Most consumers have cut back on spending because inflation is squeezing their wallets, but they haven’t stopped paying for brand-name health and personal care products, said Kenvue CEO Thibaut Mongon.

Mongon told CNBC on Thursday that consumers are still willing to spend on the company’s branded products — even if they cut discretionary spending at retail stores and cut back on some essential items by changing their usual purchase size or switching brands at lower prices.

the Johnson & Johnson pop-up consumer Kenvue beat second-quarter revenue and adjusted earnings estimates on Thursday, helped by resilient demand for the company’s wealth from widely recognized brands like Band-Aid, Tylenol, Listerine, Neutrogena and Aveeno.

However, the company’s share price fell after J&J announced that it would launch an exchange bid to reduce its stake in Kenvue much earlier than expected.

Kenvo also noted that “private label” penetration into the consumer health products market was stable during the quarter. Private label refers to products that are manufactured and sold under a specific retailer’s name and are sold at a lower price and are intended to compete with branded products such as Kenvue.

These spending trends could bode well not only for Kenvue, but also for other companies in the consumer health, beauty, and beverage industries that may not see consumers turning to cheaper products as often despite higher prices.

“We are now living in a volatile environment with continued consumer uncertainty and continued inflationary pressures,” Mongon told CNBC. “But I think people are very focused on their health and well-being right now.”

“They want to make sure they are doing what it takes to improve their health,” he said. “They’re looking for reliable, scientifically backed, and effective solutions to take better care of their health, and that’s what we and our brands do. It’s what we’ve been doing for a long time.”

Kenvue expects continued strong demand in the coming quarters. The company expects 2023 sales to increase between 4.5% and 5.5% over last year.

RBC Capital analyst Nick Moody expressed confidence in Kenvue’s ability to “maintain its momentum,” highlighting consumer confidence in the company’s brands, health and personal care products in general.

He noted that trade reduction pressures have increased for some companies, based on their market share changes over the past few months. Meanwhile, Kenvue has gained market share, and will likely continue to do so despite the broader environment.

“If we were going to see a decline in trade with them, we would have started to see it already,” Modi said.

Like Kenvue, some beauty and beverage companies may not see the same kind of trade declines as some core consumer sectors during the current period of macroeconomic uncertainty, according to Modi.

He said beauty products such as makeup are increasingly seen as an “affordable luxury” even as inflation squeezes consumers’ budgets.

“They don’t want to feel bad about their situation and buy cheaper makeup,” Modi said.

companies like Hollandwhich sells cosmetics, skin and hair care, and other beauty products, has benefited from the flexibility of the beauty category.

Earlier this year, Ulta said its 2022 revenue exceeded $10 billion, while annual net income exceeded $1 billion — both company records. Ulta also reported first-quarter earnings that beat expectations in May, largely driven by demand for its beauty products.

Oddity Tech, a beauty and wellness company that uses artificial intelligence to develop cosmetics, also appeared to be harnessing the power of the beauty category when it made its public market debut on Wednesday. Shares of the direct consumer platform rose 35%.

Beverage companies are also well positioned, Modi said, noting that big brand names such as Coca-Cola are not at great risk of private label penetration.

Coca-Cola’s first-quarter earnings beat expectations for higher demand for its beverages. But price increases for its products, which were implemented to mitigate the impact of inflation, also helped support results.

Monjon said consumers are turning to brands and products they “know and trust” during tough economic times.

The behavior — and a growing focus on health and well-being — is fueling demand for Kenvue products, which have been “in homes for years, decades, sometimes generations,” he said.

Modi agreed, adding that the Covid-19 pandemic has greatly increased consumers’ attachment to brands, especially those that help people take care of their health.

For example, demand for Tylenol soared and outpaced other pain relievers during the pandemic as people scrambled to stock up on essential health products.

“During the time frame of Covid, you were looking to save your family or get your kids through a difficult period of time with certain medicines and products, and I think that kind of emotional connection and sharing helped sustain the brand,” Modi told CNBC.

“Consumers tend to trust these brands during the most traumatic moments in their lives, so I think that’s why we’re seeing brands like Kinview remain so resilient despite the overall pressure,” he said.

The pandemic has made consumers more able to “take their health into their own hands at home,” added Navan Tai, an analyst at BNP Paribas Ixan.

This shift is likely to benefit Kenvue and others in the consumer health field, she said, and is “an additional differentiation from other consumer categories.”

I’ve noted that Kenvue isn’t “totally immune” from decline and private-label competition. But she said product recommendations by healthcare professionals offer “some protection”.

Third-party surveys of some healthcare practitioners in the United States from 2020 to 2022 found that Tylenol was the top adult pain medication recommended by physicians nationwide, according to an April Kenvue IPO filing.

Those surveys also found that neutrogena was the leading sunscreen and acne treatment brand in the united states, while listerine was the top dentist-recommended mouthwash.

Mongon noted during the company’s earnings call that these recommendations “ultimately foster a lifetime of loyalty to our brands, loyalty that is passed down from generation to generation.”