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Consumer Brands Still Have Pricing Power Despite ‘Weak Consumer’ Talk, SuperReturn Panelists Say
Talk of a weakening consumer landscape is a misconception, and limited partners who have long avoided consumer brands are starting to come around, a panel of specialist investors said at the SuperReturn US West conference in Los Angeles on Sept. 15.
One panelist, whose firm specializes in consumer investments, said the ability to shift product prices has become central to his firm’s investment decisions, especially after shocks including Covid-19 and rising fuel costs hit consumer spending. Food is one of the surest categories to cater to premium consumers, he said, noting that shoppers are still willing to pay more for products with health benefits, but only if the premium is justified.
“If you’re charging more, I think it better be real,” he said. “Consumers are smarter than they’ve ever been.”
Another panelist, who specializes in investing in upstart food brands, said his firm deliberately avoids luxury and invests in accessible products, where shoppers pay more for functional benefits rather than status symbols.
“When I get questions on, ‘Well, the consumer is weak,’ we don’t see it in our brands,” he said. “I think there’s more pricing power than people think there is in what we do in consumer across the board.”
The same panelist explained that while many allocators still refuse to touch the consumer sector, attitudes have shifted over the past 18 months as investors look for sectors that are defensible against artificial intelligence.
“Consumer investing can be really rewarding, but you have to be a specialist. It can’t be a hobby. It’s full contact adult swim,” he said. “AI can only assist consumer brands and help them be more efficient. It can’t change the way I actually put physical food in my mouth.”
Regarding exits, both investors warned against relying on corporate buyers. “Strategics are unpredictable. Your buyers when you do the deal may look completely different when you go to exit,” the upstart food brand panelist said.
In regard to exiting portfolio companies through an IPO, he said public markets have undervalued consumer companies after a wave of direct-to-consumer listings disappointed, but he predicted that IPOs will return. “It’s just going to take a little bit more time,” he said.
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