The Goods (U.S. Edition) – Too Hyped to Handle
Welcome back to The Goods! This week we’re discussing the potential impact of the MAHA movement on food prices, Amazon’s $1 billion refund, and why word-of-mouth reviews can backfire on brands.
Aldi’s newest marketing ploy is an experience for the senses and the sensible shopper. The German discount grocery chain is releasing a special “Burning Cash Candle,” which smells “like shopping for groceries anywhere but Aldi.” The scented green candle is blended “with notes of buyer’s remorse, inconsistent prices, and regret.” Customers can now sign up to receive two free candles while supplies last.
CYBER ALERT FOR RETAILERS 🚨
Hackers are always looking for a discounted defense, so make sure your cybersecurity isn’t on clearance. As threat actor group Scattered Spider is shifting its focus stateside, security firms have issued warnings to U.S. retailers to ramp up protections in anticipation of a wave of cyber attacks. Preparedness ensures an effective and swift response when dealing with a cybersecurity incident. Read more about the importance of preparedness from FTI’s Cybersecurity and Data Privacy Communications team.
What’s In: This Week’s Trends
- Recipe for Excess: The U.S. currently has one of the lowest food spending rates globally, with Americans spending less than 7% of their income on groceries – but that soon could change with the Make America Healthy Again (MAHA) movement. MAHA aims to eliminate ultra-processed seed oils, synthetic dyes, and other ingredients from the U.S. food supply, pushing many companies towards new formulations to meet standards. As brands adjust recipes, they will likely need to adjust prices as well. Organic foods are 41% more expensive on average, and removing seed oils could increase alternative oil prices by 29%.
- Freight Expectations: After a temporary tariff cut lowered rates from 145% to 30% for three months, S. retailers are scrambling to import Chinese-made goods for the summer shopping season. Container bookings from China had fallen nearly 50% in late April due to the original tariffs, but surged again after the pause, leading to concerns of rising freight costs, port delays, and congestion. Major retailers like Walmart, Target, and Costco had already front-loaded orders at the start of the year, but businesses may now struggle to meet both summer and back-to-school demand within the limited 90-day window.
- You Live and You Return: Amazon is issuing refunds to customers who returned products but never got their funds back, with some dating back to 2018. On its May 1 earnings call, the retail giant reported a one-time charge of $1.1 billion, partly attributable to “some historical customer returns.” One customer on social media claimed to have received almost $1,800 this week for a TV they returned in 2018. Amazon is currently facing a potential class action lawsuit alleging it failed to issue refunds to customers, or reversed refunds that had been issued.
Cash or Card: Consumer Behavior
What’s going on with the consumer these days? This week we discuss the jewelry habits of the ultra-wealthy, the problem with word-of-mouth reviews, and swelling consumer debt.
- Stick or Carat? As broader luxury buyers pull back, the ultra-wealthy are adorning themselves with the finest jewelry money can buy. Richemont’s jewelry division – home to Cartier and Van Cleef & Arpels – grew 8% over 2024, making it the group’s top-performing segment. But only the best will do for these shoppers, as wealthy consumers are increasingly selective in which bling brands they invest in. Richemont’s results were an outlier this earnings season, as major luxury names from LVHM to Kering and Burberry reported a slowdown in sales in the quarter.
- Too Hyped to Handle: Positive word-of-mouth may boost sales, but it can backfire once the product is in consumers’ hands. Researchers from the University of Alberta and University of St. Thomas found that the more praise people hear about a new product, the more anxious they become about using it “correctly” – leading to cautious behavior, lower satisfaction, and even negative reviews. The pressure to match others’ glowing experiences can ironically ruin their own, especially when they hold back from fully exploring what a product can do.
- Buy Now, Pay Never: Households owe a record $18.2 trillion in various forms of debt, and buy now pay later (BNPL) services like Klarna are feeling the crunch. The company’s net losses doubled in the first quarter even as its user base and revenue grew, with consumer credit losses increasing to 17%. Industrywide, BNPL borrowers are increasingly falling behind on their payments. In a survey conducted by LendingTree last month, 41% of users said they paid late within the last year. A few weeks ago, Klarna paused its plans to go public, citing tariffs and economic uncertainty.
Making Moves: Industry Transformations & Innovation
ICYMI, even industry icons need to reinvigorate their brand presence through unique and creative ways. Here are some new brand moves that you should know about:
- Don’t Steep on This: Coca-Cola is spilling the tea….into Sprite. The beverage company just dropped Sprite + Tea, a limited-time mashup inspired by a viral TikTok trend that mixes the lemon-lime soda with tea bags. Originally dreamed up as an intern project, the drink is available in regular and zero sugar versions through October. It’s the latest in Coke’s flavor experimentation era – joining wild launches like Orange Cream and Dream-flavored Coke – as the brand leans on TikTok to stay fizzy with Gen Z.
- Shipt Happens: Target’s $99-a-year Circle 360 membership just got a major upgrade. Members can now get unlimited same-day delivery from over 100 retailers and grocers across Shipt’s network with no price markups. The expansion positions the Circle 360 as a “digital shopping center,” giving users access to stores like CVS, Lowe’s, Petco, and more, and underscores Target’s broader strategy to hit $15 billion in growth by 2030. This week, the retailer cut its full-year sales outlook due to weaker discretionary spending, uncertainty about tariffs, and consumer backlash to its rollback of key DEI initiatives.
Capital Markets Corner
ICYMI, even industry icons need to reinvigorate their brand presence through unique and creative ways. Our investor relations experts break down this week’s trends and headlines.
- Wiener Takes All: Kraft Heinz has been evaluating potential strategic transactions, according to a press release issued Tuesday. While Kraft did not disclose a timeline, the iconic condiment maker said that the goal of any deal would be to unlock shareholder value. Last October, Reuters reported that meat brand Oscar Meyer was attracting interest from buyers for a deal valued at $3 billion. News of potential M&A comes just weeks after Kraft slashed full-year guidance for organic sales and profit, citing weak consumer sentiment amidst a “volatile” macro environment.
Tariffs, Ands or Buts
On Monday, the U.S. and China agreed to a 90 day reduction in tariffs, easing trade tensions with a temporary truce. China reduced its tariffs on American goods from 125% to 10%, while the U.S. dropped its rate from 145% to 30%. Retailers are hopeful the pause will help restock shelves in time to avoid a “Christmas disaster,” as the holidays accounted for over one-fifth of annual retail sales last year.
At FTI Consulting, we help clients think comprehensively about the problems they face, understand their exposure, assess and mitigate risks, and manage change needed. Learn more about our Tariff Mitigation Advisory solutions here. Have questions about tariffs? Reach out to our experts Cory Fritz, Jackson Dunn, Ana Heeren, John Whitcomb, and Nick Baker.
For more information about FTI Strategic Communications Retail & Consumer Products sector service offerings and expertise, please contact [email protected]
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