As inflationary pressure grows in the wake of the Iran war and U.S. consumers shut their wallets, major U.S. corporations are rolling out low-priced products one after another. They are expanding lines with lower prices, from groceries to big-ticket items like cars.
U.S. restaurant chain Applebee's began a promotion on the 11th (local time) offering unlimited chicken wings, riblets, shrimp and french fries for $15.99 to dine-in customers. Fast-food chain KFC also expanded its $10 chicken bucket deal, previously available only on Tuesdays, to all weekdays.
Coca-Cola earlier introduced carbonated drinks in slimmer, cheaper bottles, and Boston Beer, which produces the beer "Samuel Adams," launched a 4-can pack of 16-ounce Twisted Tea to build out a lineup under $10.
Big retailers are joining the trend. Target unveiled a new $5 toy line, and Walmart recently cut prices on 7,200 items. Walmart is also running a promotion that, by using tariff refunds as funding for additional price cuts, lets shoppers buy barbecue fixings—hamburgers, hot dogs and buns to feed eight people—for under $5 per person.
In food and beverage, companies are either absorbing the added expense themselves or shrinking package sizes to reduce price burdens and keep consumers. According to the Wall Street Journal (WSJ), PepsiCo said in February it would cut prices on snacks such as Cheetos and Doritos by up to 15% after consumers complained prices were too high.
WSJ said, "Some of the price cuts are a reuse of strategies retailers have long employed," noting, "When consumers feel economic strain, corporations have used tactics such as reducing product sizes while selling them."
Corporations are rushing to release low-priced products because high oil prices and inflation have weakened consumers' purchasing power. The U.S. consumer price index (CPI) rose 3.8% in April from a year earlier. With prices for almost everything from coffee to cars soaring in recent years, inflationary pressure has intensified due to the aftereffects of the Iran war, further dampening consumer sentiment.
John David Rainey, Walmart chief financial officer (CFO), said, "The best way to generate the highest return per $1 of capital right now is to invest in customers and price." He said the average fuel volume per fill-up by Walmart customers in the most recent quarter fell below 10 gallons for the first time since 2022, adding, "This is a sign consumers are under financial pressure."
The price-cut strategy is spreading to big-ticket items like cars. Stellantis, which owns the Jeep brand, plans to launch seven new models priced under $40,000 and two models under $30,000 over the next few years. With the average new-car price soaring to about $50,000 and roughly 1 million consumers exiting the new-car market, the company aims to expand its share in the U.S. market.
Corporations believe they can offset somewhat lower profitability per sale with higher volumes. In fact, some corporations are already seeing tangible benefits from price cuts.
Target chief merchandising officer (CMO) Cara Sylvester told investors last week that the toy segment, which added more items under $20—especially $5 and $10 products—"is seeing tremendous growth." e.l.f. Beauty CEO Tarang Amin also said that after lowering the price of the "Halo Glow Skin Tint" from $18 to $14, sales rose 36%.
Luke Schneider, CEO of coffee brand Fire Department Coffee, said, "Some corporations raise prices because of expense pressures, but sometimes they increase prices simply because they can," adding, "We will take this opportunity to lower prices."