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December 9, 2002
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Boom!
In the hunt for niches to serve, retailers and suppliers should
be careful not to miss the largest consumer target ever to appear on
the landscape. That is the nearly 70 million post-World War II baby
boomers. Boomers make up nearly half of all U.S. households, but
account for an even greater percentage of food sales because they
tend to spend more each week at the supermarket than any other group.
Every statistic about the Boomers makes them a prime target for
supermarkets. They have the largest average incomes of any
generational group and the largest percentage of college graduates.
The younger Gen Y and X cohorts have larger families, yet Boomers
still manage to outspend both in average weekly grocery shopping.
However, as the largest group, Boomers are also the most diverse
and that creates challenges for the industry. Although
generalizations are impossible to make on this group, retailers say
three strategies seem to work best with boomers.
First, offer convenience through time-saving services. That's
especially important to two-income and working-women households.
Second, remember that Boomers are highly interested in health issues
and self-care. More than most groups they are excited by whole
health initiatives. They seek information and healthy products. And
third, provide variety through ethnic and specialty products. These
consumers are willing to experiment.
Of course, there is no single answer to this or any other
demographic group. To gain additional insights on Boomers, FMI is
offering a new special report: The Generations in the Marketplace: A
Closer Look at the Baby Boomer Market Basket, which is available at
our website fmi.org.
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Consumer-Focused Category Management
Category Management has come a long way since its inception in
the late 1970s.
Scanning, which took hold in the grocery, drug and mass
merchandise channels in the mid 1980s, was the first key building
block for category management as we know it today. Over time,
channel data evolved into retailer-specific information, which
evolved into retailer-specific information organized by retailer
trade areas, which evolved into retailer-specific insights within the
broader context of other channels' performance in the same trade area.
This year, the evolution of category management took another
major step forward with the strong retailer acceptance of Category
Business Planner (CBP), which is accessed through the ACNielsen
Answers Web portal. Going beyond geographic and channel boundaries,
CBP organizes information according to each retailer's unique
category definitions. Because retailers often differ in their
definitions of product categories, CBP enables manufacturers and
retailers to begin category management discussions on the exact same
page - viewing category performance with a common view of category
definitions, the retailer's trade area, and the competition.
Today, category management is entering an exciting new phase -
one that puts the consumer front and center. Through ACNielsen's
collaboration with VNU-owned sister companies Spectra,
Nielsen//NetRatings, Nielsen Media Research, Nielsen Entertainment,
Scarborough Research, ACNielsen BASES, ACNielsen Market Decisions,
and Trade Dimensions, we are uniquely positioned to be the
single-source provider of a 360-degree view of the consumer.
Our work in tapping the synergies across VNU companies is already
bearing fruit and will be highlighted at our upcoming Consumer 360
Conference in March 2003 (www.consumer360.com). The upside potential
is enormous, and promises to take category management to a whole new
level. Look for several exciting announcements in the next couple of
months.
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12/9 CONSUMER PRE*VIEW: Speed of Life Issues - Household Chores
A new series of questions has been added to the quarterly Homescan
Consumer Pre*View Survey. These are designed to monitor and predict
how today's "speed of life" will impact tomorrow's purchases.
The topline findings of the most recent Consumer Pre*View Survey
will be released later this month. In this issue of F3, we take a
look at the analysis and the correlation to actual sales data in two
categories: "Polishing/Cleaning Cloths" (e.g., Swiffer and
Grab-It-type refills) and "Premoistened Cleaner Towels" (e.g., Pledge
Wipes, Clorox Disinfecting Wipes, and Glass Plus Glass & Surface
Cleaner Wipes).
No one would argue that many Americans are time-starved. In this
survey, ACNielsen found that 63 percent of total U.S. households
agreed "strongly or somewhat strongly" that they are seeking new ways
to get their shopping, cooking and cleaning done faster.
Click on thumbnail to enlarge, or click here.
The relatively new impregnated carrier categories in household
cleaning have, well, "wiped up" competition with sales in the
"Polishing/Cleaning Cloths" category topping $251 million (26.6%
product volume growth) and "Premoistened Cleaner Towels" at $147
million (40.4% product volume growth) for the past twelve months
ending November 2, 2002. The combination of convenience and
effectiveness of these next generation cleaning products have quickly
established themselves as major contenders in a once stagnant and
boring category.
Click on thumbnail to enlarge, or click here.
It is interesting to note that the panelists who are over 55
years old exhibited the least amount of desire for ways (i.e.,
products) that would give them more free time to get household chores
done faster. While this may seem counter-intuitive, it is possible
that this group is not as trusting of the efficacy of these new
product technologies and have more household help, rather than a lack
of desire to have more free time. The 18 to 44 year old consumers are
clearly prime targets for these types of products and will be driving
even more product innovation. Expect to see the design influences of
GenX in new packaging and decorative storage containers. Look for the
redesign of cleaning product sections of stores that will reflect a
major shift from bottles and cans to boxes.
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12/9 The Joke Is On Us - Those Really Are Mercedes and BMWs In Warehouse Club Parking Lots
In 2001, Warehouse Club Channel sales reached $70 billion and are
expected to increase by 9-10% in 2003. The merchandising concept
seems simple enough - focus on "super-sizing" the consumer's basket.
This channel's approach also seems to encourage "expandable
consumption" (i.e. the more product a consumer buys, the faster the
use-up rate). Club retailers now face competition from other
retailers selling "club" packs... along with other big-box retailers
adding gasoline pumps. The Warehouse Club Channel now has 900 +
stores, and ACNielsen reports that about half of all U.S. households
shop in this channel.
Click on thumbnail to enlarge, or click here.
Households with incomes of $70k plus are highly developed and
account for 37% of sales. These ACNielsen charts show
over-development in other segments as well, such as acculturated
Asians, 5 + member households, and acculturated Hispanics. According
to Todd Hale, ACNielsen senior vice president, Consumer Insights,
"While U.S. Grocery retailers are scrambling to react to the
expansion of Supercenters, the demographics of Warehouse Club
shoppers are actually more similar to heavy Grocery channel shoppers
than they are to heavy Supercenter shoppers. And, the Warehouse Club
channel is driving sales in categories like fresh meat and fresh
produce that have traditionally been a real stronghold for the
Grocery channel."
Click on thumbnail to enlarge, or click here.
The second chart shows that Clubs are less developed among the
following household segments: lower-income, single-member, less
educated, African American, older, male-only, and those in small
urban counties. Given the cost of entry into this channel (i.e.,
annual membership fees) and high basket rings driven by large pack
assortment within the channel, development among many of these
household types is likely to remain low.
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12/9 THE HISPANIC CONSUMER: Prepared Foods Opportunity
ACNielsen and Cultural Access Group created a Prepared Foods Model,
which explains that one's convenience and value orientation helps
define their likelihood of using Prepared Foods vs. cooking from
scratch. For a less acculturated Hispanic woman, her view tends to
be that it is easier to cook from scratch since that is what she has
always done and it is actually more convenient in that it is more
familiar. Dishes made with traditional ingredients are low stress.
She doesn't need to think about anything. For the more acculturated
woman, who is more likely to be working and familiar with the
benefits of the category, Prepared Foods are fast, easy and
consistent with her lifestyle. Value orientation also plays a big
role. For the less acculturated Hispanic, detailed food preparation
is an expression of love for her family and goes to the heart of her
identity as an Hispanic woman and mother. Cooking is also a vehicle
for passing on traditions. A fully acculturated Hispanic understands
that simplified food preparation allows her to focus on her career
and other interests and is guilt free.
Click on thumbnail to enlarge, or click here.
While an Hispanic woman who is less acculturated may quickly
understand the benefits of Prepared Foods from a convenience
standpoint, her values will be more difficult to change, and even
when Prepared Foods are served there will be significant guilt
associated.
Click on thumbnail to enlarge, or click here.
The Prepared Foods model may not be relevant for all Hispanic
cultures nor do all less or more acculturated Hispanic consumers
follow the model. What is important is that all Food Marketers need
to begin to understand the purchase behavior of their targeted
Hispanic consumer, their attitudes and beliefs, and the size of the
opportunity before food marketers can think of successfully marketing
to Hispanics. Given the size of the opportunity and its importance to
future growth of many companies, it is crucial that food marketers
begin to understand the Hispanic consumer now or potentially miss out
on the largest opportunity of this century.
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12/9 ECONOMIC SNAPSHOT
With just over 4 weeks remaining in 2001, the question is...can the
market sustain its recent gains driven by positive economic news,
which has the DOW up over 20% from its lows on October 9th? Most
recent economic data including stronger than expected 3Q GDP (4%),
sharper than expected declines in unemployment claims (Below
400,000), increases in Consumer Confidence from nine year lows,
sustained levels of consumer spending, strong housing results, record
levels of productivity, and respectable 3Q profits point to a
positive trend. However, can this recent news spur businesses to
increase their low levels of capital spending? The key indicators to
monitor as we head towards 2003 are therefore those tied to
manufacturing activity. Several are:
-Durable Goods orders: + 2.8% in October and biggest gain
since July,
-Industrial Production: Declined for 3rd month in a row in
October,
-Business Inventories: Increased .5% in Sept, biggest rate in
almost two years,
-ISM Manufacturing Index: Contracted in November for 3rd month in
a row.
Click on thumbnail to enlarge, or click here.
*Development to Watch
With October and November same store sales results coming in at
the low end of expectations for the majority of retailers, the three
days after Thanksgiving will be a key barometer for the remaining
holiday sales. Early indications are sales were strong due to
aggresive promotions and discounting. However, it remains to be seen
if these results will carry over into strong holiday sales. One
further thought, while a stream of indicators could point to a
slowdown in spending, it is tough to bet against this continuously
resilient consumer.
*Fun Fact:
To provide current estimates of sales, The Census Bureau of the
Department of Commerce tracks companies with one or more
establishments that sell merchandise and related services to final
consumers. Through a survey of about 12,000 retail businesses, firms
provide data on dollar value of retail sales and inventories. Results
are widely utilized across government agencies to gauge economic
activity and specifically to calculate GDP, consumer price indexes,
productivity, and to assess recent trends in consumer purchases.
Monthly Retail Sales have been captured since 1951 with the November
2002 results scheduled for advance release on December 12th.
*For Further Information;
For further information or to arrange a comprehensive
presentation on the State of the Economy and its impact on the Retail
sector please contact James Russo at
James.russo@acnielsen.com
or 516-682-6068
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12/9 THE GROCERY CHANNEL: Hispanic Loyalty
The Hispanic population continues to grow rapidly, and retailers must
take notice of the differences of the shopping behaviors specific to
this culture in order to both attract and keep these consumers.
Although the traditional Grocery Channel remains the primary outlet
for this segment, we have learned that more acculturated consumers
supplement their shopping in alternative mainstream outlets such as
Mass & Club; while less acculturated consumers prefer more
"traditional" outlets such as Butcher shops & Fruit stores.
Hispanics also make fewer shopping trips per household for UPC
purchases annually - 103 as compared to 158 for non-Hispanics; not
surprisingly, shopping frequency tends to increase with
acculturation. Although shopping frequency may be lower, the average
amount spent per trip compensates - $41 per trip versus $32 for
non-Hispanics. The question is: as the frequency increases will the
amount spent remain at the above average level making the Hispanic
shopper even more coveted?
Click on thumbnail to enlarge, or click here.
Mass merchandisers have attracted the more acculturated Hispanic
shopper as a result of lower prices and by providing an alternative
to Club shopping for HBA items. ACNielsen Homescan finds that 95%
of acculturated Hispanics shop in 3+ channels, which is more than
non-Hispanics. As supermarkets need to compete for "food dollars",
focusing on and satisfying the Hispanic shopper may be among the most
important opportunities to maintain market share.
Less acculturated Hispanics exhibit more exclusive channel
shopping behavior. The most recent Homescan survey of Hispanics found
that the key reasons for shopping in the Grocery chain were
assortment of merchandise, price, and cleanliness & quality of fresh
produce.
Click on thumbnail to enlarge, or click here.
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12/9 PRODUCE: Is Random Weight Dead?
Sale of fresh produce in most grocery outlets continues to rise
dramatically. Most analysts credit both the shopper's desire for
better health and the rise in convenience driven pre-packaged salads,
vegetables and fruits for the increase. Little attention seems to be
given to random weight produce items, which still occupies the
greatest amount of shelf space in the department; and kinesthetically
sets the stage for the shopper's experience throughout the store.
Consumers buy fresh produce, according to the most recent
ACNielsen Homescan Fresh Foods Panel, an average of 42 times a year -
which is a greater frequency than any other mega-category. As
programs such as "Five-A-Day" continue to educate and motivate
shoppers to increase their consumption of fresh fruit and vegetables,
retailers will have an even greater need to understand the dynamics
of this important department in the future.
With roughly 400 SKUs of fresh produce available, it's critical
for retailers and growers to understand what and how consumers are
buying. More choices mean more trade-offs and more switching between
produce items. Yet with today's advanced utilization of category
management, retailers are gaining a much better handle on consumers'
changing preferences.
The basics - tomatoes, potatoes, apples, oranges, and iceberg
lettuce - traditionally have delivered the higher volume. However, as
shoppers continue to become more familiar with the more exotic types
of products being served to them in restaurants, they are
increasingly choosing items such as arugula, shitakes, mangoes,
kiwis, and tangelos as tasty alternatives. This shift to a broader
variety of fruits and vegetables has also made the produce department
more colorful, more fragrant and more exciting.
Click on thumbnail to enlarge, or click here.
"New and emerging technologies will have great implications on
the future directions of the produce business," says Meg Major, fresh
food editor for Progressive Grocer. "Produce companies that have
previously marketed faceless commodity products are increasingly
establishing a branded presence in the produce section. And if it's
done right, and if the technologies become affordable and prevalent,
the potential is promising that we'll soon see a commodity-driven
department become a highly branded department in much the same way as
packaged goods."
Consumer confidence levels and the related sales in the current
assortment of value-added produce has further prompted suppliers to
continue seeking opportunities in the fresh-cut domain, particularly
with pre-cut fruit. It is expected that advances in processes and
packaging technologies will soon usher in a new generation of
fresh-cut fruits, giving retailers another strong category.
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12/9 PRIVATE LABEL: The Real Growth is in Price
Private Label continues to expand into many new categories and retail
channels. In 2001, consumers purchased store brands more than once
a week and spent an average of nearly $7.00 on these categories per
shopping trip. (Excluding milk, eggs, & bread, the purchase size
drops to $6.29 per trip)
Click on thumbnail to enlarge, or click here.
It is the growth in the amount being spent on Private Label items
that has boosted sales. ACNielsen reports that in the past 4 years,
the dollar amount spent on Private Label items per trip has increased
by +24%, but the average number of items purchased has grown just
minimally. "More of these store brands have taken on a premium
price and positioning, which may well be the reason for this change,"
according to Gail Zielinski, ACNielsen account director.
Click on thumbnail to enlarge, or click here.
ACNielsen's Homescan Panel found that a third of all purchase
occasions include three or more Private Label items. Retailers may
be able to increase this number by promoting their products through
cross promotion of complimentary store brand items.
Some retailers do promote store brands through one time unique
merchandising events such as receiving a store brand free when buying
the name brand counterpart. But for the most part, the day-to-day
private label merchandising efforts are not maximizing their in-store
cross-merchandising and sampling efforts.
As grocers look to differentiate themselves and build a stronger
relationship with the customer, expect to see more efforts (and
dollars) focused on store brands.
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Facts, Figures and the Future is copyrighted and may not be
reproduced without prior permission. For more information about the
publication, please contact Phil Lempert at 323-860-3070 or via
e-mail at
PLempert@FactsFiguresFuture.com
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