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

Procter & Gamble Co. Tide brand laundry detergent sits on display in a supermarket in Princeton, Illinois, U.S., on Wednesday, Oct. 23, 2013. Procter & Gamble Co., the worlds largest consumer-products maker, said fiscal first-quarter profit rose 7.6 percent as sales of home-care goods and baby products gained. Photographer: Daniel Acker/Bloomberg via Getty Images
Photograph by Daniel Acker — Bloomberg/Getty

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.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.