The trend: Consumer packaged goods brands are prioritizing profitability over topline growth as macroeconomic headwinds reshape consumer behavior. Procter & Gamble, for example, recently reported consumers are doing laundry less often to save money on detergent.
Many CPG companies are streamlining operations and focusing on core strengths:
Why is this happening? The Trump administration’s trade policies—including steep tariffs—have eaten into CPG companies’ margins. Kimberly-Clark, for example, expects tariffs to cost it an additional $300 million this year, despite the fact that the majority of its US products are sourced and manufactured domestically.
That’s forcing them to walk a fine line: absorb those costs or pass them along to shoppers without losing volume. With consumer price sensitivity on the rise, many are tightening operations, shedding complexity, and concentrating on their most profitable segments.
Our take: While short-term headwinds may be driving CPG companies’ actions, portfolio reassessment is a valuable exercise in any economic climate. It allows companies to clarify which areas warrant further investment and which are ripe for pruning. Those that take the time to find efficiencies that enable them to emerge stronger and more agile will be better positioned for long-term success than companies simply focused on cutting costs.
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