Why Cheap Toilet Paper Sets Off Alarm Bells Among Some Investors
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,623,020 (+0.08%)       Melbourne $974,710 (-0.81%)       Brisbane $992,583 (-1.37%)       Adelaide $896,270 (+0.26%)       Perth $892,481 (+0.31%)       Hobart $726,595 (-0.35%)       Darwin $664,958 (+1.76%)       Canberra $1,012,150 (+0.04%)       National $1,048,965 (-0.14%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $751,258 (-0.23%)       Melbourne $495,378 (+0.24%)       Brisbane $583,696 (-1.32%)       Adelaide $453,443 (-0.76%)       Perth $458,999 (+2.21%)       Hobart $509,191 (+0.99%)       Darwin $362,436 (+1.68%)       Canberra $497,643 (+0.69%)       National $536,245 (+0.06%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 9,903 (-109)       Melbourne 14,181 (+71)       Brisbane 8,075 (-54)       Adelaide 2,184 (+36)       Perth 5,723 (+16)       Hobart 1,216 (+3)       Darwin 275 (+14)       Canberra 888 (+5)       National 42,445 (-18)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,719 (+28)       Melbourne 8,357 (+7)       Brisbane 1,747 (+49)       Adelaide 405 (+23)       Perth 1,442 (+5)       Hobart 211 (-1)       Darwin 399 (-7)       Canberra 1,018 (+16)       National 22,298 (+120)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $800 (-$20)       Melbourne $620 ($0)       Brisbane $635 (-$5)       Adelaide $610 (-$10)       Perth $675 (-$20)       Hobart $550 ($0)       Darwin $700 (-$30)       Canberra $680 ($0)       National $666 (-$12)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $750 ($0)       Melbourne $595 ($0)       Brisbane $625 (-$5)       Adelaide $510 (+$10)       Perth $630 (+$5)       Hobart $470 (+$5)       Darwin $560 (+$30)       Canberra $550 ($0)       National $597 (+$4)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,884 (-132)       Melbourne 6,585 (+256)       Brisbane 4,488 (+137)       Adelaide 1,589 (+2)       Perth 2,880 (+283)       Hobart 411 (+13)       Darwin 93 (-4)       Canberra 632 (+17)       National 22,562 (+572)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 10,906 (+381)       Melbourne 6,312 (+294)       Brisbane 2,339 (+54)       Adelaide 371 (+21)       Perth 797 (+18)       Hobart 143 (+3)       Darwin 126 (+3)       Canberra 816 (+23)       National 21,810 (+797)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.56% (↓)     Melbourne 3.31% (↑)      Brisbane 3.33% (↑)        Adelaide 3.54% (↓)       Perth 3.93% (↓)     Hobart 3.94% (↑)        Darwin 5.47% (↓)       Canberra 3.49% (↓)       National 3.30% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 5.19% (↑)        Melbourne 6.25% (↓)     Brisbane 5.57% (↑)      Adelaide 5.85% (↑)        Perth 7.14% (↓)     Hobart 4.80% (↑)      Darwin 8.03% (↑)        Canberra 5.75% (↓)     National 5.79% (↑)             HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.8% (↑)      Melbourne 0.7% (↑)      Brisbane 0.7% (↑)      Adelaide 0.4% (↑)      Perth 0.4% (↑)      Hobart 0.9% (↑)      Darwin 0.8% (↑)      Canberra 1.0% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.1% (↑)      Brisbane 1.0% (↑)      Adelaide 0.5% (↑)      Perth 0.5% (↑)      Hobart 1.4% (↑)      Darwin 1.7% (↑)      Canberra 1.4% (↑)      National 1.1% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND       Sydney 29.8 (↑)        Melbourne 31.6 (↓)     Brisbane 30.4 (↑)        Adelaide 25.3 (↓)       Perth 35.7 (↓)     Hobart 33.0 (↑)      Darwin 43.9 (↑)      Canberra 31.9 (↑)      National 32.7 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND       Sydney 30.2 (↑)      Melbourne 31.7 (↑)        Brisbane 27.1 (↓)       Adelaide 25.5 (↓)     Perth 37.5 (↑)        Hobart 38.0 (↓)       Darwin 37.9 (↓)     Canberra 41.2 (↑)        National 33.6 (↓)           
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Why Cheap Toilet Paper Sets Off Alarm Bells Among Some Investors

Companies selling everyday goods say lower-income consumers are struggling, but better-off households are spending freely

By AARON BACK
Wed, Jul 3, 2024 7:00amGrey Clock 4 min

Sellers of everyday consumer goods are experiencing a growing divide in their customer base between the more and less affluent. How they respond depends in part on where their products sit in the pecking order.

Both packaged-food companies and makers of household goods such as cleansers and paper towels are describing a bifurcation whereby higher-income consumers are spending freely, but those with lower incomes are feeling increasingly pinched by the cumulative impact of years of inflation.

“I think there’s certainly been much more bifurcation of the market, and it’s been creeping up over time. I wouldn’t say it’s been a sudden change,” Bank of America analyst Anna Lizzul said in an interview. Companies that are more exposed to low-income consumers “have mentioned the word bifurcation many times over the last 12 months,” she added.

Yet things appear to have come to a head recently. For food companies in particular, discounts and promotions are now back on the table after years of price increases—a significant concern for their investors. General Mills , during its latest quarterly earnings conference call, said it would step up coupon offerings in the current fiscal year and described the intensity of promotions in the industry as back to pre-Covid levels. The company’s stock fell 4.8% in response.

But for those targeting better-off households, the imperative is to keep investing and innovating to continuously improve their products, justifying still-higher prices in a process referred to as premiumisation.

This has long been the strategy of Procter & Gamble , which tends to occupy the premium tier of the categories in which it operates, from Gillette razors to Bounty paper towels. “The consumer within our categories, the consumer that represents our consumption base is actually holding up very well,” P&G Chief Financial Officer Andre Schulten said at an investor conference in June.

Most consumer-staples companies, however, have products targeting various income levels. General Mills, for instance, boasts organic Annie’s mac and cheese and high-end Blue Buffalo pet food among its brands. Kimberly-Clark competes with P&G at the high end in many categories, while also offering value-tier brands such as Scott toilet paper and paper towels.

The premium tier of products “continues to grow very, very robustly,” Kimberly-Clark Chief Executive Michael Hsu said on the company’s first-quarter conference call in April. “That all said, clearly, I would say, middle- to lower-income households look like they are becoming more stretched.”

“I think the growth driver for us over the long term is by making products better, premiumising, elevating our categories. But we want to serve the value-oriented consumer as well, too,” Hsu said.

Compared with P&G and Kimberly-Clark, Clorox stands out as more exposed to low-income consumers thanks to the categories it plays in, such as cleansers that face more competition from private-label goods, said Bank of America’s Lizzul. This is the case even though Clorox too often occupies the higher end of those categories, such as with its Glad-brand trash bags.

The company “is returning to pre-COVID levels of promotion to support a return to volume growth,” she wrote in a recent note. While much of that promotion spending will go to things such as displays as well as discounts, she still sees it having an impact on pricing and sales mix in the near term. Many other companies in the household-goods space are preferring for now to spend on stepped-up marketing and other investments in their brands instead of discounts, she said.

To be sure, lower-income American households are in aggregate still better off than they were before the pandemic, even accounting for inflation. Goldman Sachs forecasts that real, inflation-adjusted incomes for the bottom 20% will rise 1.8% this year. They also expect the top 20% to earn 2.7% more. At the same time, cash cushions built up during the pandemic have declined. The percentage of Americans who say they have enough cash to cover an unexpected $400 expense fell to 63% in 2023, equivalent to 2019 but down from 68% in 2021, according to Federal Reserve surveys.

Among those living paycheck to paycheck, there have been other shocks as well. Notably, the expiration of higher pandemic-related Supplemental Nutrition Assistance Program benefits in March 2023 hit the food budgets of certain households by hundreds of dollars a month. Speaking on an earnings conference call in April, Nestlé CFO Anna Manz said that benefit change plus years of cumulative inflation had together reduced the purchasing power of lower-income American households by about 50% as of the first quarter.

“Now those are the consumers that predominantly buy in the frozen-food category, which is why we see a continued ongoing impact there,” Manz said. The Swiss food company owns frozen brands such as DiGiorno, Stouffer’s and Lean Cuisine. In its first-quarter earnings report , it said real internal growth, its measure of underlying sales volume, fell 5.8% year-to-year in North America, “primarily driven by a decline in frozen food.”

Yet even here, the company expects product innovation to be part of the solution. “There’s a lot to come, particularly on frozen actually, which is a high-innovation category. Consumers like seeing new stuff coming through; they want new meals,” Manz said.

Over time, premiumisation is a fundamental growth driver for all consumer-staples companies. The unit volume growth of diapers, for instance, is essentially just a function of birth rates. Only by making them better over time and charging more for that improvement can companies really drive revenue growth.

When lower-income consumers are feeling pressured, however, that long-term imperative might conflict to a degree with near-term necessities. So while it is understandable that companies often say they prefer to invest in marketing and innovation, many will also capitulate on price.

Investors could punish them for that.



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After Pandemic Slowdown, Global Wealth Is Growing Once Again, Led by the U.S.
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The latest edition of an annual UBS wealth report notes that while “the global economy is in the midst of a dramatic structural upheaval,” wealth is growing once again after a downturn through the pandemic.

UBS analyzed income and wealth data from 56 markets, representing “92% of the world’s wealth,” in its Global Wealth Report 2024, released Wednesday. The report’s overarching theme found that global wealth grew by 4.2% in 2023, offsetting a loss of 3% in 2022. Even in the face of continued inflation, adjusted global wealth grew by 8.4%.

However, overall global wealth growth is down, from an annual average of 7% between 2000 and 2010 to just over 4.5% between 2010 and 2023, the report said. This equates to a reduction in global wealth of almost one-third.

The remaining growth seems to be continuing on pace in the world’s most developed and already prosperous nations. In the U.S., average wealth per adult grew by nearly 2.5% and the country accounts for 38%, roughly 22 million, of all millionaires worldwide.

Mainland China came in second with just over 6 million millionaires, followed by 3 million  in the U.K.

The report also took a look at the growing issue of wealth transfer. Over the next 25 years, US$83.5 trillion of global wealth will be transferred to spouses and the next generation. UBS estimates 10% of that will be transferred by women and US$9 trillion will shift between spouses.

Wealth in the Asia-Pacific region grew the most—nearly 177%—since the report began tracking data 15 years ago. The Americas come in second, at nearly 146% growth. Surprisingly, Turkey has enjoyed the most wealth growth per adult of any individual nation in the last 15 years—more than 1,700% in local currency.

The world’s wealthiest class continues to be a small, tightly concentrated group. According to the report, only 12 people hold between US$50 billion and US$100 billion and just 14 people hold US$2 trillion of the world’s wealth. The U.S. and Canada are home to individuals holding 44% of this wealth, while another 25% is held by people in Western Europe.

UBS data suggests that global wealth will continue to grow most in emerging markets, with some countries experiencing millionaire growth of up to 50% over the next five years.

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