Companies from Clorox to Kraft Heinz are finally realizing that half of American consumers can’t afford what they are selling.
To appeal to cash-strapped and inflation-weary shoppers, the companies are launching smaller and cheaper products, pitching value packages and, in some cases, reversing price increases.
Coca-Cola is selling soda in skinnier, cheaper bottles. Target has new offerings in its toy department for $5. Automaker Stellantis is planning two new car models that will sell for under $30,000.
Not even the venerable six-pack is safe. Boston Beer, the maker of Samuel Adams and other beverages, is now offering a four-pack of 16-ounce Twisted Tea drinks to make sure it has an offering under $10.
The new affordability efforts are aimed at consumers who have less money in their pockets, stung by rising prices at the gasoline pump and the grocery store. Consumer prices rose 3.8% in April from a year earlier, but the problem isn’t just one year’s worth of rising costs. Americans have been smarting for years over how much more expensive everything from coffee to cars has become.
Walmart Chief Financial Officer John David Rainey said last week that higher-income shoppers continue to spend with confidence, but lower-income consumers are “navigating financial distress.” In the most recent quarter, Walmart customers filled their gas tanks with an average of less than 10 gallons for the first time since 2022, he said. “That’s an indication of stress,” Rainey said.
While consumers are feeling pinched, the biggest U.S. public companies are feeling flush. With more than 90% of S&P 500 companies reporting results for the first quarter so far, year-over-year growth in earnings per share is up about 29%—the sixth quarter in a row that it has exceeded 13%, according to estimates from financial-data firm LSEG.
And that is before much of the expected windfall from tariff refunds kicks in. An estimated $166 billion in tariffs collected over the past year—plus interest—is due to flow back to the companies that paid the levies the Supreme Court struck down in February.
Walmart executives said last week that they had lowered the price tag on 7,200 items and planned to use the company’s tariff refund to fund further price cuts. The retailer pointed to a promotion where it is offering burgers, hot dogs, buns and all the other essentials for a cookout that feeds eight people for under $5 a person.
“We think the single best return that we can have on a dollar capital right now is to invest in the customer and invest in price,” said Rainey, the CFO.
On conference calls this month, several other large retailers said they were consciously allowing profit margins to shrink in order to attract and retain customers. Among them was BJ’s Wholesale Club . “The time to play offense is now,” said Chief Executive Bob Eddy.
Some of the price-cutting repackages an old playbook for retailers: When consumers feel pinched, the retailers sell products in smaller sizes. For example, Clorox, the owner of the Kingsford charcoal brand, this year began selling smaller bags of briquettes—4 pounds in addition to the usual 8 or 12 pounds—designed to be just enough for a single cookout. They retail for $6 at Walmart and Dollar General.
But this time, many companies are cutting prices across their existing offerings.
PepsiCo said in February that it would slash prices by as much as 15% on snacks such as Cheetos and Doritos after receiving a flood of emails and voicemail messages from shoppers complaining about high prices.
Kraft Heinz has reduced prices on its Oscar Mayer Deli Fresh products and Maxwell House coffee. The company reset promotions on brands like Kraft Mac & Cheese and Lunchables, launched pasta sauce, cheese and salad dressings in smaller sizes and reviewed its “price curves” on Heinz ketchup, tweaking prices on its offerings from cheapest to priciest, CEO Steve Cahillane said in an interview this month. Cuts to the U.S. food-stamp program are already affecting sales, Kraft Heinz said, contributing to its work on prices.
Typically, Cahillane said, food makers work to pass roughly half of their higher costs on to consumers through higher prices and try to make up the rest with increased productivity.
“If we can do better than that, this is the year to do it,” Cahillane said. “The consumer can only absorb so much.” Kraft Heinz said it plans to absorb about 80% of its inflation this year.
McDonald’s USA President Joe Erlinger told franchisees in an internal memo viewed by The Wall Street Journal that consumer sentiment is “expected to remain pressured.” He added that the chain needs to offer targeted deals, given the environment.
The burger chain in April started an under-$3 and a $4 breakfast meal deal at U.S. restaurants, on top of $5 food bundles it started offering in 2024.
Other fast-food and fast-casual chains are also touting new deals. Applebee’s this month started an unlimited wings, riblets, shrimp and fries deal for $15.99 for dine-in customers. And KFC just expanded a $10 chicken-bucket deal offered on Tuesdays, making the promotion available on every weekday now.
The price-cutting strategy is extending to big-ticket items, too.
Jeep maker Stellantis, which also makes Ram trucks and Chrysler minivans, is planning seven new cars “under the $40,000 range” and two new car models that will sell for less than $30,000 in coming years. It is part of a plan to grab more share in the U.S., where new-vehicle prices have reached about $50,000—a figure that has pushed roughly one million buyers out of the new-car market.
Some companies that have lowered prices say they are finding success with the strategy.
Target’s chief merchandising officer, Cara Sylvester, told investors last week that the company is experiencing “tremendous growth” in its toy department, where it has introduced offerings priced at $20 or less, including many priced at $5 and $10.
Tarang Amin , the CEO of budget makeup brand E.l.f. Beauty, said sales of its Halo Glow Skin Tint foundation cream rose 36% after it lowered the price from $18 to $14. The company will now look to cut prices on other products, he said.
Fire Department Coffee sales increased sharply last year after the company reduced the price of its bestselling ground coffee to $9.86 from around $11.96, said CEO Luke Schneider. This summer it will also drop the price of its coffee pods and bourbon-infused beans at Walmart, he said.
Though each sale becomes less profitable, the increase in sales volume is worth it. “There are times when companies raise prices just because they can, not because they have to,” said Schneider. “We are going to take the opportunity to lower our price.”
