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April 14, 2003
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Selling the Sizzle
Looking for a way to really tap into shopper demand, maybe it's
time we break from our slavish devotion to statistics and stray a
little into human behavior. People are bored, and they are looking
for excitement and for supermarkets that means opportunity.
Consider this: a friend of mine who runs a grab-and-go Mexican
foods restaurant recently ran a completely ridiculous promotion.
Customers buying a certain burrito were given a free breakfast
toaster pastry. The promotion, he admitted, was all for laughs. His
food has nothing to do with toaster pastries. In fact, the restaurant
doesn't even serve breakfast.
His customers weren't laughing. They were buying. The
promotion, run on a Thursday night in a busy suburban shopping center
was a smash hit. My buddy gave away a lot of pastries, but more
importantly, he sold of lot of high profit burritos.
It really wasn't a surprise for this restaurant. He's a
promotion marvel, hiring high school cheerleaders to cheer outside
the restaurant; making burritos in honor of candidates and letting
people vote with their choices; or even taking pictures of kids in
the restaurant and hanging them as ornaments at holiday times.
And he's not alone. A supermarket retailer I know recently
started trying to promote a holiday a week, even in week's without a
"real" holiday. The key is building excitement, and as my restaurant
friend has discovered it builds quickly among shoppers and staff to
create a new atmosphere. There are countless other retailers trying
just as hard to be innovative, creative and maybe a little wacky.
And many times the result is a jolt to sales.
The numbers we present monthly in this publication are extremely
important. They help us have a good sense of shopper behavior and
clues for important decision making.
FMI's Consumer Trends study, coming out in early May, will
show again many of the key barometers of shoppers' moods. It will
show how shoppers are coping with tough economic times and how they
are trying to make financial and time pressures balance.
It's important information, but not everything gets measured in
statistics. Sometimes we have to sell the sizzle too.
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Bringing Blurred Channels Back Into Focus
The biggest information challenge facing both brands and
retailers today is not that there isn't enough data. It's not even
that the data that you have isn't the right data. The real problem is
adhering to and applying standardized retail definitions that seem to
be constantly changing.
The categories that may have once defined the trade channels have
blurred. Supermarkets are opening gas stations and convenience
stores in their parking lots. Some drug stores have two aisles of
groceries; toy stores sell ice cream and everyone sells soda. But
common definitions of these channels are still relevant as ever --
they apply the very basic framework for analysis and planning around
retail.
Before you can even plan for the benefits of your larger
information initiatives like CRM or ERP, first worry about getting
your retail information defined and accurate. Other initiatives, such
as trade promotional effectiveness, are dependent on external data
sources such as product movement data from ACNielsen, consumer
insight from Spectra, consumer promotional activity and even media -
all of which need to be integrated as they relate to common
definitions.
Retail today is a moving target. Thousands of stores open, close
or change reporting relationships every month. Coupled with mergers
and acquisitions, you have a nearly insurmountable updating and
tracking task. Be sure to have a clear understanding of this pace of
change within standardized channel definitions to truly understand
how it ultimately impacts your business.
When we started coding stores and every level of their hierarchy,
even we didn't fully grasp how important this work would become.
Today, TDLinx Codes are in use by CPG manufacturers in their customer
master files enabling seamless retail data integration internally and
externally with syndicated data providers, sales and marketing
agencies, and many other companies that need to communicate about
retail. Ultimately, all to help our clients get the right products to
the right shelves in the right stores.
If you'd like to learn more, please stop by to see us at the FMI
Show. We'll have a demo station at the ACNielsen booth (#1226).
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Send Us Your Sizzle
When you see the 'sizzle' share it! Send us the information,
photos or descriptions for those extra-special promotions you conduct
or you see others conduct. . If we use them in F3 we will give you
credit and send you a Facts, Figures & the Future baseball cap [just
in time for those summer athletes]. Send to
TheSizzle@factsfiguresfuture.com
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DOLLAR STORES: Continued Growth
Dollar stores may be the ONLY thorn in the side of Wal-Mart. Store
growth within the Dollar Store channel is unsurpassed by any other
retail channel and retailers within the Dollar Store channel are
moving from their rural and small town American roots into both urban
and suburban America. Since 2000, the three major players in the
channel (Dollar General, Family Dollar, and Dollar Tree) have added
over 2,600 stores.
The following chart ranks U.S. retailers by store count for the
year ending December, 2002. Note that two of the top three retailers
are from the Dollar Store channel.
Click on thumbnail to enlarge, or click here.
New dollar store openings are contributing to the channel's
growth in household penetration and shopping frequency.
Click on thumbnail to enlarge, or click here.
Perhaps most noteworthy to Wal-Mart is the similarity of the
dollar store channel shopper base to that of its own. Dollar stores
attract a disproportionate share of households on the lower end of
the education and income spectrums. It also does well with large,
rural, blue collar and African-American households.
Click on thumbnail to enlarge, or click here.
While dollar stores have been succeeding in product categories
such as batteries, detergent, and household cleaners, it has also
garnered a respectable share of several food categories such as
candy, snacks, and cookies. And, whereas the dominant grocery
channel is losing share of such food categories, the dollar store
channel is gaining share.
Other retailers are beginning to take note of the threat that
dollar stores represent by including "Dollar Store sections" or
"Dollar Store merchandising activities" to capture some of the sales
that have been going to this channel. Wal-Mart recently announced
that it is testing a dollar-only section in a few of their stores and
king of retailers hasn't ruled out the idea of creating its own
free-standing Dollar Store format. Stock prices for each of the major
Dollar Store players took a hit with that announcement, but the
growth of the dollar store channel clearly is a trend to keep an eye
on.
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FREQUENT SHOPPER PROGRAMS: Just How Much "Value"
According to ACNielsen's 7th Annual Frequent Shopper Survey Update,
81 % of all U.S. households currently participate in at least one
Supermarket Frequent Shopper Program - more than doubling since 1996.
Of the 23 markets that were examined, significant growth was noted
in Miami and Tampa, which experienced double-digit gains vs. year-ago
data. Miami increased 47 points and Tampa increased 13 points. The
gains are due to new programs from Albertson's and Winn Dixie in both
markets.
Click on thumbnail to enlarge, or click here.
When asked to describe the "value" of the Frequent Shopper
Program used most often, 69% of all members answered "very valuable"
or "valuable." However, there are indications that the cards may not
be having their intended effect. First, consider the fact that 68%
of all cardholders belong to more than one program - perhaps a sign
that shoppers are more loyal to the idea of saving money than they
are to a particular retailer. However, the convenience of the
store's location is still the primary reason why shoppers choose the
store where they buy their groceries, followed by store deals.
Click on thumbnail to enlarge, or click here.
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Economic Snapshot
Clearly any discussion on the state of the U.S. economy, or world
economies for that matter, center on the ongoing war in Iraq.
Markets, consumers and businesses are tying their actions and most
specifically their planning, to the speed of a resolution. A major
component of this apprehensiveness is the impact due to rising energy
prices. Inflated crude oil prices act as a tax on consumers and
businesses alike as spending is restrained and demand weakens. In
fact, trading on Nymex crude has gone from a high of near $40 a
barrel during the early stages of the war to current levels of $28.05
a barrel, resulting in a significantly reduced impact on spending.
While still garnering a level of importance, economic indicators have
temporarily moved to the sidelines, as the markets are fixated on
Iraq and news tied to its conclusion. This is illustrated in the
chart below, which underscores the instantaneous volatility of market
trends.
Click on thumbnail to enlarge, or click here.
The $10,000 questions (or the $10 trillion question, which is the
United States GDP) is therefore....What will be the state of Demand,
Sales and Earnings post Iraq? To answer those we turn to the most
recent economic fundamentals and datapoints. To do this effectively,
we not only consider February data, as it was influenced by war
worries and weather, but the consensus 1Q03 results as well.
Unfortunately, the overall message is one of cautious hiring,
decreased spending and slowing manufacturing. Therefore the sluggish
recovery that we experienced in 2002 is running along the same lines
in the early part of 2003. Manufacturing activity remains trepid and
capital spending subdued. A bright spot of the economy, which points
to future earnings growth, is that many companies have executed
cost cutting initiatives to increase profits, which result in longer
term benefits. Therefore, with a second half pick up in GDP expected,
corporate balance sheets should improve due to topline and bottom
line gains.
On the retail front, fiscal year end sales and earnings are in
for the majority of companies with several messages becoming
apparent. The charts below focus on the financial performance of the
leading retailers who account for over $663 billion sales or put
another way.. these 18 retailers account for a staggering 18% of
total 2002 US Retail Sales.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/AprilJR2.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/AprilJR3.jpg
)
Summary Comments:
Leaders Take Hold: Overall, strong sales for the
leaders within each class of trade driven by innovative
merchandising, in-store execution and efficient operations.
Year of challenges for Club and Food: Trading at near
52 week lows, sales and earnings were impacted by a slowing economy
and the increased penetration of Wal-Mart respectively.
Dollar And Drug: Strong sales and earnings due to
aggressive openings and improved profit margins.
INDICATORS TO WATCH - The ISM Manufacturing index has been
a key barometer of manufacturing activity since 1915 as it captures
data from over 400 companies in 20 industries. The insights into such
areas as New Orders, Production, and Export Activity help to
understand the expansion or contraction nature of manufacturing.
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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COUNTRY-TO-COUNTRY: A Look at the Fastest Growing Categories Around the Globe
Analysis of the Canadian categories highlights the common ground
between the two countries. For example, speed of life issues are
impacting both countries and, as a result, we see refrigerated meal
starters topping the U.S. list and refrigerated entrees in the top 10
of the Canadian list.
It is also important to note that these Country-to-Country
comparisons are based on the one-year growth rate, and
detailed long term sales analysis should also be consulted for a
complete picture to determine the success of a particular category.
Energy Bars and Drinks & Diet Products appear on the Canadian list,
but have already become established in U.S. supermarkets and are no
longer among the U.S. fastest-growers.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/AprilC2C2.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/AprilC2C1.jpg
)
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Global Mega Brands
Today's global consumers connect with brand franchises that symbolize
trust, offer a specific expertise and group products logically,
according to a study released by ACNielsen. The findings are based
on an examination of more than 200 brands from more than 50
manufacturers across 50 countries in the Fast Moving Consumer Goods
industry. The study highlights the 62 brands that meet ACNielsen's
criteria in identifying Global Mega Brand Franchises.
Manufacturers in the Personal Care & Cosmetics area seemed
particularly adept at building Global Mega Brand Franchises. In
fact, more than half of the 62 Brands highlighted in the study were
related to Personal Care & Cosmetics. Beiersdorf's Nivea, for
example, leverages its expertise in skin care across 19 product
categories, ranging from skin moisturizers and tanning lotions to
hair cleaning and shaving gel products. Further examples include
Johnson & Johnson, Colgate-Palmolive and L'Oreal, who utilize their
highly trusted corporate names to extend multiple brands across
multiple product categories throughout the world. In fact, more than
22 of the 62 brands found on the entire list utilize the corporate
name in their brand offerings. Others like Gillette's Oral B utilize
logical product groupings - toothpaste, toothbrush, dental floss, and
mouthwash - to build a powerful global mega brand franchise in the
minds of consumers.
In the Food, Beverage and Confectionery arena, ACNielsen named 23
brands as Global Mega Brand Franchises. Of these, the Nestle brand
was found in the most categories (17). Nestle also takes advantage
of consumers' trust in the corporate name, extending into such
product categories as Breakfast Cereals, Baking/Cooking Aids,
Chocolate and Water.
Some manufacturers have established a specific expertise that
allows them to extend their brand name across multiple product areas.
Novartis' Gerber, for example, capitalizes on its expertise in
babies, allowing the brand name to be extended across Personal Care,
Food, Beverages & Cosmetics as well as Health Care and even into life
insurance for young children.
Click on thumbnail to enlarge, or click here.
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BEVERAGE ALCOHOL NEWS: More Beer Means More Dollars At the Checkout
ACNielsen measures Alcoholic Beverages in many parts of the world.
Three of the five fastest growing food and beverage categories in the
global marketplace were Beverages in 2001, led overwhelmingly by
Prepared Alcoholic Beverages, according to an ACNielsen study
released in July 2002. Products such as "malternatives" and
spirit-based mixed bottled drinks added excitement to the category
and drove growth. In fact, Prepared Alcoholic Beverages topped the
list, growing by more than 30% with significant growth in 13 of 16
markets in 2001. Beer had the largest gain, with an increase in
sales of $3 billion in 2001, representing a growth rate of 5%. Wine
also appeared in the top 10, reporting absolute growth of $1.1
billion and growth in 20 out of 28 markets surveyed. Beverage
Alcohol penetration is much lower compared to other beverage
categories...but Beverage Alcohol buyers are valuable consumers for
retailers to attract given their high dollar spending in food stores!
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/AprilBev1.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/AprilBev2.jpg
)
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French Kiss Off?
Several weeks ago, SupermarketGuru.com reported on what seemed
to be a small, isolated movement on the part of a few people to call
for a national boycott of French wine and cheese as a way of
protesting the fact that France has led opposition to US moves toward
using military force to disarm Iraq.
But the movement has grown to include consumers and retailers
across the country...and it appears that the American sentiment is
being felt at the cash register. French Wines, among the highest
profile of the French imports had already been showing a decline
(down 6% for the 52 week period ending 3/15/03); but for the week
prior to the official beginning of the war sales of French wines
dropped even further. In the week of 3/8 sales dropped 10% (as
compared to a 1% increase in the total category) and in the week of
3/15 declined 15% as the category remained flat (according to
ACNielsen ScanTrack as reported in the Grocery Channel).
There have been extremes to this argument, of course, with some
people saying that it would affect just their personal buying habits
and others saying that French fries should be renamed (as one
restaurant owner in North Carolina did).
Consumer response to the quick poll generally approved by a 7-3
margin the notion that Americans could use their buying power as a
legitimate form of political protest. And while it hasn't yet
reached the stage of being an organized national movement, there
remains ample evidence that the anti-French product trend is picking
up momentum.
For example:
Restaurants located in places as geographically disparate as
Nevada and New Jersey have publicly dumped expensive French wines and
champagnes with great fanfare, and returned much of their stock to
their wholesalers.
In Chicago, an independent retailer called Garden Fresh Markets
pulled everything "French" off its shelves, ranging from Evian water
to cheeses and mustards.
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VNU CONSUMER 360 AWARDS: Congratulations to the "Best of the Best"
VNU Business Publications (Progressive Grocer, Retail Merchandiser
and Brandweek) sponsored the first annual VNU Consumer 360 Awards.
These awards honor the manufacturer, retailer and sales agency that
have demonstrated the best understanding of the consumer in their
year 'round merchandising activities.
The three VNU publications asked the retail community to choose
one manufacturer and one sales agent [and the manufacturer community
to choose one retailer and one sales agent] who each demonstrated the
best use of those consumer insights in the year 2002.
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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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