The six-week extravaganza that was earnings season is pretty much done and dusted. But Costco’s results today leave us with some deep thoughts about how chocolate chip cookie consumption explains the current state of American household spending.
The club store giant beat on the top and the bottom lines, saying that the slowdown in inflation has left its clientele willing to open their wallets a bit wider.
“Our members are returning to purchasing more discretionary items and growth in the category was led by toys, tires, lawn & garden and health and beauty aids,” said Gary Millerchip, the company’s CFO.
The appropriately named Millerchip added this aside: “Within our ancillary businesses, the food court had the strongest quarterly sales with continued success of the Chocolate Chip Cookie that was added to the food court this year.”
This wasn’t the first time chocolate chip cookies were name-checked in quarterly conference calls recently.
Weeks ago snack food giant Mondelez acknowledged lackluster sales of its Chips Ahoy brand, noting that the cookies — sales of which tend to skew toward lower income households — seemed to have hit the limit of price increases these folks were willing to swallow.
“People are much more conscious about price points. The frequency is coming down, particularly with the lower-income consumers. And particularly, the brands that are important for them, like Chips Ahoy!, can see that they're losing some market share to private label,” said Dirk Van de Put, CEO of Mondelez.
What does this tale of two cookies tell us? Well, for one thing it suggests that more affluent Americans — Costco members are relatively well off — are doing pretty dang well. Well enough to splurge slightly. The 750-calorie Costco cookie costs $2.49.
At the same time, companies whose traditional customers are not as well off are going to have to face reality. They raised prices too high, and they have to adjust. And they seem to be, at least according to Mondelez’ CFO Luca Zaramella.
“I think we are moving a little bit the price point of Chips Ahoy! and that would allow us to recuperate share and volume. And Chips Ahoy! is the number one driver of the volume declines that you see in the North American segment,” he said. “Then we will have to see how elasticity plays.”
As we’ve mentioned before, average American consumers seem to have hit a wall with prices, especially when it comes to food. Corporate America seems to be taking note and adjusting. Which all seems sort of healthy...unlike chocolate chip cookies.
