Nestlé and Unilever Revise U.S. Market Pricing Strategy to Counter Weak Consumer Confidence

Nestlé and Unilever have adjusted their pricing strategies in the U.S. market due to weakened consumer confidence and heightened price sensitivity. Nestlé has lowered its prices by 1%, while Unilever has slightly increased prices by 2.1% to tackle competition from store brands. Data from Nielsen and McKinsey indicate that consumers are turning to lower-priced alternatives, prompting brands to rethink their pricing strategies.

Price Pressure and Market Challenges for Brands

Nestlé CEO Laurent Freixe acknowledged in the latest earnings call: "Certain political and economic decisions have weakened consumer confidence that was already weak." As the world's largest packaged food company, Nestlé decided to cut prices by 1% in the U.S., its largest market. Freixe noted, "In terms of pricing, we must consider the movements of customers, consumers, and competitors. We are trying to cover costs while also considering consumer reactions."

This strategic adjustment is not aimless. According to Barclays' analysis of Nielsen data, Nestlé has lost market share in the U.S. retail market for 18 consecutive quarters, particularly facing challenges in market share in the frozen food and creamer categories. Unilever's U.S. business is facing similar difficulties, with products like Ben & Jerry’s ice cream experiencing market share declines in all but two of the past 18 quarters.

The Rise of Private Labels and Changes in Consumer Behavior

Consumer sensitivity to prices is changing the entire retail landscape. According to Rob Holston, EY's global consumer products leader: "Consumer brands have raised prices to the limit. Now, a significant portion of people are directly turning to private labels." He added that many consumer goods companies are already in a state of combat readiness against private labels.

Data provided by NielsenIQ to Reuters shows that by the first quarter of 2025, the average price increase for major brands is about 2%, while private labels have increased by 4%. Even so, the average price of private labels is still at least $1 cheaper than major brands. This price gap is driving consumers to opt for more cost-effective choices.

McKinsey partner Patricio Ibáñez pointed out: "We do not recommend further price increases. The growth rate of private labels in the U.S. is four times that of major brands." According to McKinsey's survey, 60% of consumers plan to change their consumption habits, including buying cheaper goods, turning to wholesale clubs, or online retailers.

Intensified Competition Between Retail Channels and Brands

Retailers like Walmart and Target are rapidly evolving their private labels, even surpassing traditional major brands in some innovations. Aftab Hussain, a senior partner at Boston Consulting Group (BCG), stated: "The number of retailers capable of multinational branding has significantly increased. You will see that private label innovation has already surpassed major brands."

For example, on Walmart.com, consumers can purchase Unilever's Persil laundry detergent (100 fl oz) for $12.97, but can buy Walmart's own brand Great Value detergent (154 fl oz), advertised to wash 154 loads, for only $11.64. This price and capacity comparison poses a direct threat to brand manufacturers.

Changes in Consumer Confidence and Spending Behavior

According to U.S. Department of Commerce data, U.S. retail and food services spending in March 2025 increased by a seasonally adjusted 1.4% month-over-month and 4.6% year-over-year. However, sales growth in food and beverage stores was only 1.9%, with grocery stores growing just 2.2%. This indicates that despite strong overall retail performance, food spending remains weak.

Jack Kleinhenz, chief economist at the National Retail Federation (NRF), noted: "Despite some positive economic indicators, consumers remain uneasy about future spending, especially against a backdrop of policy uncertainty and tariff fluctuations." According to an NRF March survey, 46% of consumers have preemptively stocked up due to concerns about price increases caused by tariffs.

Industry Response and Strategic Adjustments

In such a market environment, brands are adopting more cautious pricing strategies. Unilever raised prices by only 2.1% in North America, much lower than its increases in Europe (3%) and emerging markets (3.9%). Reckitt CEO Kris Licht also stated: "With declining consumer confidence, we see consumption patterns changing, and competition will remain intense."

Nestlé, on the other hand, has achieved growth in other markets such as confectionery (8.9%) and coffee (5.1%) through strategic price increases, but has chosen to lower prices in the U.S. market to address competition and consumer pressure. The company maintains its 2025 profit margin target of 16% and emphasizes continued investment in core businesses to strengthen its market position.

References

• Analysis-Nestle, rivals ease US price hikes in bid for anxious American shopper
• Rebounding retail sales may not be good news for grocery stores and national food brands
• Nestle, rivals ease US price hikes in bid for anxious American shopper
• Nestlé beats Q1 sales forecast as it braces for tariff impact
• Nestle, rivals ease US price hikes in bid for anxious American shopper