Procter & Gamble's Tide laundry detergent Photograph by Daniel Acker — Bloomberg/Getty

What’s Really Behind the P&G-Walmart Tensions

Jun 15, 2016

When a business is in growth mode, people like to talk about collaboration. When it's in trouble, some of that teamwork begins to disappear.

That's what's going on between P&G and Walmart, it seems, based in part on this insightful story in The Wall Street Journal this morning. The story goes into the various tensions between the two giant consumer-facing companies, both of which have faced declining sales of late. (For a deep dive into P&G's woes, please read "Can P&G Find its Aim Again?")

Two things are going on here: one secular, and the other specific to the industry. First, rising income inequality means that companies like Walmart and P&G, which both cater to middle-income consumers, are getting squeezed. Declining purchasing power means that middle-to-premium brands must truly distinguish themselves if they want the masses to buy them, because such customers may have to sacrifice something else in order to make those purchases. Also, younger shoppers are prioritizing experiences over things, which hurts companies that sell consumer products.

But it is really the lack of newness from both companies—whether that be store formats, truly life-changing products, or tremendous value—that is causing the former BFFs to begin backbiting. In an era where Amazon (amzn) is taking market share away from both companies, without something exclusive and great, or at the very least an enjoyable in-store experience, consumers will continue to reject big brands. And without true innovation, we'll likely see more former partners turn against each other.

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions