The trend: Consumers are pulling back on snacks, an unexpected shift given their usual reliance on salty and sweet treats during economic downturns. Instead, shoppers are prioritizing essentials like flour and sugar and fresh foods around the store perimeter, General Mills CEO Jeff Harmening said.

His comments echo similar insights from other consumer packaged goods companies, including PepsiCo.

Why it matters: This shift is creating an unexpected headwind for General Mills, which had expected the consumer environment to improve as the year progressed. But “that hasn't really been the case,” Harmening said during the company’s earnings call. “Consumers are still seeking value as much or more than they had when our fiscal year began.”

The impact is clear in the company’s latest earnings:

• Fiscal Q3 revenues fell 5% to $4.84 billion, missing analysts’ forecast of $4.95 billion. The shortfall stemmed from a 4% decline in volumes and foreign exchange pressures.
• North American retail net sales dropped 7% to $3.0 billion, below the expected $3.08 billion, driven by lower volume and unfavorable price realization and mix. The company’s divestiture of its Canada yogurt business also shaved 1% off net sales.
• Adjusted per-share profit fell 15% in constant currency to $1.00, though it still beat analyst estimates of 96 cents.

Given the challenging landscape, General Mills lowered its full-year organic sales forecast and now expects a decline of 1.5% to 2%, down from its prior view of flat to 1% growth.

Our take: The rapid shift in consumer behavior is a troubling sign for the CPG industry. Price sensitivity is only intensifying, and with little sign of relief, even historically resilient categories—like snacks—are now feeling the pressure.