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The New Economy
Winter Is Already Here for Big Brands

The old economy keeps withering away. The WSJ reports that sales of packaged consumer goods like razor blades, soap, and cereal are down:

Many segments are affected by changing preferences, habits and spending priorities. People are eating less cereal and drinking less soda. Razorblade sales are down as many men shave less or grow beards. Pre-measured laundry soap capsules and higher-efficiency machines require less detergent. And more people are choosing freshly prepared food over packaged fare […]

Americans now devote about 10.8% of their personal expenditures to packaged consumer goods, down from 11.2% in 2000 and 13.7% in 1990, according to Ali Dibadj of Bernstein Research who examined data from the U.S. Bureau of Economic Analysis.

Packaged consumer goods used to be a mainstay of the American economy, with consumers buying heavily advertised, horribly overpriced ‘brand name’ goods like heavily processed breakfast cereals, detergents and soda. Nothing was more reliable than the growth of the companies that produced these goods, and huge amounts of time and talent went into advertising them on mass market TV.

This was all part of the Blue Model system: a small number of big brand companies selling to a national mass mass market with big markups. Americans had jobs for life in the factories where these goods were produced and packaged. This was the industrial society that gave us the world’s first mass middle class.

That old model is slowly falling to pieces. Factories have moved to Mexico and China. Fewer people watch the mass market entertainments where Madison Avenue advertising can reach a whole nation of consumers night after night. Cost-conscious consumers are less hypnotized by advertising images into paying the markup on the big brands. The large and relatively homogenous middle class of late industrial society is breaking up and differentiating. Consumers are more interested in spending their money on information-based products (cell phone services, internet) while bottleneck service industries like health care and education suck up more and more of the country’s purchasing power. These industries are called “bottlenecks” because their prices keep rising faster than inflation even as our dependence on these services grows.

In short, the American public is more individualistic, value-conscious, in many cases cash-strapped, less susceptible to the charms of traditional advertising, and has moved on from the Ozzie and Harriet world of 1950s conformist consumption. Because of all this, low growth and shrinking margins in many consumer product categories may be here to stay as late Fordist America continues to recede in the rearview mirror. The big brands of the blue era and the companies behind those brands are facing some tough times ahead.

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  • Anthony

    Human life is less an affair of institutions and systems than of people and their motivations and consciousness. Perhaps Fordist transitions have changed interplay between consumers and producers; time will tell

  • Corlyss

    “less susceptible to the charms of traditional advertising”

    I think if the assumptions behind this assertion were examined in the literature on the subject of advertising effectiveness, it would be found to be false and misleading. Vance Packard aside, people can’t be compelled by clever advertising to buy things they don’t need or want. Experience has always trumped advertising.

  • TalkTalkTalkType

    Does every snippet of fact from a newsfeed have to be remanufactured into a factoid proving the failure of the “Blue Model/Fordist America”? So if hipsters suddenly decide Gillette is cool and shave every day, is that the triumph of the Blue/Fordist/Smooth/Hairless/Metrosexual model? A statistic is not a revelation, or even a trend.

  • Anthony

    Observation that is neither Blue model/Fordist but perhaps sui generis and related to topic: “In the selection and purchase of goods and services, the disorganized public is led in some cases by necessity, in others by the quest for convenience and comfort and, at times, by the attraction of dispensable diversion and luxury. Beyond these ends it may, too, as advertisers well realize, be led by the prospect of purely imaginary and illusory advantages, as that women will become intensely amorous at the sight of men who use certain…”

  • mgoodfel

    I think the country is also getting older, and the ethnic mix is changing. That changes the mix of products we buy.

  • Curious Mayhem

    This aspect of the Blue Model has been declining since the 2001 recession. It’s changing demographics and an overindebted consumer looking for value.

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