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The Dollar Store Consumer, is available for $595.
Click here for more
details.
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For more information and to order your copy of the 2003 ACNielsen
Consumer & Market Trends Report click on the report cover.
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April 12, 2004
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Keeping It Complex
The entire business of food retailing would be a whole lot
simpler if shoppers themselves were simpler. If a retailer knew
their shoppers only behaved in one way-say, were only interested in
price or variety or convenience-the store could be perfectly geared
that way.
But nothing is that simple. Shoppers are complex beings who in
the course of an individual day-even in the course of a shopping
trip-can become many different people. The same shopper who wants to
save money on some items might feel no conflict with stopping off at
Starbuck's for a latte, even if it might be a pricey cup of coffee.
Or the battle between budget and convenience might leave a shopper
paying more for easy-to-prepare or ready-to-eat items, even while
they cherry pick specials.
The complexity is well documented in the early information FMI is
gleaning from our annual survey of consumer attitudes, published each
year as our Trends report. (The report itself will be excerpted in
the May edition of Advantage magazine and will be ready for sale at
FMI's annual convention in Chicago.)
A quick review of the findings shows many of these complexities
that retailers must understand to best deal with the shopper needs of
the moment. Among these findings are the following:
Consumer confidence remains shaky overall and shopping
strategies reflect this. Shoppers are still looking for ways to
economize and cut their food bill, yet overall the emphasis on low
prices eased off somewhat. Shoppers in 2004 say store cleanliness
and high quality meats are more important than low prices. Of
course, many shoppers still rank low prices first.
Shopper use of traditional supermarkets as their primary
source for grocery continues to slide. Slightly more than 70% say a
supermarket is their primary store these days, as increasing trips go
to discounters, limited assortment stores, clubs and others.
Nutrition remains a top concern, though shoppers readily
admit they are struggling with their diets. In the age of Atkins
diets, it's hardly surprising that carbohydrates are now the second
most cited nutrition concern (after fat content.) Use of bakeries is
falling thanks to the rise of low-carb diets. Consumers are also
showing increased awareness of trans-fatty acids and hydrogenated
oils in foods.
Convenience also remains a top concern and the good news for
supermarkets is that they are drawing an increasing share of the
take-out food business. Fast food remains the biggest source of
take-out, but supermarkets were named as a source by more than
one-fourth of shoppers.
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Frequent Shopping Isn't Loyalty
Shopper loyalty is an elusive goal. Frequent shopper programs
were supposed to build loyalty, but with 73 percent of program
members belonging to more than one program according to the latest
ACNielsen Homescan research, it appears that shoppers are more loyal
to saving money than they are to any one retailer.
Most retailers know there's more they could be doing with their
frequent shopper data. There's more analysis that could be done.
There are better marketing programs that could be developed with it.
But even the most thorough analysis of such data can fall well short
of the insights needed to build loyalty. While frequent shopper
programs tell retailers which customers shop in their stores most
often and spend the most, neither the frequency with which consumers
shop in a particular retailer nor the amount that they spend in that
retailer equates to store loyalty. It's only when retailers look
beyond their own walls to measure how much of their shoppers' total
spending they are capturing - and not just at the store level, but at
the category level - that loyalty becomes a meaningful concept.
This 'Share-of-Wallet' research, now available through
ACNielsen's new Consumer Direct @ Retail service, shows that
category-level shopper loyalty varies widely. A retailer's seemingly
loyal shoppers are often very disloyal with regard to specific
product categories.
These category-specific share-of-wallet metrics - the best
measures of loyalty - enable retailers to utilize one-to-one
marketing and merchandising activities to increase their share of
each customer's spending. They enable retailers to build same-store
sales by going beyond product and category management to customer
management, proactively focusing on capturing more spending from
current customers - a much more efficient approach than trying to
build sales by attracting new customers.
Our new Consumer Direct @ Retail service can also utilize the CPG
industry's gold-standard lifestyle/lifestage segmentation grid from
Spectra, which identifies opportunities for retailers to drive
loyalty among groups of customers that offer the highest potential
return on marketing investments and helps them build the programs as
well.
For more information on Consumer Direct @ Retail, contact Jim
Dippold at
james.dippold@acnielsen.com.
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Location, Location, Location - Not Always!
In prior survey research fielded within our Homescan consumer panel,
we learned that time-starved U.S. consumers have a strong desire to
get their household chores done much faster. Almost two-thirds (63%)
of households surveyed agreed with the statement that "I'm constantly
looking for new ways to get the household chores (like shopping,
cooking, cleaning) done faster." As highlighted in the below, the
U.S. manufacturing community has done a good job of responding to
those needs and convenient consumer solutions are driving strong
sales and sales growth.
Click on thumbnail to enlarge, or click here.
Many retailers are trying to make themselves more convenient with
investments in self-check-out scanners; extended days and hours of
operation; bigger stores and broader category assortment offering
one-stop shopping; home delivery options, etc. A recent survey among
our Homescan consumer panel validated conventional wisdom around the
importance that store location plays in how consumers shop retail
channels like Grocery, Drug and Convenience/Gas, but it also showed
that Mass Merchandisers, Supercenters and Club retailers have a much
stronger "distance" draw. In the survey we asked panel members to
indicate "How far from your home is the Grocery store where you shop
most often?" and we repeated the question for the Drug, Supercenter,
Mass-Merchandiser, Warehouse/Club, Dollar Store, and Convenience/Gas
channels.
The vast majority of households travel relatively small distances
to shop their favorite Convenience/Gas, Drug, Grocery and Dollar
Store retailer. For example, almost half of households travel less
than one mile to shop their favorite Convenience/Gas retailer and 75
percent or more of households travel five miles or less to shop their
favorite Drug, Grocery, or Dollar Store retailer. Significant
percentages of shoppers in the Mass Merchandiser, Supercenter and
Club channels travel six miles or more to shop their favorite store.
The Club channel fared the best in "distance draw" as 40 percent of
Club channel shoppers travel 11 miles or farther and 15 percent
travel greater than 30 miles. Retailers in these three channels have
obviously learned how to leverage their value proposition to
over-shadow the importance of convenience.
Click on thumbnail to enlarge, or click here.
For further information or to arrange a comprehensive
presentation on consumer shopping patterns, please contact Todd Hale
at thale@acnielsen.com or
859-905-4615.
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Do You Know Where Your Shoppers Are Online?
Consumer use of the Internet continues to grow, with over 200 million
individuals now online. The explosive growth of broadband now reaches
45 percent of active users, enriching the experience of consumers and
expanding the canvas for marketers. The Internet now ranks third in
terms of total consumer media consumption, with 14 percent of total
media voice, ahead of magazines and newspapers combined. Despite
this, CPG companies are still not distributing an equivalent percent
of media dollars online, spending less than one percent of their
media dollars on the Internet.
CPG companies have been reluctant to take full advantage of the
Internet as a marketing vehicle because of the lack of understanding
on how their target consumers are using the Internet. For example,
questions remain such as:
How many brand buyers can we reach online?
How often are my brand buyers using the Internet?
What online activities are most popular among core buyers?
Where can brand buyers best be reached online?
For the first time, services are available to answer these
important questions. One of these is Homescan Online. This service,
a collaboration between ACNielsen Homescan and Nielsen//NetRatings,
is the first of its kind to measure both consumers' offline
purchasing behavior and their online surfing activity on an ongoing
basis.
The ACNielsen Homescan panel provides household purchase
information derived from panelists who use a patented in-home scanner
to record all products purchased. The Homescan panel is a
demographically representative and nationally projectable consumer
panel. Right now, members of the Homescan panel have agreed to
download the NetRatings NetMeter software on to their home PC's.
This proprietary Nielsen//NetRatings software monitors the Internet
use and behavior of all households every time the panelists engage in
any surfing activity.
For the first time, CPG companies will be able to know what sites
their brand buyers visit online, how much time they spend online and
whether certain sites attract more high volume brand buyers than
others. Web publishers will understand what brands and categories
their visitors purchase, an invaluable aid in attracting CPG
companies to advertise at their sites.
A recent analysis of the online behavior of frozen pizza buying
households provides an example of these valuable insights.
Click on thumbnail to enlarge, or click here.
Brand A buyers are active on the web, with over 70 percent of
their buying households on the web during the Fourth Quarter of 2003
(chart one). In addition, these online households account for 76
percent of Brand A's total dollar volume. This insight can help Brand
A to justify or expand an investment in online marketing, given the
potential to reach the vast majority of buying households and a
disproportionately larger percent of total dollars.
Looking at which sites might provide the largest reach to Brand
A, it was not surprising to see Yahoo! and MSN channels on top. For
example, Yahoo! Shopping reaches 36 percent of total buyers, and
those buyers are heavier than average spenders with an average brand
dollar spend of over $21 per year (index of 120).
Click on thumbnail to enlarge, or click here.
In addition, Homescan Online can provide an understanding of
which sites have the highest percentage of users who buy the product.
Teenage and kids gaming sites can provide enormous opportunity as
chart three illustrates. While a site such as Cheat Planet only has a
4.9 percent reach, over a third of the site households that visit buy
Brand A. These buying households also spend more on the brand with
an average annual buying rate of over $28 per year. Other gaming
sites show similar behavior. While most of these gaming sites are
smaller in terms of reach, they may be included in a media plan in
combination with other larger sites. At a minimum, gaming should be
incorporated into the creative for online marketing. In essence,
online behavior can tell you much about the lifestyles of your target
households.
Click on thumbnail to enlarge, or click here.
With reach and relevancy optimization being the key, it may make
sense to find game sites with a sizable reach. Yahoo! Games and MSN
Games may be good choices, with 18.9 percent and 15.3 percent reach
respectively, they will reach a sizable audience of brand buyers.
With Homescan Online, CPG companies now have a way to better
leverage the marketing capabilities of the Internet. You can't
understand today's consumer without understanding their online
behavior.
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C-Stores: Hidden treasure or just more challenges?
The Convenience Industry has a multitude of strengths...their stores
continue as a huge benefit to time-starved customers, their smaller
store size translates to close customer contact and building a
relationship, and the C-Store operators continue to prove that they
are among the most versatile of retailers. The implementation of
store based technologies are increasing and with the bounce-back in
foodservice demand, there is growth for sales and profits.
Where will those emerging profits be found? In order to isolate
the opportunities and understand the industry climate, Convenience
Store News commissioned Ernst & Young to prepare their second annual
Industry Forecast Study. The report finds that as with all retail
channels, there are also unique challenges for the C-Store operators:
Higher operating costs, especially in labor and benefits
Gasoline is becoming more commoditized and volatile,
problematic as it delivers $170 billion of industry sales (61 percent
of total sales.)
Gasoline continues as a traffic builder, but no longer profit
driver.
Tobacco sales are extremely volatile and once a key driver,
this category's sales and profits are in decline that will not
reverse. Today, those sales account for close to $40 billion.
Industry pretax profit declines for third straight year, at
46%, from a high of $4.8 billion in 1999 to $2.6 billion in 2002.
Recovering from industry shakeout and consolidation.
C-Stores are a fragmented industry, with the majority of stores
still being run by single-unit operators. 25 percent of all stores
are owned by 10 percent of the chains, and store count actually
declined in 2002, for the first time in many years. In-store sales
account for 40 percent (or $120 billion) vs. gasoline sales, which
drive 60 percent; however there is an inverse relationship, as the
in-store sales deliver 60 percent of the profits.
Two factors underscore the strength for C-Stores: they usually
have prime corner locations and store operators know customers by
name...few other retailers can claim that closeness to the customer.
Click on thumbnail to enlarge, or click here.
When we discuss the C-Store as a class of trade, an interesting
analysis is to focus on the change in store count from 2000 to 2003.
What we see is not only the shear size of C-Stores in terms of store
count, but that they have held their own in this three year period.
The so called alternative channels are really not so
alternative...this is where the growth is occurring
Click on thumbnail to enlarge, or click here.
From 2000 to 2002, the sq. footage of average C-stores increased
steadily providing more space for increased product offerings.
Click on thumbnail to enlarge, or click here.
As more shoppers are pressed for time and the C-Store operators
are becoming more sophisticated, we can see opportunities and growth
potential in this Retail Channel as many operators have already
remodeled and increased the breadth and quality of their food
offerings. Many supermarket and Mass operators have been eyeing and
testing this retail space, and we can expect major activity in this
sector; perhaps through acquisition in order to secure the coveted
locations that have kept this segment of the industry strong.
Much of the information for this story came from a Convenience
Store Industry Forecast Study conducted by Ernst & Young in
conjunction with Convenience Store News magazine and ACNielsen.
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ECONOMIC SNAPSHOT: SIGNIFICANCE OF APRIL 2ND 2004
Arguably one of the most important economic datapoints
for the year was the March Employment report released
on April 2nd. The financial community, economists, Federal Reserve,
corporate executives and for that matter the current administration,
breathed a collective sigh of relief.
Click on thumbnail to enlarge, or click here.
The March report confirmed what other indicators of
employment were showing, namely that while layoffs were slowing,
hiring will soon pick up.
It was not so much that the economy added 308,000 jobs in
March, but rather that January and February results were revised
upward which translates into 171,000 jobs per month being added for
year to date 2004.
March marked the sixth consecutive monthly payroll employment
gain.
March stopped a trend of manufacturing jobs declining for 42
straight months.
Unemployment rate edging up to 5.7 percent in March is a
positive. An increase in the number of job seekers (measured by the
participation rate) points to improving optimism.
Why the attention on jobs? Because there is
no other single factor as important to consumer spending and retail sales
than the consumers' confidence that they will either keep their job
or find a new one without much difficulty in the same pay range.
So where do we go from here? Expectations for remainder of 2004:
An analysis of 21 leading indicators, designed to predict
economic strength going forward, points to continued strength in
2004. The Nov-Feb 2004 period experienced the most broad based gains
over the past year. One of the main takeaways is that while several
of the key barometers gauging economic activity have moderately
slowed, we are still at high levels of activity which bode well for
continued growth. A case in point are building permits. Although
permits declined 1.5 percent in February, we are still on pace for
another record year of housing.
This, along with the long awaited spike in March payrolls, sets
up well for a continuation of strong retail sales in 2004.
For further insight into the State Of The U.S Economy and its
implications on consumer spending, Please contact James Russo at
ACNielsen at 516-429-8086 or
james.russo@acnielsen.com.
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Dollar Stores Continue to Win New Shoppers
Not only is the Dollar Store segment of retail outpacing other
retailers in terms of store openings, but the fastest growing channel
is also continuing to attract new and highly coveted shoppers.
According to an analysis of ACNielsen Homescan consumer panel
data, fully two-thirds of all U.S. households now shop at dollar
stores - up from 62 percent in 2002, and the shopping frequency in
the channel is growing as well.
In part, growth in household penetration for dollar stores is a
function of the channel's growing availability to more shoppers. In
previous issues of F3, we've reported TDLinx data which shows that
the store count for the channel grew from 13,342 in 2002 to 15,703 in
2003 - an increase of 18 percent.
While dollar stores are especially popular with low-income
households, they are making their greatest gains with more affluent
shoppers. Nearly half (49%) of all households earning $70,000 per
year or more now shop at dollar stores - up 9 percent versus 2002.
The higher income groups are also showing growth in shopping
frequency.
An analysis of the top ten product groups sold in dollar stores
in 2003 shows that the channel continues to take significant share
away from other retail channels. The chart below shows each
channel's share of the dollars spent in each product group in 2003
and the percentage change from 2002. As the chart shows, in all ten
product groups, dollar stores are continuing to grow their share of
sales.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/Apr04ds1.gif
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/Apr04ds2.gif
)
Most of the above product groups generate over $1 billion in
annual all-outlet sales, so even small share changes are significant.
For example, Paper Products is a more than $16 billion product
group. When the Dollar Store channel grew its share from 3.1 percent
in 2002 to 3.6 percent in 2003 -- a 16 percent gain - it captured
nearly $809 million in new revenue.
A more detailed ACNielsen study,
The Dollar Store Consumer, is available for $595.
Click here for more
details.
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Will the Low Carb Phenomenon Continue?
As of January 2004, there have been over 800 Low Carb type products
launched in the last 2 years, according to ProductScan. As of
February 2004, LowCarb Biz magazine estimates that the Low Carb
market is a $15 billion arena, which is predicted to grow to $30
billion in just one year. But the bottom line, according to the
Market Decisions Center of Excellence, a part of ACNielsen which
specializes in In-Market Testing, is that 80-90 percent of these
products will fail in the first year of their introduction.
What does Low Carb mean to the average shopper? More confusion
and more misleading package claims; which are expected to continue
until the new Federal Labeling regulations are announced (which is
anticipated for early Summer 2004).
Click on thumbnail to enlarge, or click here.
The Low Carb diets, led primarily by Atkins and South Beach, are
based on a four-phase diet program; a message that has not been made
clear to many, as the top line remains "cut out all bread and pasta,
and eat meat and bacon". This approach to the Low Carb diet, which is
practically impossible for the average American to adhere to, is what
makes the headlines and leads to the controversies. The truth is that
today the average shopper understands America is too fat, and that
it's time for change. So America wants to be on a diet, but which
diet may be surprising, and bring to light where the real trends and
opportunities for manufacturers might exist.
Click on thumbnail to enlarge, or click here.
The largest number of Americans according to an ACNielsen recent
Homescan Panel*Views Dietary Awareness Survey, are just simply not
dieting, as the chart above indicates. However, the most telling
number is that almost 30 percent of the country is designing their
own diet. These are the questions that we need answered: Does that
mean eating "healthy"? Who has their share of mind? And, where are
these consumers getting their diet information?
Digging deeper into the Homescan Survey, we predict that:
The change in consumer behavior might be stronger in
restaurants.
The South Beach Diet could be starting to dominate the "share
of mind" in the dieting world as this book is maintaining its
position in the best sellers. Also, the negative press appears to be
targeted at Atkins more than other diets.
There appears to be a larger trend in the industry to eating
healthy by creating custom diets that suit a consumer's lifestyle.
Manufacturers should use the larger message of "Healthy" as an
umbrella type theme to be included in these diets.
Atkins has launched many new products in the last year and
has also embedded the market with Atkins PR.
ACNielsen and Spectra analyzed the geographical markets
throughout the US that have a High Brand Index (BDI) and High
Category Index (CDI) for Low Carb, setting in place a blueprint for
Brands and Retailers. It is important to note, that this chart shows
these BDIs and CDIs as a snapshot in time, and it is expected that as
the "nutritional correction" becomes more commonplace, these cities
will shift into different stages of development.
Click on thumbnail to enlarge, or click here.
It is clear which cities are falling into the Core Markets,
Growth Opportunity Markets and that Miami, especially, is a great
opportunity Market; many other cities are falling into the No
Opportunity Markets... so Brands should be cautious in those
locations and not waste time or money going there (unless you have to
for other strategic reasons, such as establishing your brand presence
before the trend becomes apparent in that Market).
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COUNTRY-TO-COUNTRY: A Look at the Fastest Growing Categories in Spain
This month we take a look at the fastest growing categories in Spain,
where the "milkshake" tops the list with a growth rate of almost 32
percent; leading us to wonder if the next big trend in the US dairy
case will be ready-to-drink milkshakes. We continue to see
refrigerated yogurt shakes and drinks growing (105.1 percent
year-to-date growth as of 1/24/04) and expect the demand for non-soda
products to increase as well; question is if the yogurt based drinks
will satisfy the expanding taste bud needs, or if there is an
opportunity for milk-based and soy-based ready-to-drink shakes as
well.
In Spain, we see Still Drinks and Non-carbonated water growing at
a faster pace than Cola Soft Drinks, causing us to wonder if the
world's love affair with bubbles is over - or perhaps it's just those
aging Baby Boomers throughout the world that are trying to avoid
bloating and that extra gas.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/Apr04c2c1.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/Apr04c2c2.jpg
)
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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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