The trend: Shoppers are finally beginning to return to premium brands, much to consumer packaged goods (CPG) companies’ relief.

• Unilever grew sales volumes for the second-straight quarter thanks to strong demand for its power brands, including Dove, Knorr, and Sunsilk. Volume growth reached 2.2% year over year (YoY) in Q1, an acceleration from 1.8% growth in the previous quarter.
• Likewise, growing unit sales for Dettol, Lysol, Durex, and Finish products helped Reckitt Benckiser beat sales expectations in Q1. The company expects sales to rise 2% to 4% this year, driven by a more balanced combination of price increases, product mix, and volume growth.
• Kimberly-Clark had a better-than-expected volume recovery in its North American personal care and consumer tissue segments, with volumes up by 1% and 2%, respectively.
• Danone said it was winning back market share from private labels thanks to its strategy of offering shoppers a wide array of products across price points.

On the other hand: Not every CPG brand is successfully winning back consumers. Concerns about inflation and the economy continue to weigh on purchasing decisions, particularly for lower-income shoppers.

• Nestlé’s real internal growth—a measure of sales volumes—fell 2% in Q1, which the company blamed on weak US demand as well as intense price competition in the frozen food category.
• And continued price hikes by PepsiCo and Keurig Dr Pepper are turning off price-sensitive consumers. All three of PepsiCo’s North America divisions—Frito-Lay, Quaker Foods, and its beverage business—posted volume declines last quarter.
• A similar scenario played out at Keurig, where a 1.3% decline in volume/mix for its US refreshments segment was offset by a 5.6% increase in prices.

The fight back: CPG companies are turning to a number of tactics to restore their market share and prevent further encroachment from private labels.

• Several are increasing their marketing investments to raise their profile with consumers and differentiate themselves from competitors.
• Others are leaning into innovation and premiumization to justify their higher price points and attract shoppers.
• And some, like Danone, are expanding their range of products and package sizes to appeal to shoppers across income levels.

The big picture: While there are indications that shoppers are beginning to feel more comfortable about spending on name brands, mounting pressure on lower-income consumers continues to pose a threat to CPGs.

• Shoppers in that cohort “have led the trend to trading down and buying private label,” Nestlé CEO Mark Schneider noted, citing inflation as well as the end of supplemental government benefits.
• On the other hand, there’s a significant subset of consumers willing to spend more on premium brands—a dynamic that’s playing out in the grocery aisle as well as in other segments like luxury and apparel.
• This growing bifurcation means that brands will have to find ways of tailoring their messaging to each group, emphasizing price with cost-conscious customers and quality with wealthier shoppers.