Since the onset of the COVID-19 pandemic, consumers and companies across every industry have had to deal with consequences of inflated prices for everyday goods. Even after the pandemic lessened its hold on the economy, a slew of geopolitical events (e.g. Ukraine-Russian War, Israel-Palestine conflict, China-Taiwan dispute over semiconductor manufacturing) followed, further disrupting pricing.
Additionally, price wage increases, price increases of supplies and materials, and rising labor costs all contribute to fluctuations in the stock market. And with no end in sight for warfare occurring abroad (many of which we’re sending billions of dollars in aid to), the value of the American dollar is unlikely to improve soon.
Even so, measurable progress has been made in taming inflation within the US: according to the US Inflation Calculator, “in 2023, the average rate of inflation was 4.1%—a major decrease from 2022, when the average rate of inflation was 8.0%.
However, economists predict that we are a ways away (Q4 2025, more precisely) from reaching ideal inflation rates (between 1% and 2% per year)—which is influencing consumer and retail companies’ pricing strategies.
As the end of 2024 inches closer, a few questions emerge as to what consumers can expect for the rest of this year and into 2025, regarding inflation and product pricing: What is being done to tame inflation today? How will these actions reflect in pricing of consumer goods in the months to come? Where does the market stand currently on prices for everyday commodities? Below, we use the AlphaSense platform to answer these pressing questions and more.
Inflation and the Federal Reserve
In the past year, the Federal Reserve has put forth more optimistic outlooks on reining in inflation rates. When the COVID-19 pandemic hit in early 2020, the Federal Reserve responded promptly and decisively: it slashed its short-term interest rate target to nearly zero in March 2020, maintaining this level until March 2022 and then resuming substantial purchases of U.S. Treasury and government-backed mortgage bonds through “quantitative easing.” Coupled with significant fiscal policy measures and the rollout of newly developed vaccines, this approach fostered a robust economic recovery. However, this recovery was accompanied by a persistent surge in inflation, with the consumer price index peaking at nearly 9% year over year in the summer of 2022.
In an attempt to counteract the highest inflationary pressures witnessed in four decades—reaching a peak of 9.1% in June 2022—the central bank began to steadily raise interest rates in 2022. The Federal Reserve’s most recent increase occurred in July of 2023, marking a continuation of their efforts to stabilize economic conditions amidst persistent inflation—and remains around the 3% mark annually.
Ultimately, consumers are still feeling the heat of overpriced goods. They are, in AP News’ words, “fed up with prices that remain about 19%, on average, above where they were before the pandemic, consumers are fighting back. In grocery stores, they’re shifting away from name brands to store-brand items, switching to discount stores or simply buying fewer items like snacks or gourmet foods.” If prices remain as high as they are, corporations will have to increasingly account for the trade down effect in their profit margins and earnings calls.
Consumer Goods Pricing Outlook
Some major beauty and grooming corporations are already reporting major losses due to high pricing. In the turbulent years of high inflation following the pandemic, consumers have focused on cost-effectiveness and reducing waste, leading to decreased demand for products previously considered essential. Companies like Proctor & Gamble (P&G), Unilever, Edgewell, and numerous others in the packaged goods sector have reported several quarters of stagnant or decreasing sales volumes as a result.
Why? In the instance of P&G, the consumer goods giant is making consumers pay the price of inflation, and therefore, eschewing pricing strategy that appeals to consumers:
“[P&G] boosted prices by 10% across its various brands for the three months ending on March 31, with the largest increases impacting products in the fabric and home care category. It was the second straight quarter of double-digit hikes for Procter & Gamble compared to pricing levels one year earlier. American households are footing the bill for lingering inflation as various companies pass along their higher costs to the public.”
– New York Post | Procter & Gamble Rakes in Profits After 10% Price Hike Amid Inflation, February 2024
“Our gross margin benefited from increased pricing across the company’s portfolio, partially offset by headwinds that included higher input costs, including commodity impacts across the Shellac business as well as higher packaging costs.”
– Vital Farms, Inc. | Q4 2023 Earnings Call, 2024
Corporations are learning that there are limits to consumers’ patience with price increases. As prices rise, consumers are more and more likely to take their business elsewhere, regardless of brand loyalty.
And while price increases may benefit corporations in the short-term for profit margins, it’s a strategy that has an expiration date. McKinsey recently shared that “optimism about the strength of the US economy fell in the second quarter of 2024, the lowest it’s been since the end of 2023. This follows the first quarter’s spike in optimism, which was the highest since 2022. Mixed feelings, which accounted for the majority of consumer sentiment, also rose in the second quarter. Together, these shifts could signal a meaningful shift in consumer spending.”
Global counterparts are already experiencing the brunt of overpricing to compensate for inflation. According to research from Financial Times, Unilever and Reckitt Benckiser Group Plc have seen sales drop QoQ, and in China, everyday essential sales have shifted from robust double-digit expansion before the pandemic to modest single-digit growth this year.
The Emergence of Upflation
Even In the wake of these gloomy trends for US corporations, price reduction isn’t a strategy under consideration. Rather, in an attempt to gain consumers who’ve strayed from brand loyalty in favor of trading down, executive leaders in the consumer and retail sectors are embracing upflation. Similar to shrinkflation (where package sizing is reduced but prices are maintained or increased), upflation focuses on finding new uses for old products, and charging a premium price for them. Companies like P&G are reporting profits from taking this approach, though they are not yet sharing any hard numbers in their reporting.
But how does upflation translate into consumers’ purchasing decisions?
Several consumer goods companies have recently embraced the upflation strategy.. P&G launched a high-end full-body deodorant for $14, a staggering departure from traditional stick deodorant pricing. Meanwhile, Gillette released a specialized $15 intimate razor designed for precision in sensitive areas—priced $5 higher than its standard Venus razor. Personal hygeine company Carefree has unveiled advanced menstrual pads designed to handle various types of leaks, priced higher than their previous versions.
“Gillette India, the country’s grooming brand has ventured into a new segment of super premium category of razors with Gillette Labs. Driven by advanced technology, this razor aims to elevate the shaving experience from routine to sensational. The latest innovation combines shaving and gentle exfoliation technology into one efficient stroke and offers a gadget-like unboxing experience. The razor is crafted with design in mind.”
– Afaqs, News Bureau | Gillette Enters the Super-Premium Category with the Launch of its One-of-a-Kind Razor
“The fear of odour breakthroughs is an extra source of stress in women’s daily lives, said P&G. Recommended by four out of five gynecologists and dermatologists, Secret Whole Body Deodorant is made with superior skincare ingredients and is free of aluminium, baking soda, dyes, phthalates, and parabens for 24/7 freshness with daily use.”
– World Aerosol | Secret’s Whole Body Deodorant tackles “Unspoken Body Odour Concerns”
While this is unlikely to be a surefire strategy to retain consumer interest, it’s proving to bring in revenue in an increasingly complex consumer market and unpredictable economy.
Keeping Tabs on Consumer Behavior
Consumer behavior is ever-evolving, particularly with persistent inflation and a weakened economy.Investing in a market intelligence platform is the most strategic choice you can make to prepare for the challenges of a volatile market. Not only can a platform help you track shifts in consumer preferences and behavior through access to premium content sources, it also allows you to observe the moves your competitors are making and evaluate market landscapes for new opportunities.
If you’re looking for a leg up, upgrading your market intelligence strategy should be a top priority. AlphaSense helps you cut through the noise with proprietary AI search technology. Premium features like Smart Synonyms™, sentiment analysis, and Smart Summaries allow you to take the lead in your respective industry and amplify your ability to conduct competitive and market landscape analyses—in less time and with more confidence. Get our latest white paper, The Complete Guide to Conducting Competitive & Market Landscape Analyses, to learn more.
Content Marketing Specialist
Formerly a writer for publications and startups, Tim Hafke is a Content Marketing Specialist at AlphaSense. His prior experience includes developing content for healthcare companies serving marginalized communities.
Read all posts written by Tim Hafke
