Consumer attitudes have shifted sharply in recent weeks. This could have big implications for chemical companies, and they need to respond quickly.
On Thursday, the president of Wal-Mart Stores U.S.A., Eduardo Castro-Wright, came out with a no-holds barred statement to accompany June sales figures.
‘Consumers continue to be challenged financially, with more pressure on discretionary spending’, he said. ‘Gas (eg gasoline/petrol) prices have moved to be their chief concern in our latest survey and they appreciate the opportunity to save on everything.’
Outlining a new Wal-Mart strategic focus, he added ‘We are committed to helping our customers find lower prices by working with key suppliers, reducing packaging and lowering distribution costs’.
On Friday, Tesco, the UK retail giant, joined Wal-Mart in identifying this new trend. Commercial director, Richard Brasher, announced that Tesco was changing its focus from more affluent shoppers and green issues. ‘If you don’t have the basic things right, you will be talking at the edge rather than at the centre’, he stated.
‘Consumers are more focused on value-for-money than they were a year ago. I could see price coming up the agenda last year, although the talk was all about quality’, he added. ‘Coming down the road is a tougher time, and that is why we are doing this now’.
Brent crude oil prices reached a new all-time high on Friday night at $79.64. So chemical companies are going to have to increase prices further if margins are not to be squeezed. This will not be easy in the new retail environment.
Volumes may also come under pressure, if the consumer is becoming more focused on value-for-money. Whilst Wal-Mart's statement also highlighted a likely push to reduce packaging volume - which will provide not only cost-savings, but an easy win on the sustainability agenda.
How should business managers respond to this new consumer focus? The next few weeks provide a vital breathing space, whilst consumers in the Northern hemisphere head for the beach on their summer vacations. By the time they return, chemical company CEO's will need to have a major ‘cost-leadership’ programme ready to roll-out.