The news: Consumer packaged goods (CPG) manufacturers Unilever, Procter & Gamble, and Nestlé offered nuanced views of the North American consumer in their most recent earnings reports.

• Nestlé CFO Anna Manz noted that the “US consumer is increasingly challenged,” although the company reported improvements in its pet care and coffee businesses during Q3.
• P&G continues to see diverging behaviors from low and high-income consumers, with lower-income shoppers looking for ways to make products last longer while higher-income households show enthusiasm for trading up to new, more expensive products.
• Unilever struggled with declining sales volumes in North America, which were only partially offset by higher prices.

Zoom out: All three companies singled out “execution” as the key to growing sales and gaining share in a challenging environment. That means having a range of pack sizes and price points to reach consumers regardless of their budgets. It also means investing in innovation to give shoppers a reason to choose their brands’ products over competitors—as well as justify higher prices.

CPGs also have to thread the needle between participating in a highly promotional environment and protecting margins and brand desirability. Unilever strained to strike that balance in Q3 as its determination to maintain its premium position in condiments created an opening for lower-priced value brands to take share.

Implications for CPGs: Consumers’ selective spending behavior is forcing CPGs to reassess which parts of their portfolio to prioritize, scale back, or shed. Investing in those brands with the strongest growth potential and loyalty is a relatively safe strategy, especially for CPG conglomerates with expansive holdings, although even that isn’t foolproof as insurgent brands capture a larger share of growth.

CPGs can best defend their position by underlining the superiority of their products, maintaining a robust pipeline of innovation and wide distribution, and offering a wide range of price points to appeal to as many shoppers as possible.

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