Lower-income spenders are showing the strain
Cracks are showing in one of the main pillars keeping the economy out of a recession: resilient spending by U.S. households.
Consumer goods giants from PepsiCo to Kraft Heinz have described recently how the combination of high inflation and higher interest rates is hurting their lower-income customers.
It’s the culmination of everything getting more expensive amid high inflation, even if it’s not as bad as before, and the drag of higher interest rates because of more expensive credit-card and other payments.
“The lower income consumer in the U.S. is stretched,” PepsiCo CEO Ramon Laguarta said late last month when reporting better profit than expected, and “is strategizing a lot to make their budgets get to the end of the month. And that’s a consumer that is choosing what to buy, where to buy, and making a lot of choices.”
Kraft Heinz CEO Carlos Arturo Abrams-Rivera also said lower-income customers are pulling back from restaurants and convenience stores. That’s even as higher-income earners buy more Kraft Heinz products because they’re spending more on travel and entertainment.
At Mondelez International, Chief Financial Officer Luca Zaramella recently told analysts that U.S. sales of some products particularly popular with lower-income households have been weakening, such as Chips Ahoy cookies.
Much of the commentary recently has come from big food and drink companies, but several retailers will be joining them in upcoming weeks. Walmart, Dollar General and others will offer more evidence about how well or not lower-income Americans are faring.