Household goods and packaged food makers are easing U.S. price increases to avoid losing American shoppers to retailers' less expensive private-label brands as a global trade war tests the limits of their pricing power at grocery stores.

U.S. President Donald Trump has imposed broad tariffs on several countries around the world in recent months, sparking worries that the U.S. economy will be pushed into recession, with commodities and basic utilities becoming more expensive.

Trump met with major retailers, including Walmart and Target on Monday to discuss the tariffs' impact on their imports.

"Some political decisions, economic decisions taken have rather undermined already soft consumer confidence," Nestle CEO Laurent Freixe told journalists Thursday during an earnings call. Nestle, the world's biggest packaged food company and maker of Nescafe and Kit-Kat, cut prices in the United States, its biggest market, by 1%.

"When it comes to pricing, we have to take into account the customers, the consumers, competitors' moves," Freixe said. "We are trying to take as much price as we can to cover our costs while being mindful of the consumer response."

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Dove soap maker Unilever, which also reported earnings on Thursday, noted "declining consumer sentiment" in North America, where it raised prices by only 2.1%.

Nestle, Unilever and other makers of household products and packaged food need to show caution with price hikes to avoid alienating American shoppers who are worried about having less money to spend on groceries, industry consultants and investors said.

In grocery stores, these companies compete head-to-head with retailers' private-label products, which are generally lower priced.

PRIVATE-LABEL SALES SOAR

"Consumer confidence is down. We can see consumption patterns are changing, and it will remain competitive," Kris Licht, CEO of Reckitt, said on an earnings call Wednesday. He added that, in that context, the maker of Durex condoms in the first quarter raised prices by just 0.9% in North America compared to 3% in Europe and 3.9% in emerging markets.

During the COVID-19 pandemic, consumer goods firms lost market share to store brands made by retailers like Walmart and Target.

Rob Holston, EY's global and America's consumer products sector leader, said consumer companies selling major brands of everyday products had raised prices as much as they can in recent years.

"There's a large percentage of people that will just move into private label" options, Holston said, adding that his consumer goods clients have said they're on "war-footing" with private label brands now.

Data pulled for Reuters by research firm Nielsen IQ showed that as recently as in the first quarter, makers of major household goods brands on average kept price increases roughly flat at 2% when compared with faster price hikes of about 4% from private label brands for the same basket of goods that included categories from coffee and soap to baby food and tampons.

Private-label goods are still cheaper on average by at least roughly $1, according to the NielsenIQ data. The U.S. Consumer Price Index increased 2.4% in March on a year-on-year basis, above the 2% rate at which big brands were recently raising prices, according to the NielsenIQ data.

McKinsey partner Patricio Ibáñez said shoppers are bracing for costs to rise because of tariffs, and a survey led by the consulting firm showed 60% of people plan to shift their consumption habits by buying things that are cheaper or by switching to wholesale clubs or going to online retailers.

"We wouldn't recommend price increases," Ibáñez said. "Private brands are growing four times faster than national (big) brands in the U.S."

'HIDING PLACES'

This trend is worrying for investors in major consumer goods companies like Nestle, even though most of the firms insist their operations aren't significantly exposed to tariffs.

"It's very difficult to find hiding places for investors," said Tom Lemaigre, a portfolio manager on the European equities team at investor Janus Henderson. Lemaigre said shoppers are thinking carefully about how they spend their money and that consumer goods companies need to figure out how to combat competition from private label brands.

On Walmart.com, shoppers can buy a 100-fluid-ounce bottle of Unilever's Persil liquid laundry detergent for $12.97. For $11.64, however, shoppers can buy a 154-fluid-ounce bottle of Walmart's Great Value detergent which promises 154 loads of laundry.

Walmart and Target did not immediately respond to requests for comment.

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"The number of retailers that have developed the capabilities of the multinational consumer companies has increased quite significantly," Aftab Hussain, a managing director and senior partner in BCG's consumer and retail team, said. "You're seeing innovations come through from retailers on private brand that's actually ahead of the (bigger) brands."

Nestle has lost U.S. market share in stores for at least the past 18 quarters, according to Nielsen data analyzed by Barclays.

The company said on Thursday when it reported quarterly results that it had "market share challenges" in the frozen food and creamer categories. Unilever's U.S. business, which sells Ben & Jerry's ice cream, has lost market share in all but two of at least the past 18 quarters, by comparison, the data shows.