‘Choiceful’ Consumer Behavior Snapshot: How WK Kellogg, Molson Coors, Kraft Heinz Are Adjusting
If the latest round of earnings calls had a word cloud, “choiceful” remains the standout adjective to describe consumer behavior.
It’s the slightly more succinct way to describe the price-sensitive, value-seeking consumer who has been no stranger to most of the largest CPGs. Like “value,” choiceful represents the consumer who prioritizes products meeting their current needs at prices they deem to be fair, whether that’s surprise/delight or seeking a familiar favorite.
“Consumers have been choiceful across many factors,” Sally Lyons Wyatt, Circana global EVP and chief advisor of consumer goods and foodservice insights, tells CGT. “We have witnessed consumers shifting to everyday value channels [mass, club, and dollar], but also online for convenience.”
This is leading to a persistent bifurcation across product selection. Although some consumers are choosing private label, shoppers across all income groups continue to spend on premium brands in CPG for items they feel are worth paying more for, she notes.
While choiceful is neither a new trend nor term, it’s certainly one with staying power. Despite a boost in consumer optimism that has translated into an increased willingness to spend, shoppers remain cautious and may be suffering from an “inflation overhang, according to McKinsey & Company.
More than half of survey respondents in a late July/early August McKinsey survey said rising prices and inflation are among their concerns. The findings dovetail with recent research from FMI, which found 69% of grocery shoppers reported being very or extremely concerned with retail food inflation.
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The concern persists despite inflation consistently dropping from the 2022 peak, pointing to the potential for consumers requiring months or even years to adjust to new, higher prices even as inflation stabilizes, noted McKinsey.
With that said, consumers in McKinsey’s survey did plan to increase spending on most essential, semi-discretionary, and discretionary items during the next three months.
CPG Strategies
As today’s CPGs refine their strategies, wooing this highly selective, yet increasingly optimistic consumer means rethinking and committing to organizational shifts, product innovation, and crystal-clear marketing.
“Overall, messaging about benefits-value is key,” says Wyatt. “Consumers still have willingness to pay but are more discerning. Companies need to fully understand the evolving market structure of their products, what the consumer values and is willing to pay for, and drive simple, clear and distinct messaging on those points.”
As part of this, getting assortment pricing and sizing right across all channels is critical, including understanding the digital shelf levers impacting product sales.
Many CPGs have accelerated new product launches, which can be risky given consumers’ tight budgets. Brands need to target different consumer cohorts with personalized messaging to incentivize them to try the new product utilizing social media and/or retailer levers, Wyatt stresses.
“Another risk is whether retailers will accept the new product in their stores,” she adds. “CPGs need to make sure their selling story is strong enough to bring traffic to stores and/or online purchases.” They must communicate the consumer need that the product addresses and why.
It's a checklist that many of today's consumer goods companies are working on. Here’s how companies like Coty, Kraft Heinz, Kenvue, WK Kellogg, Molson Coors, and Tapestry are adapting their product, marketing, and operational strategies to adjust.
Coty
Fragrances are having a moment, and for Coty, both prestige and mass market remain bright spots.
“It's really a story of two-folds … People shopping high-end fragrances are continuing to shop high-end fragrances,” said CEO Sue Nabi. “But at the same time, you also see in the same channel entry prestige fragrances doing very, very well. So it's not either. It's not one or the other. It's both at the same time.”
Entry-level prestige fragrances are being driven by smaller and trial formats — a trend cited by other consumer goods manufacturers — as well as the body sprays favored by younger consumers. (While not specific to Coty, Target chief commercial officer Rick Gomez noted in an earnings call last week that minis are a major growth driver for the beauty category, with travel on the rise and consumers seeking affordable indulgences at home.)
Consumers are also interestingly trading up for color cosmetics, according to Nabi.
“Now that the prices of mass market have been increasing quite strongly in the last two years, you see some trade-up, which is really a first in this kind of environment,” she noted. “You see a portion of consumers from mass market trading up to entry prestige color cosmetics. So that's very interesting. So we are not at all seeing trade downs. We are seeing trade ups. And we are seeing consumers operating in the different price brackets.”
How they’re responding: Coty is implementing an internal “startup organization” to increase product innovation and capitalize on recent success from their advocacy marketing model. The goal is to reduce the go-to-market timeline to six to nine months, down from over one year.
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Tapestry
Count Tapestry CEO Joanne Crevoiserat as among the execs who specifically used “choiceful” to describe the current consumer, noting the consistency of the behavior across channels and income levels. This in turn has raised the bar on the brand execution and heat, prompting the company to continue investing in brand building and product innovation.
How they’re responding: Attracting new Gen Z consumers is a key area of focus for the parent company to such brands as Coach, Kate Spade, and they’re engaging the cohort through gaming and virtual experiences via collaborations with Roblox and Zepeto.
Looking ahead, Tapestry will also increase their focus on marketing storytelling with a focus on top- and mid-funnel efforts, as well as expand retail experiences for its luxury brands “through engaging the five senses,” said Crevoiserat. Eva Erdmann of L’Oreal will join the company in October as the new CEO and brand president for Kate Spade.
WK Kellogg
The cereal category is a unique environment, WK Kellogg CEO Gary Pilnick stressed on an investors call. Though their innovation performance is down, the price-volume gap is narrowing.
Private label continues to grow, but the growth is moderating, he noted. Though new product innovation — an important cereal category driver — isn’t performing as well, more consumers are flocking to the core brands of Froot Loops and Frosted Flakes as they seek certainty for their value.
“The thing that … we say that’s such an interesting thing about our category is bifurcation. Granola [is] doing well and growing, premium [is] doing well and growing — it’s actually up 15%. So that’s an interesting thing for us that actually speaks to the affordability of the category,” said Pilnick.
How they’re responding: WK Kellogg’s current innovation plan was determined prior to the Kellogg’s spinoff, and their next round will be “highly incremental” with the goal of bringing new consumers into the category.
Molson Coors
Noting that they’re not seeing anything “terribly different,” Molson Coors CEO Gavin Hattersley said value-conscious consumers in the United States continue to engage in channel and pack shifting, though not brand shifting.
Consumers within the ready-to-drink category specifically are fond of a good flavor treasure hunt, per the exec.
“Consumers, as we've learned in this space … have a little bit of [a] treasure hunt mentality. So, keeping innovation, flavor innovation, in particular, is really important to keep pace with this flavor consumer.”
How they’re responding: The beverage company is leaning into the exploratory desire by focusing on driving trial consumption.
Kenvue
While consumers are both thoughtful and choiceful, they’re also increasingly prioritizing their health, according to Kenvue CEO Thibaut Mongon. The company has not seen a change in private-label penetration in their categories.
“One area where they are not making trade-offs is their health and the health of their loved ones,” he said, noting that consumers are still willing to pay for premium products that are up to 20% more expensive than base offerings.
How they’re responding: The company is working to improve in-store presence for the skin and health category, including increasing the number of displays. They’re also expanding both healthcare professional and consumer engagement by doubling the size of their salesforce, increasing sampling, and pivoting the Neutrogena brand to meet Gen Z consumers through influencers.
To build demand before the new Neutrogena Collagen Bank product hit stores, the brand first made its inaugural debut on TikTok Shop — a move that motivated a major retail customer to pull forward their retail launch, according to Mongon.
Kraft Heinz
Consumers are increasing the number of trips and locations in which they shop, said Kraft Heinz CEO Carlos Abrams-Rivera, and the company is acutely focused on meeting their pricing needs without returning to excessive promotions.
With budget-concious consumers, providing options at different price points in categories like mac and cheese is important, he said.
How they’re responding: The company continues to expand its presence within dollar stores and making inroads within club. They are also taking steps to re-engage consumers with the Capri Sun brand through a product renovation and doubling its media spend.
For the similarly underperforming Lunchable brands, Kraft Heinz is doubling marketing spend and launching the brand’s first on-pack partnership with the upcoming “Transformers One” movie.
