Some Americans Aren’t Looking to Save on Home Goods — They’re “Trading Up”

Some companies are struggling to sell basic household goods, but consumers are snapping up luxury toothpaste and hair care products.

Procter & Gamble (PG) is rolling out “innovations” or upgrades across its entire portfolio — from budget brands to high-end alternatives, increasing prices as the company deals with tariffs and rising costs, Chief Financial Officer Andre Scholten said on a conference call last month. So far, the strategy has worked — at least for the high-end market, according to the maker of Pampers diapers, Tide detergent and Charmin toilet paper.

“In some channels, we are seeing the majority of the growth in our categories at the premium end, rather than at the value end of the spectrum,” Scholten said, according to a transcript provided by AlphaSense.

Noel Wallace, CEO of Colgate-Palmolive (CL), gave a similar assessment of the domestic market for household staples in a conference call last week. The company, which produces Colgate toothpaste, Speed ​​Stick deodorant and Ajax detergent, is also adopting an innovation-intensive strategy.

“We continue to see premium and super premium [segments] “It’s growing very well, in the industry,” Wallace said, according to the transcript. “It seems like the value-oriented brands, the SKUs, the segment, as well as the mid-price segment, are the ones that are suffering.”

Weak job growth and concerns about inflation are weighing on consumers, especially low- and middle-income families. This translates not into a focus on “affordability,” but rather on “value,” Schulten said.

“We continue to see consumers increasingly trading in,” he said.

Sales of cheap brands remained sluggish, despite companies competing for customers by cutting prices, intensifying promotions and issuing coupons, the companies said.

“We have seen some slowdown in volume in the categories in which we compete,” Wallace said. “All retailers and all competitors are looking for solutions.”

The disparity in demand for bargain and premium goods has become a common topic for consumer companies. A frothy stock market and rising home values ​​have helped wealthy Americans feel comfortable paying for things like international flights and saving on some items to splurge elsewhere.

Overall, the volume of P&G products sold in North America in the fourth quarter remained flat compared to the previous year, Scholten said. Total sales in North America were up 1% year over year due to higher prices, he said. Colgate-Palmolive reported a 0.5% year-over-year decline in North American sales by volume in the fourth quarter. Total sales in the region decreased slightly due to higher prices, according to a news release.