Tough times, tough choices: Pampers or chicken?

A customer shops for chickens at a Sam's Club store in Arkansas, June 4, 2009. REUTERS/Jessica Rinaldi
CINCINNATI (Reuters) - 
U.S. consumers are making hard choices to save money when they shop, but Procter & Gamble Co (PG.N) believes the idea that they are developing an entrenched habit of thrift could be overblown.

By: Reuters News

P&G, best known for Pampers diapers, Tide laundry detergent and Gillette razors in a $79 billion brand portfolio, is famed for its consumer research. In interviews with Reuters at P&G's headquarters, its top executives described studying how consumers live and shop to get a better understanding of their needs than from data and sales figures alone.

These days, such discussions can often be eye-opening.

During a recent visit to a store, Kirk Perry, P&G's vice president of North America, was pleased to see Pampers diapers on a mother's shopping list.

When she got to the diaper aisle, the woman went to grab a box of Pampers. She stopped, looked at the price, and checked to see if she had brought a coupon with her. She had not.

The shopper, armed with an envelope of cash, other coupons and a calculator, quickly opted to buy a store brand instead.

Buying the less expensive, private label diapers meant that she could go back to the store's poultry section and pick up another package of chicken to feed her family.

"These are the brutal choices our consumers are having to make every day," Perry said. "Talking to consumers throughout the recession has been the most humbling thing you can imagine."

Perry, a 20-year P&G veteran, has been known to walk away from his family when they go shopping and follow strangers instead. Handing out coupons for P&G products seems to persuade those who thought he was a bit odd to open up to him.

He also does less impromptu visits and said he is out talking to shoppers at least 50 percent more now than before the recession.

"In general, I would say optimism is returning, but it is cautious optimism," said Perry. "They are never going to go back and be non-saving, free-spending consumers."


P&G Chairman and Chief Executive Bob McDonald saw a different version of frugal choice play out. A woman bought one of P&G's $45 Olay Pro-X skin creams, priced above competing lines, and then searched for private label hair care products.

A complete reset in the consumer mind-set would presume everyone is willing to choose a cheaper option and give up benefits of branded goods regardless of the product category.

"I just haven't seen that," McDonald said. "I thought the idea of resetting habits was a little bit overstated and a little bit generalized."

Data released on Friday showed the U.S. unemployment rate fell in January and factory payrolls grew, hinting at a labor market recovery. Still, 8.4 million jobs have been lost since the recession began in December 2007.

"My experience in previous recessions is that's the most stubborn number to get changed," McDonald said hours before Friday's unemployment figures came out. "It only gets changed once consumer confidence goes up and once business feels like stability is approaching."

McDonald also said he was more worried about the United States now than he has ever been in his career.

P&G is still hiring but does not need a lot of people to grow as it has improved its productivity, McDonald said.

Last year, P&G hired about 5,000 people out of 720,000 applicants.

"I am glad I was hired in 1980," McDonald joked while sitting in P&G's executive suite in Cincinnati. "I fear that I would not be hired today. It's really competitive out there."

(Reporting by Jessica Wohl; Editing by Michele Gershberg and Richard Chang)

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