Paradoxically, it's Wall Street that best indicates the suffering of Main Street and the average American. Take a look: Starbucks, the king of coffee, fell 16% on the stock market; Tyson Foods, the king of beef, pork and chicken, fell 9%; Yum, owner of KFC (Kentucky Fried Chicken), was down 6%. When these seemingly invincible multinationals announced their first quarter results for 2024, it sent shockwaves through Wall Street.
The explanation is that US consumers, exhausted by cumulative inflation reaching 20% since Joe Biden took office, are starting to tighten their belts. These companies are admittedly suffering from stagnation in China, the strong dollar and the war in the Middle East. However, for the first time since the Covid-19 crisis, consumption seems to be stalling in the US.
The heads of these companies were unanimous when presenting their results to financial analysts. "The consumer is under pressure, especially the lower-income households," said Melanie Boulden, head of prepared foods at Tyson Foods, on Monday, May 6. She believes "20% cumulative inflation over the last three years" has helped to create a "more cautious, price-sensitive consumer." The same sentiment was expressed by Chris Kempczinski, CEO of McDonald's, who further detected a generalized cautiousness. "It may be more pronounced with the lower-income consumer; I think it's important to recognize that all income cohorts are seeking value," said the head of the leading fast-food company.
Exceptional decline
As a result, these giants are experiencing an exceptional decline in sales. Starbucks' situation is downright bad, with sales per store down 4%: "Our performance this quarter was disappointing and did not meet our expectations," confirmed CEO Laxman Narasimhan. KFC saw its sales fall by 2% when analysts were expecting an increase.
Even marketing giant Procter & Gamble, owner of Pampers diapers and Gillette razors, has acknowledged "headwinds," with sales up 3%, below expectations. The famous Kraft Heinz ketchup has also seen a drop in sales volumes, particularly due to the end of the food programs implemented during the Covid-19 pandemic and the decline in sales to restaurants.
Consumers can't stand price increases any longer. They are eating out less, including at McDonald's. The company is trying to counter this trend with promotions and other special offers. Kempczinski emphasized the importance of concentrating "100%" on maintaining affordable prices. Companies are sometimes to blame for their situation, such as Starbucks, whose service and quality are in decline. "At any company that misses badly, there must be contrition" and it must "own the shortcoming without the slightest semblance of an excuse," declared an angry Howard Schultz, the firm's former CEO and major shareholder.
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