By Sharon Terlep, Jennifer Maloney and Annie Gasparro 

The biggest sellers of consumer products from soda to diapers are sounding a cautious note on shopper spending amid broader retail woes.

Executives from Procter & Gamble Co., PepsiCo Inc. and Nestlé SA said slowed spending in the U.S. cut into results in the most recent period, though they don't all agree on the reasons. Several said they expect business to pick up later in the year.

Some blamed the weak start of the year on higher gas prices, bad weather and other external factors, while other executives pointed to shifting consumer tastes. Analysts say some big brands, such as Gillette and Yoplait, are losing ground to upstarts. Overall purchases of consumer packaged goods in the U.S. declined 2.5% in unit terms in the first quarter, according to Nielsen.

"There is probably more sources of volatility today that at any other time in history," P&G Chief Financial Officer Jon Moeller said Wednesday in a call with reporters.

The most recent period was P&G's weakest of the fiscal year as organic sales -- a closely watched metric that strips out currency moves, acquisitions and divestments -- increased just 1%.

Mr. Moeller said consumers are cutting back purchases, aggressively seeking deals and drawing down supplies at home. At the same time, he said, a growing affinity for beards has played a big part in driving down razor sales, which contributed to a 6% organic sales decline for P&G's grooming unit.

Although pricing increases helped PepsiCo post growth in its beverage and snacks businesses in its latest quarter, sales declined in its Quaker Foods North America unit, which sells grocery staples such as Rice-A-Roni, Aunt Jemima and its namesake oatmeal.

PepsiCo, like big food rivals Kraft Heinz Co. and Nestlé, is struggling as consumers shift away from diet sodas and processed foods to fresher and healthier options. It has launched new products, such as a premium bottled water brand, to adjust to the shift.

"Our next challenge is how do we leverage our relationships with retailers to reinvent the center of the store?" said CEO Indra Nooyi on a conference call Wednesday. "And we need to do that in order to bring interest back to that whole cereal aisle and therefore, Quaker."

For food and nonfood staples, big brands are struggling more than the overall industry. The 20 largest consumer packaged goods companies last year had flat sales while smaller ones posted sales growth of 2.4%, according to Nielsen.

Wal-Mart Stores Inc., meantime, has been reducing inventories and slashing prices as it fights to compete with Amazon.com Inc. and European discounters moving into the U.S. Those cuts are eating into its own profit and, in turn, leading the world's biggest retailer to put pressure on its vendors.

Kimberly-Clark Corp. this week reported its first quarterly organic sales decline in 13 years driven largely by falling demand in North America. The maker of Kleenex tissues and Huggies diapers lowered its forecast for the year but said it expects better performance as the year progresses.

Nestlé Chief Executive Mark Schneider said weak U.S. demand isn't an issue isolated to Nestlé and that it reflects a breakdown in the usual relationship between economic growth and consumer spending. At the same time, he said, intense competition is making it harder to push through price increases.

"In spite of good economic data we are seeing a large amount of uncertainty" in the U.S., Mr. Schneider said last week on an investor call. "When that uncertainty subsides it will be good news."

While growth is stronger outside the U.S. for many companies, foreign markets also are rife with volatility. P&G said everything from the Brexit in Europe to political uncertainty in developing markets has made for bumpy times in overseas operations.

The dynamics are driving tough choices for companies as they are forced to decide between reducing prices and ceding market share. PepsiCo and Coca-Cola Co. have been shrinking packages and raising prices. P&G has been lowering prices in some of its biggest categories such as diapers and razors, forcing down prices of rivals as well.

"Don't ask me who started it," Kimberly-Clark Chief Executive Thomas Falk said of price wars in consumer products. "Everybody thinks it's the other guy."

--Brian Blackstone contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com, Jennifer Maloney at jennifer.maloney@wsj.com and Annie Gasparro at annie.gasparro@wsj.com

 

(END) Dow Jones Newswires

April 26, 2017 12:26 ET (16:26 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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