P&G and the hourglass economy

When trying to find out the real truth on matters it is often helpful to see how people actually invest and spend money.  Of course as our recent financial and real estate bubbles indicate, they are not perfect barometers.  But talk is talk, and the phrase "put your money where your mouth is" is one generally well understood.

In this case we are looking at the behaviour of large United States companies catering to our consumer economy. 

As Middle Class Shrinks, Procter & Gamble Aims High and Low

Ellen Byron, Wall Street Journal, 12 September 2011

For generations, Procter & Gamble Co.'s (P&G) growth strategy was focused on developing household staples for the vast American middle class.

Now, P&G executives say many of its former middle-market shoppers are trading down to lower-priced goods—widening the pools of have and have-not consumers at the expense of the middle.

That's forced P&G, which estimates it has at least one product in 98% of American households, to fundamentally change the way it develops and sells its goods. For the first time in 38 years, for example, the company launched a new dish soap in the U.S. at a bargain price.

P&G's roll out of Gain dish soap says a lot about the health of the American middle class: The world's largest maker of consumer products is now betting that the squeeze on middle America will be long lasting.

In the wake of the worst recession in 50 years, there's little doubt that the American middle class—the 40% of households with annual incomes between $50,000 and $140,000 a year—is in distress. Even before the recession, incomes of American middle-class families weren't keeping up with inflation, especially with the rising costs of what are considered the essential ingredients of middle-class life—college education, health care and housing. In 2009, the income of the median family, the one smack in the middle of the middle, was lower, adjusted for inflation, than in 1998, the Census Bureau says.

The article goes on to note other companies making the change:  H.J. Heinz Company catering more to the lower end, Saks Inc going even more upscale.

It ends on this sobering note:

"This has been the most humbling aspect of our jobs," says Ms. Jackson. "The numbers of Middle America have been shrinking because people have been getting hurt so badly economically that they've been falling into lower income."