Consumer spending boosting companies like P&G despite price hikes
The consumer products giant Procter & Gamble said this week that sales grew 6% in the most recent quarter — despite the fact that the company raised its prices by 3% on average during the same period.
The news is a sign that even though consumer goods are getting more expensive, consumers themselves are paying up.
P&G sells things like Tide laundry detergent and Bounty paper towels — the types of products people need to clean their homes and take care of their families, explained Linda Montag, senior vice president at Moody’s.
“And so these categories tend to be able to bear rising prices more than others,” she said.
Plus, Montag said many consumers have stayed loyal to name brands during the pandemic. That’s helped the big consumer product companies, like P&G.
Even if people are worried about higher prices at checkout. “They have multiple price tiers. And so consumers can make choices and actually still do business with Procter,” Montag said.
It also helps that many consumers can still afford to buy name brands, said Brian Yarbrough, consumer research analyst with Edward Jones.
But he said that could change now that federal relief aid has gone away.
“And then that will remain kinda the million-dollar question: If consumers are willing to pay these higher prices or if they look for substitutes.”
In the meantime, Procter & Gamble said it expects to raise prices some more this year to help cover higher costs.