Over the past few years, the consumer story has often been described

as K-shaped, with higher income households holding up much better than

lower income households. That dynamic is still present, but it's no longer

the full story. What we're seeing now is a shift in both who is

driving growth and how that growth is showing up in the market.

Growth is becoming increasingly concentrated among higher income consumers.

At the same time, value-oriented behavior is spreading across

all segments. So the key question isn't just how strong the consumer

is overall, but who is driving growth and how those

consumers are choosing to spend. It starts with income, because that's

really the foundation of consumer demand.

Wage growth has been a major tailwind for consumers over the past few

years, particularly when the labor market was tight.

But that momentum is clearly slowing across much of the income distribution.

More importantly, when you look at real income, the picture is increasingly

uneven. Real income growth is now concentrated among higher income

consumers, while lower income households are facing

contraction and middle income outcomes are more mixed.

As a result, the broad-based support for consumption we saw earlier in the

cycle is narrowing noticeably. At the same time,

inflation has not played out evenly across consumers.

Lower income households continue to face higher effective inflation,

largely because more of their spending is concentrated in essentials like

shelter and utilities, which have seen larger price

increases than many discretionary categories.

That means the benefits of moderating inflation since

mid-2022 have been uneven, and real purchasing

power remains under pressure for many households.

So even as the macro environment has been more stable, the consumer

experience is still quite uneven beneath the surface.

The unevenness we're seeing in income and price pressure is already showing up

clearly in the spending data.

Retail spending remains strongest among higher income households,

while lower income growth continues to lag and middle income consumers

are showing signs of slowing.

So growth isn't disappearing, but it's becoming more concentrated

among a narrower set of consumers.

And that concentration matters because it means fewer

consumers are driving a larger share of growth.

This is less about broad-based slowdown and more about a

redistribution of demand. But this is where the story changes,

because it's not just about who is spending, but also how they're

spending. Value-seeking behavior is increasing across all

income groups, including higher income households.

Importantly, this doesn't contradict the idea that higher income

consumers are still driving growth.

They're still spending, but they're becoming more deliberate, more

selective, and more focused on value.

In many cases, this reflects a normalization after a period of

elevated spending, as well as lasting changes in how

consumers think about price and value following the 2022

inflation shock, and the more recent risk to increased

prices from elevated energy costs.

So what we're seeing is a combination of financial

divergence and behavioral convergence.

Consumers look very different financially, but increasingly similar

in how they evaluate purchases,

and that has meaningful implications for pricing, promotion, and

positioning. So stepping back, what does all of

this actually mean for your business?

First, growth is concentrated, not disappearing.

Demand is increasingly driven by higher income consumers while middle

and lower segments soften.

Second, price sensitivity is rising across all segments.

Even higher income households are becoming more deliberate and

value-oriented. Third, traditional segmentation

is somewhat breaking down.

Behavior is no longer well explained by income alone.

And finally,

winning requires precision, not broad exposure.

Sharper targeting across pricing, assortment, and messaging

will separate winners. The bottom line is that the opportunity is

still there, but it's becoming more concentrated and more

selective,

and that makes how you engage the consumer more important than ever.