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As consumers look to save $$, they’re cutting back on spending and seeking value in a number of consumer categories, impacting many CPGs’ third-quarter results.
Hershey reported this week a 1.4% net sales drop in its third quarter on the back of high cocoa prices that’ve led to higher prices passed on to consumers, as well as a “challenging consumer environment,” CEO and President Michele Buck noted. The company reduced its full-year growth outlook to be flat year over year.
“Consumers across the income spectrum are making budgetary trade-offs and shopping differently this year,” Buck noted, as consumers prioritizing “satiety” has led to fewer trips to convenience and drug stores, favoring club, dollar, and online retailers, where its product categories are “less developed.” In confection, especially chocolate, it’s losing share to smaller brands and private labels, she said. Its North America Confectionary segment secured 0.9% growth thanks largely to price increases. In September, the company brought on former PepsiCo exec Michael Del Pozzo to lead its US confection business, who will prioritize “reigniting chocolate,” Buck said.
It’s not the only CPG struggling: Last month, PepsiCo lowered its annual sales forecast as volumes fell for North American beverage sales and Frito-Lay snacks, while Nestlé CEO Laurent Freixe noted that “consumer demand has weakened in recent months.”
Beer sales are taking a hit too. Molson Coors saw a 7.8% decline in net sales, and 11% in the Americas, in Q3, the company reported this week, attributing the results to “impacts the macroeconomic environment has had on the US beer industry,” particularly during the peak beer-selling season of summer. The company said it would drop its top-line guidance by 1% as a result. Other brewers like AB InBev and Heineken have recently reported dipping beer volumes in the US.
“As we have heard across many consumer products companies, macroeconomic pressures have been impacting the consumer, and beer has not been immune,” Gavin Hattersley, president and CEO of Molson Coors, said on the company’s Q3 earnings call. “We have seen value-seeking behavior in the form of channel and pack shifting, particularly in the peak summer season.”
Molson Coors has been working to grow its presence within non-alcohol and reach Gen Z consumers, announcing this week it’s taken a majority ownership stake in energy drink brand ZOA, co-founded by Dwayne “The Rock” Johnson.