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What makes a great stock? That seems to be an obvious question for every investor, but the answer isn't always as obvious. Is it a revolutionary product? New technology? Fantastic growth? Strong cash flow? Clearly, different qualities resonate with different investing styles.
From a long-term investing standpoint, one of the most important factors separating winners from losers is pricing power. It means that a company can charge more for its product without curbing demand, and it implies that the company has an excellent brand with a strong following. Companies with pricing power can withstand challenging times and grow into bigger, better companies.
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There's no better time to access this than in a high-inflation climate. According to a McKinsey report, 79% of consumers are trading down. As consumers become more choosy about how they spend, notice which companies don't have to cut prices to generate sales. Consider these five powerhouses: Costco Wholesale (NASDAQ: COST), Coca-Cola (NYSE: KO), On Holding (NYSE: ONON), Starbucks (NASDAQ: SBUX), and Procter & Gamble (NYSE: PG).
Costco is a discount king, but what makes it stand out in terms of pricing power is its membership fee. It raised the fee in 2025 from $60 to $65, or $110 to $120 for an executive membership, but its renewal rates and signups have been strong. On the contrary; shoppers tend to shop at Costco even more when times are tough and every penny counts to get the most out of their membership and the best prices.
In the 2026 fiscal fourth quarter (ended Aug. 30), total sales increased 11.2% year over year to $93.9 billion, driven by a 9.4% increase in comparable sales (comps). Average ticket was up 5.9%, but management said it's keeping prices down, implying that the increases are due to consumers buying more.
Coca-Cola is the classic example of a company with great pricing power, and that's one of the reasons Warren Buffett loves its business. People need to have something to drink, and they love Coca-Cola. The company has taken many actions to keep consumers buying despite inflation, including new marketing campaigns, smaller, lower-cost packages, and working with retailers to keep its beverages in front of shoppers.
The results have been fantastic. Sales increased 6% year over year in the second quarter, although unit care volume was up 1%. Higher pricing is offsetting rising costs, and earnings per share (EPS) rose 30% to $0.86.
This model has led to extraordinary success over time, and Coca-Cola pays shareholders back with its excellent dividend, which it has raised for 64 years, making it a Dividend King (a designation for companies that have raised dividends for 50 or more consecutive years).
On Holding is a relatively new player in athleisure and athletic footwear, and it's positioning itself as the leader in premium products. It has cultivated a major following and targets affluent consumers, which has helped it withstand the need to mark down its products in the current operating environment.
In the second quarter, revenue increased 21.6% year over year (currency neutral) and 34.3% in its direct-to-consumer channels, indicating customer loyalty. It has maintained its pricing and image, and gross margin improved from 61.5% to 65.4%. It has signed important celebrity ambassador deals with names like actress Zendaya and soccer star Kylian Mbappe to secure its branding as a power player in its industry. Management got a thumbs-up from the market when it announced at its investor day that it was confident in its ability to retain its premium status and maintain gross margins of 65% through 2029.
Starbucks has had a rough time over the past few years, but under the new leadership of CEO Brian Niccol, things are starting to turn around. The pricing power is actually working in its favor; previous management had run too many specials, diluting the brand. Niccol has taken the opposite approach, cutting the specials and leaning into the company's premium image. It's working.
In the 2026 fiscal third quarter (ended June 28), global comps increased 7.9% year over year, driven by a 4.2% increase in transactions and 3.5% increase in average ticket. That means that even as inflation rages, more people are coming back for Starbucks' high-priced beverages. Profits are increasing, too, which Niccol has said would happen after it fixes comps, and earnings-per-share (EPS) grew 86% to $0.91.
Procter & Gamble makes many of the premium beauty and hygiene brands you know and love, and are willing to pay a little bit more for. That's what it counts on, and sales typically increase by low single digits even in rough times. While some customers switch down to generic brands, many pay up for the small luxuries of brands they see as a value because they're better. These are names like Pampers diapers, Tide laundry detergent, and Puffs facial tissues.
Price increases contributed to sales increases in three of its five categories in the 2026 fiscal fourth quarter (ended June 30), and total sales increased 2% year over year. Instead of cutting prices to boost growth, it's doubling down on its premium positioning and generating higher consumer loyalty.
Procter & Gamble is also a Dividend King and has raised its dividend for the past 70 years.
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Jennifer Saibil has positions in On Holding. The Motley Fool has positions in and recommends Costco Wholesale, On Holding, and Starbucks. The Motley Fool has a disclosure policy.
As Shoppers Trade Down, These 5 Brands Still Have Pricing Power was originally published by The Motley Fool
