Trading down to comparable cheaper products usually goes hand in hand with times of economic crisis as consumers look for any way possible to penny pinch.
But two FTSE 100 giants seemed to have bucked this trend.
Unilever and Reckitt Benckiser, the consumer goods companies which own household brands such as Bovril, Dove and Durex to name a few, have navigated these tricky economic times largely intact.
With consumer price inflation still rising, one might have thought the pair would be suffering as a result of cost-conscious shoppers looking for cheaper alternatives to branded cupboard staples.
But no.
Both companies raised guidance for the year, expecting to beat previous forecasts even with input prices soaring as high as 11%, according to Unilever in its half-year results.
What’s even more remarkable is both businesses are surviving and flourishing, where the fashion and food retail sectors have started to run into headwinds.
Why no switch ?
A lot of the success of these companies boils down to consumers being willing to pay a few extra pennies for brands that they trust. That, at least, is the view of Julie Palmer, a partner at corporate restructuring firm Begbies Traynor (AIM:BEG).
Palmer argues that consumers know what they are getting with an established brand - and that the “consistency of a trusted product is not where people would change just to save a few pennies”.
By way of example, Palmer mentions baby products, where parents will make sure they purchase what is deemed as the ‘best’ product for their child.
The same can be said for other household basics such as soap, dishwasher tablets and cleaning products, where consumers have built a familiarity with the product that works best for them.
Food cheaper than it seems?
Drawing parallels with the last cost of living crisis in the 1970s, when food was a greater proportion of the total household budget, may not be helpful when analysing what’s going on today
According to research from Hargreaves Lansdown, the price of pint milk soared by 80% in the 70s, while the cost of dozen eggs went up by 32%.
So far this year, the price of a pint of milk is only up 8%, the same for a dozen eggs.
Now for consumers, who will often buy food and household goods from the same supermarket, two things may be at play.
First, they are not put off by the comparatively small price increases in milk, eggs, bread etc, meaning they continue to pay the extra for their branded soaps and the cleaning products, and trade down on other ‘non-essential’ food items, such as ice creams and juices.
Data from Kantar would appear to bear out this assertion, with supermarkets reporting own-line sales grew by 4.1% in the 12 weeks to July 10, while branded products fell by 2.4%, although it is unclear whether this is specifically for groceries.
Alternatively, consumers are making savings by shopping at one of the discounters for their food, such as Aldi or Lidl, which both grew their market share to 9.1% and 7% respectively.
This then allows consumers to buy branded products with the savings made on own-brand or discounted food.
The likelihood is that shoppers are using both methods to cut back on costs.
It’s clear from the latest updates from Reckitt and Unilever that the cost of living crisis isn’t biting yet for two of Britain’s biggest companies.
However, there may come a point where the consumer, hit with soaring household bills, says enough is enough and opts for budget lines instead.