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Some of the biggest consumer brands are reporting lingering softness in customer demand, from slow restaurant traffic to lagging sales in certain products.
To be clear, the latest indicators show a strong overall economy. US GDP grew 2.8% YoY in the third quarter, the unemployment rate was “essentially unchanged” at 4.1% in October, and a key inflation indicator showed further cooling in September, at 2.1% YoY compared to 2.3% in August, according to federal sources.
That doesn’t mean things are hunky-dory everywhere. CFO Brew reviewed recent quarterly results for companies that make popular consumer products and major restaurant chains. They reported either slow demand or continued need to focus on product pricing for cash-strapped buyers.
Eat, drink, and be wary. As CFO Brew previously reported, fast-food giant McDonald’s saw lighter queues last quarter, continuing the trend from Q2.
“QSR [quick-service restaurant] traffic has remained pressured, reflecting industry-wide challenges,” McDonald’s CEO Chris Kempczinski said on an earnings call. “And while we anticipated a challenging environment in 2024, our performance so far this year has fallen short of our expectations.”
Customer traffic was also a little light at Starbucks stores during the company’s fiscal fourth quarter.
“Our traffic challenges persisted in Q4, resulting in pressures throughout our P&L from our top line to our bottom line,” Starbucks CFO Rachel Ruggeri said on an earnings call. Ruggeri noted that traffic was down “across all channels” and throughout the day, particularly in the afternoon.
Starbucks’ Q4 consolidated net revenues declined 3%, according to a news release. Comparable store sales fell 7% globally and decreased 6% in North America and the US, due to declines in comparable transactions.
Prices may vary. Last quarter was a mixed bag for major beverage makers.
James Quincey, CEO of The Coca-Cola Co., reported in an earnings call that “global consumer sentiment and spending in aggregate held up well, and our broader industry continued to expand.” Coca-Cola’s global unit case volume and net revenues both declined 1% in the quarter, and operating income declined 23%, according to a news release.
Quincey said there was still a “part of the consumer landscape where there's pressure on disposable income.” He said consumers are “exhibiting value-seeking behavior” by seeking out deals or pricing specials—such as combo meal deals or smaller, cheaper beverage package sizes. But some market segments showed “strong purchasing power,” such as Coke-owned Fairlife milk, he noted.
Keurig Dr. Pepper, meanwhile, reported that net sales increased 2.3% and net income bubbled up by 18.9% in Q3, according to a news release.
But the company was not without its challenges during the last few months.
CEO Tim Cofer noted in an earnings call that its products’ prices were “a source of modest pressure in Q3.” The company will take “pricing actions across meaningful parts of our portfolio,” including its canned soft drinks and single-serve coffee, in early 2025.
KDP also “experienced a soft overall quarter” in its US coffee segment, Cofer said.