As Shoppers Trade Down, These 5 Brands Still Have Pricing Power

A McKinsey report says 79% of consumers are trading down, while the article highlights Costco, Coca-Cola, On Holding, Starbucks and Procter & Gamble as businesses sustaining premium pricing. Reported results include On revenue growth of 21.6% and gross margin expansion to 65.4%, Starbucks comparable-sales growth of 7.9% and EPS growth of 86%, and Coca-Cola EPS growth of 30%. The article presents pricing power and brand loyalty as long-term strengths; Coca-Cola and P&G have raised dividends for 64 and 70 years, respectively.

Analysis

The key distinction is durable willingness to pay versus temporary price/mix support. With consumers trading down, reported sales growth alone is weak evidence of pricing power: watch unit volumes, transaction counts, and gross margin together. KO and PG have portfolio and pack-size levers, but persistent price-led growth alongside weak volumes would raise the risk of private-label substitution and delayed volume losses. COST’s membership model is comparatively defensive; its value proposition may capture trade-down even while limiting merchandise price increases. SBUX’s improving traffic and ticket are encouraging, but the turnaround is exposed to labor and operating costs, and premium positioning can be tested quickly if visits fade. ONON has the greatest brand-concentration and fashion-cycle risk: high margins and celebrity marketing do not establish that premium demand will persist through a consumer slowdown.

Near term, price action may reward the broad “pricing power” label; over 1–3 months, results should separate volume-led recovery from price/mix. Over 6–18 months, trade-down persistence could favor value formats and pressure premium discretionary brands. The contrarian risk is that the market extrapolates recent reported growth without discounting elasticity or valuation; the article provides no valuation or relative-consensus data, so avoid assuming these names are mispriced. Reassess on sequential volume/traffic deterioration, margin guidance, or evidence of heavier promotions.

Key Decisions for Investors

• Prefer COST as the defensive expression of consumer trade-down, but initiate only on relative weakness versus consumer-discretionary peers; thesis weakens if membership renewal/sign-up trends soften or comparable sales rely increasingly on higher ticket rather than traffic/units.
• Treat KO and PG as monitor/hold candidates rather than automatic inflation hedges. Verify organic volume and category-level pricing/mix in upcoming results; sustained volume declines or renewed discounting would challenge the pricing-power case.
• Do not chase ONON solely on margin expansion or brand endorsements. Wait for evidence that full-price sell-through and demand broaden beyond premium consumers; markdowns or margin guidance deterioration would be a thesis-falsifying signal.
• For SBUX, keep the turnaround conditional: track transaction growth and operating margin together over the next 1–3 reports. Traffic reversal or cost pressure that prevents profit conversion would argue against adding exposure; no short is warranted from this evidence alone.