The Hourglass Society
by digby
When business bets on the middle class disappearing, the people should wake up:
This week brought a different kind of evidence that brings home (literally and figuratively) the trend of America becoming a two-class society. Among other companies, Procter & Gamble is adopting an “hourglass” marketing strategy, with products aimed at high- and low-end consumers, but not much in the middle.
In a marked shift from P&G’s historic focus on middle-class households, “the world’s largest maker of consumer products is now betting that the squeeze on middle America will be long lasting,” The WSJ reports.This is no small matter or a minor change by a second-tier firm: P&G has at least one product in 98% of U.S. households, The WSJ reports. U.S. sales totaled about $30.5 billion in its latest fiscal year, about 37% of its total, while accounting for 60% of the firm’s $11.8 billion profits.
The company is engaging in what The WSJ calls a “fundamental change” in how it markets products in the U.S. “We’re going to do this both by tiering up in terms of value as well as tiering down our portfolio down,” CEO Robert McDonald says.
As noted above, P&G isn’t the only company coming to the same conclusion: Heinz is following a similar strategy to P&G while Saks is focusing its attention more on high-end consumer vs. ‘aspirational’ shoppers.Meanwhile, Citigroup has created an index of 25 stocks designed to profit on this hourglass theme, including Estee Lauder and Saks as the top and Family Dollar Stores and its ilk at the bottom. The strategy has returned 56.5% since its inception in December 2009 vs. 11% for the Dow, another statistic reflecting the hollowing out of America’s middle class.
I suppose there will always be a lot of Americans who assume they’ll be among that 1%. (And many of them would rather be dirt poor than see someone he doesn’t like get a government benefit) But this is a disaster for them — and us — whether they know it or not.
By the way, austerity is designed to escalate this process. Why wait?
h/t to Jay Ackroyd