates<\/p>\n<p>So, how did Wall Street view Kraft\u2019s 2024 results and plans? Not well. Below is the stock\u2019s performance for the Covid-period. Note that the company (and others like it) was able to produce inflation-beating results early, but then the consumer actions began to hit, causing a reversal of the previous gains.<\/p>\n<p>With the consumer shifts continuing to hit results in 2025, the stock has now fallen below the cumulative inflation, making the Covid-period &#8220;real&#8221; (inflation-adjusted) stock performance negative.<\/p>\n<p class=\"color-body light-text\" role=\"button\">Kraft Heinz Covid-period stock performance (including dividends) now below cumulative CPI<\/p>\n<p>John Tobey (StockCharts.com)<br \/>\nThe ill effects are not limited to Kraft<\/p>\n<p>While the Federal Reserve focuses on the latest 12-month change in prices, it is the cumulative inflation damage that consumers focus on. After all, a &#8220;good&#8221; 12-month inflation change of \u201conly\u201d 3% nevertheless compounds high prices even higher. The Covid-period rise is now about 23%.<\/p>\n<p>That level of inflation continues to cause damage, particularly in this period of high uncertainty (see &#8220;<a class=\"color-link\" href=\"https:\/\/www.forbes.com\/sites\/johntobey\/2025\/04\/18\/uncertainties-are-churning-us-stock-market-outlooks\/\" data-ga-track=\"InternalLink:https:\/\/www.forbes.com\/sites\/johntobey\/2025\/04\/18\/uncertainties-are-churning-us-stock-market-outlooks\/\" target=\"_self\" aria-label=\"Uncertainties Are Churning U.S. Stock Market Outlooks\" rel=\"noopener\">Uncertainties Are Churning U.S. Stock Market Outlooks<\/a>&#8221; for explanation of why uncertainty can be more troublesome than risk). Here are the S&amp;P 500\u2019s nine companies in the sector\/industry combination of the normally safe consumer defensive\/ packaged foods. They all got an inflation boost early but are now struggling with both higher costs and changing consumer buying actions. The weak and negative &#8220;real&#8221; (inflation-adjusted) total returns for the Covid period show Wall Street\u2019s bearish views of the situation and the outlook.<\/p>\n<p class=\"color-body light-text\" role=\"button\">Double-digit negative real performance shows inflation&#8217;s continuing problems<\/p>\n<p>John Tobey (StockCharts.com)<br \/>\nThe bottom line: Today\u2019s inflation trend could worsen<\/p>\n<p>In the early 1970s when inflation was a similar concern, I read an interview with a wealthy individual. He made a surprising statement, saying he would happily give up half his wealth if the other half was guaranteed to retain its value. Why was he willing to make such a large payout? Because inflation has a potentially destructive power that can become self-sustaining, even as economic, business, and financial conditions deteriorate. It is what happened in the late 1970s and early 1980s.<\/p>\n","protected":false},"excerpt":{"rendered":"Inflation has altered consumers&#8217; buying habits getty Year-to-year inflation may look low, but prices continue to compound upwards.&hellip;\n","protected":false},"author":2,"featured_media":148083,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3091],"tags":[51,63477,476,2441,977,16,15],"class_list":{"0":"post-148082","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-business","9":"tag-consumers-fight-inflation","10":"tag-inflation","11":"tag-markets","12":"tag-stock-market","13":"tag-uk","14":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114605217771742465","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/148082","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=148082"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/148082\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/148083"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=148082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=148082"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=148082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}