Retailers everywhere are locked in a battle for consumer dollars, and the fight may be most heated in the consumer staples sector as shoppers go generic. As brand names fight back, exchange traded funds (ETFs) can win.

The multibillion dollar consumer staples companies are slowly bringing back their customers, but the ways in which they lured them differ. How did they get consumers to pay a little more to get Colgate toothpaste, Kellogg’s Frosted Flakes and Gillette Fusion shavers, rather than the store-brands that were preferred a few months ago? (The allure of generic).

Dan Sewell and Sarak Skidmore for the Associated Press report that name-brand products have been battling to keep shoppers from trading down to store brands to save money.

  • Procter & Gamble (NYSE: PG) cut prices and rolled out cheaper versions of some products.
  • Colgate-Palmolive (NYSE: CL) took advantage of lower advertising rates to deliver the message that its products give more bank for their buck.
  • Kellogg (NYSE: K) also put money toward marketing. (Brand names fight back).

Consumer spending is perhaps the single strongest driver of the economy, accounting for about 70% of the economy by federal measures. The sector remains weak and continued struggles in the job market could undermine a full recovery.

For more stories about consumer staples, visit our consumer staples category.

  • Vanguard Consumer Staples (NYSEArca: VDC): up 11.9% year-to-date; Procter & Gamble 13.4%; Colgate Palmolive Co. 3.4%; Kellogg 1.2%

  • Consumer Staples Sector SPDR (NYSEArca: XLP): up 10.4% year-to-date; Procter & Gamble 16%; Colgate-Palmolive 3.9%; Kellogg 1.5%

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.