We got another glimpse into consumer behaviors via Sean Connolly, chief executive officer of Conagra Brands Inc., who told analysts during a conference call Thursday that consumers are dialing back their food purchases.
"Now let's talk headwinds. First, shifting consumer behavior," Connolly said. He continued:
"As you can see in the weekly scanner data, food companies are starting to wrap pricing in the year-ago period, and dollar sales are coming down as expected. But the rate of improvement in volume recovery is lagging. That suggests new consumer behavior shifts beyond the initial elasticity effects that occurred when pricing actions were initially taken. We've seen this dynamic since just after Easter, and it has been broad-based across many categories and competitors. And importantly, where we see it, it is usually not a trade down to lower priced alternatives within the category, rather, it's an overall category slowdown."
Connolly joins an expanding list of consumer staple executives who have voiced concerns about a faltering consumer, which all seems to run counter to the Biden administration's touting of a new economic renaissance known as 'Bidenomics.'
Cheerios maker General Mills and Walgreens Boots Alliance have recently warned about a weakening consumer. Earnings season is underway, and that will provide even more insights into consumer behaviors.
Recall Goldman's Rich Privorosky told clients not too long ago, "Something is not quite adding up on the consumer" and asked, "Have we just run out of excess savings and are we returning to replenishing savings?"
"Conagra CEO's observations on consumer spending reductions align closely with the ongoing narrative of disinflation.," said Chadwick Chilcot, senior wealth advisor at Wilmington Trust.
Perhaps consumers are hitting a proverbial brick wall after two years of negative real wage growth forced many to draw down on personal savings and rack up record amounts of credit card debt in the highest interest rate environment in decades -- all to make ends meet.
Some consumers could be hit with a balance sheet recession as they must divert income to debt servicing payments in a high-interest rate environment. The latest revolving credit (i.e., credit card debt) data via the Federal Reserve for May shows consumer credit is dramatically slowing.
We've pointed out in recent months, "Consumers Trade Down From Walmart, Dollar Tree Becomes Supermarket For The Working Poor" as "Dollar Tree Dinners" go viral for the middle class amid the inflation storm. There has been a massive surge in cash-strapped consumers panic-searching "pawn shop near me," as this might suggest some are pawning items for quick loans. And new data from Bloomberg shows some consumers are cutting back on toilet paper and toothpaste purchases.
We had a discussion with an analyst from a top multinational food, beverage, and snack company in the US. He expressed his team's concern about the ending of emergency food assistance programs from the government that might be denting consumer spending. There's also worry that, come September, when student loan repayments resume, consumers might cut back even more on spending.
And, of course, how could we forget this disturbing trend as 'Bidenomics' transforms America into a Venezuela-like state in two short years: Cash-Strapped Consumers Resort To 'Dumpster Dining' To Save On Grocery Bill.
