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As you'll read in the column adjacent to this one, Michael Sansolo
shares great news -- supermarket and food brand ratings are on the
rise with the American consumer.
Later this morning, Consumer Reports will hit newsstands
around the country and in this issue you'll find results from their
once-every-two-year survey (conducted Spring 2001 thru Spring 2002)
in which 25,000 readers shared their
experiences at 52 chain food stores.
The supermarket world has changed considerably since the Spring
of 2001 - mass merchandisers and warehouse clubs has gotten a lot
better at their food offerings, dollar-type stores are stealing food
dollars, convenience stores have begun selling sushi and organic
produce and the traditional food retailers have woken up and are
increasing their service and offerings. I suggest then that the CR
rankings aren't really that useful or accurate; but that doesn't mean
the magazine - and the stores with top rankings -- won't be getting a
lot of
publicity based on the survey.
According to Consumer Reports some chains had a low of 196
responses while others received over 3,600 responses over the
12-month period. (Because readers could rate more than one
supermarket, CR's survey reflects more than 48,000
shopping experiences.) To me it is a questionable survey sample,
as many of today's large supermarkets and supercenters have customer
counts of around 30,000
people each week. ACNielsen reports that the average household
shops for groceries 1.4 times every week.
What this survey does reflect accurately is that shoppers today
want more than just price. In fact the top rated chains only ranked
fair in the category of low prices. In 2003 it's all about "value"
and that means price + service + quality + relationship.
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August 11, 2003
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There's No News Like Good News
Most of what we hear and read about our industry these days is
gloomy. Problems, challenges and dilemmas are seemingly everywhere.
But guess what? Our shoppers really, really like us.
In a recent Harris Poll, Americans gave supermarkets and packaged
food companies their highest marks for serving customers. The survey,
which asks consumers to rank their satisfaction with 15 industries
(including banks and health care) included supermarkets and food
manufacturers for the first time this year.
That was a good addition. Eighty-five percent of shoppers said
supermarkets do a good job for them, and 75% said the same of
packaged food suppliers. The next highest rank went to hospitals
(73%), although managed health care providers (HMOs) tied for last
with tobacco companies at 30%.
It's the kind of news that every supermarket operator should
enjoy. Our shoppers visit our stores weekly-far more than the other
industries in the survey. And their high marks suggest that what
they are finding is what they are looking for: clean stores with a
wealth of variety, service, competitive prices and sensitivity to
shopper needs.
But don't enjoy it for long because shoppers' feelings can be
fickle, and the overall rating means nothing to an individual store.
Instead, let's examine the list for a few Dos and Don'ts that matter
to even a one-store operator.
Don't ever underestimate the importance of credibility.
There's little surprise that tobacco companies rated lowest on the
list given the public pounding this industry has taken for years in
the media and in lawsuits. Remember that this wasn't always the
case. Your public image and reputation are earned every day and
attacked every day. Make sure you and your staff stay focused on
what issues matter to your shoppers. There isn't enough polish in
the world to fix a tarnished image. The bottom line is this: If they
don't trust you, they won't shop with you.
Do keep the customer's needs foremost in everything you
do. Is anyone really surprised the HMOs and health insurance
companies land at the bottom of this list? Many consumers-rightly or
wrongly-consider these companies uncaring when it comes to their
needs. For supermarkets, this sensitivity is even more important.
Shoppers may not have another choice when it comes to health
insurance, but they sure have many choices when it comes to buying
food. If you take care of your customers, everything else will take
care of itself.
Don't be greedy. The information from Harris did not list
why companies got the rankings they did, but it's likely that
consumer concerns about prices and profits contributed to the low
rankings for oil companies and pharmaceuticals. Supermarkets are
known for competitive prices and low profits. This is one topic that
will probably cause you more problems with competitors before
shoppers notice it.
Most importantly: Don't get complacent. Getting the top
rating is tough, keeping it is tougher. Especially for your store,
constantly evaluate why shoppers choose to shop with you and ask
yourself how you can get better. Make sure your employees know what
you are facing, and don't ever forget to ask yourself the tough
questions. It's not hard to look down the Harris Poll list and see
industries that have lost once lofty reputations (airlines,
automobile companies, telephone companies). A great reputation is
earned every day.
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Driving Measurable Retail Sales with Effective Online Marketing
Three of the most important words in marketing are "Return on
Investment." In order to know how to best allocate investments in
advertising and promotion, the ability to quantitatively measure a
campaign's effectiveness is fundamental. However, when it comes to
utilizing what is arguably the most powerful medium available today,
the Internet, consumer packaged goods (CPG) marketers have been left
to wonder about the true impact of their online marketing efforts.
Think about it. Just about all sales of consumer packaged goods
take place at traditional "brick and mortar" retailers. So, when CPG
marketers conduct online advertising and promotional campaigns, how
do they know whether they moved the retail sales meter? And if sales
do increase, how can they quantify the degree to which the increase
came from their online activity?
It's not to say that CPG marketers haven't tried to utilize the
Internet. Several have conducted campaigns to drive traffic to their
Web sites, which they can measure to a degree. Others have conducted
Web-based promotions that they credit with boosting overall sales.
What's been missing is a hard link - a closed loop system - that
shows precisely how groups of consumers exposed to online marketing
programs respond at retail.
That's why I'm very excited about a new initiative ACNielsen is
pioneering called Consumer Direct. The first iteration,
Yahoo! Consumer Direct, Powered by ACNielsen, is focused not
only on providing a way to measure the offline impact of online CPG
marketing, but to maximize it as well.
An 18,000-household subset of the ACNielsen
Homescan consumer panel has agreed to allow their online
activity on the Yahoo! network to be monitored. This "matched panel"
enables us to direct online ads to segments of consumers we've
identified through Homescan as heavy users of a particular
category, as one example. By "scoring" the Yahoo! user database of
millions of visitors - that is, by using computer models to find many
more people with similar behaviors as those on the matched panel
households - we are able to reach sizable well-defined segments of
consumers with relevant communications and promotional programs.
Then, at the back-end of the Consumer Direct process, we can
go back to the ACNielsen Homescan consumer panel to precisely
measure the retail sales impact of such campaigns among households
that we know were exposed to the targeted online marketing program.
CPG marketers who have partnered with us on the first
Consumer Direct campaigns include Kraft, Unilever, Purina, and
Pepsi - each of which has been very satisfied with the results; more
Consumer Direct campaigns are in process.
Other versions of Consumer Direct are in development as
well. Consumer Direct at Retail will combine
Homescan insights with grocery store frequent shopper
databases. Consumer Direct at Home will extend the concept to
direct mail marketing. At the end of the day, it's all about Return
on Investment: how to measure it and how to maximize it. By
hard-linking information about consumer behavior from multiple
sources, Consumer Direct is providing CPG marketers with
highly effective new solutions on both fronts.
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FAT: Who's to Blame? And for how long?
In one of the largest "fat" surveys to date, an ACNielsen survey of
over 22,000 American Households offered new insights into our
nation's fastest growing problem. This Homescan Panel*Views Survey
conducted in June/July of 2003 found that 90% of U.S. Households are
concerned about child obesity in children under the age of 17.
One of the most interesting findings in the survey was, when
asked "who do you believe is responsible for child obesity," 62% of
the respondents felt that the "child him/herself" was responsible for
the "fat" problem, which followed the number one reason (86%) that
the "parent/guardian" was responsible.
Click on thumbnail to enlarge, or click here.
This finding is quite interesting as "fast food restaurants",
"advertising", "school vending machines" and especially
"manufacturers of grocery food products" all ranked significantly
lower as the responsible party. The question that we need to ask
ourselves is whether, after all the fanfare about lawsuits and other
surveys (including those on SupermarketGuru.com) publicizing the fact
that people need to take responsibility for their own eating habits,
a child has enough knowledge and opportunity to make wise eating
choices?
When the respondents were asked "who do you believe is
most responsible, 60% of the households said parent/guardian,
10% of the households said fast food restaurants, 9% of the
households said the child him/herself, and only 1% said food
manufacturers.
Certainly the 17 year-old has greater access to both nutrition
information and various food products than say a 10 year-old; and at
what point in time does the parental responsibility shift to the
child? Much blame has been directed toward the foods available at
schools, and perhaps rightly so as the students are physically
captive within the environs, and when hungry, have little choice.
Homescan Panel*Views Survey also asked what school systems
should consider implementing, and the number one recommendation (by
41% of the respondents) was to "completely ban the sale and
consumption of unhealthy foods/beverages at school", followed closely
by the idea of 'banning the sale of unhealthy foods, but allowing
students to bring (them) from home" at 38%.
Click on thumbnail to enlarge, or click here.
Here's the bottom line: consumers are concerned. But look for the
"blame" to continue to be a moving target, at least until the next
generation of healthier foods from Kraft, Frito-Lay and the others
who have made public their efforts, appear on supermarket shelves. At
that point we can only hope the energy placed on blame will shift to
the energy used to actually consume these next generation of foods.
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Schools Accepting Money From Manufacturers
Contracts between school districts and companies like Coca-Cola and
Pepsi are common, especially as cash-strapped boards of education
have sought alternatives to program cutbacks and austerity budgets.
But some feel that schools "abuse their duty of trust" if they sign
contracts with manufacturers that allow them to sell potentially
unhealthy products to students on an exclusive basis.
The difference of opinion on this issue is reflected in the
results of a SupermarketGuru Quick Poll (July 2003), in which
participants were asked how they felt about the issue:
57 percent of respondents said it was a bad idea because it
over-commercializes the classroom.
43 percent thought that such contracts are a good idea
because they help school districts with cash flow problems.
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Consumer Dynamics Driving Growth In Natural and Organic Foods and Beverages
With growth of the Total Natural Supermarket Channel up +14.3% YTD*,
and growth in Total Organic Food & Beverage Products up +16.9% YTD*,
both retailers and manufacturers want to increase their ability to
target and communicate with the Natural and Organic consumer.
ACNielsen/SPINS' joint 2002 consumer reports on the
Natural/Organic food and beverage universe can help retailers and
manufacturers gain insight into consumer purchase behavior and
demographics. These reports provide a detailed picture of consumer
purchase dynamics driving the success of the natural/organic sector
across 10 organic categories and 300 leading natural and organic
brands.
The percent of the US population buying organic jumped in 2002 to
44.9%, contributing to the growth of organic product sales. In
general, consumers are becoming more committed buyers of organic
products, as households buying an organic product (at least twice
during the year) increased over 2001. However, overall repeat rates
are still fairly low with only 27.5% of households purchasing organic
2+ times during the year.
Click on thumbnail to enlarge, or click here.
So, who are these consumers? The average natural and organic
consumer (profiled in the chart below) tends to be Caucasian, work
full-time, and belong to a two-member household with no kids.
Click on thumbnail to enlarge, or click here.
Although the percent of households purchasing organic products
has increased, the number of households purchasing key organic brands
is still very low. For example, Boca Foods, Horizon Organic and
Kashi brands are bought by 8.9% of households or less.
However, each of these brands is showing double-digit growth
primarily driven by an increase in the buyer base.
Click on thumbnail to enlarge, or click here.
To learn more about the Natural and Organic Consumer report
please contact SPINS at 415-957-4400.
*Source: SPINSscan (Natural Supermarkets $2mm+ACV with 65% of
sales from natural products). Data through 6/14/03.
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Is There Value In Being Different?
When marketers examine their portfolios of potential new product
initiatives, there is likely a mix of closer-in line extensions as
well as some "out there" ideas that represent new brands, new
behaviors, or entirely new categories of products. As these ideas
are exposed to consumers in concept testing or idea screens, often
the more "familiar" lower risk concepts (for instance, line
extensions of an established brand) rise to the top on the basis of
concept purchase interest alone. Other more radical ideas may be
perceived by consumers as really unique, without necessarily
translating into "breakout" consumer purchase interest.
Click on thumbnail to enlarge, or click here.
While more products may not be clear winners in terms of concept
purchase intent scores, ACNielsen BASES has found that such highly
unique new products do tend to experience significant advantages
over more pedestrian new products in marketing plan efficiency. That
is, for a similar dollar investment, initiatives that break away from
the familiar achieve stronger results in key consumer and trade
marketing indicators in the real world environment. Collectively,
these advantages can play out into substantial volumetric and
financial benefits.
How can the marketing environment differ for really innovative
products? The following are two examples.
Distribution
Most typical close-in new products (e.g. line extensions)
generate greater financial benefits for the manufacturer than for the
retailer. Convincing consumers to switch brands can put more money
in the manufacturer's pocket, but does little to grow the retailer's
business. However, when not-so-typical new products offer the
potential to stimulate new behaviors that create new categories, they
tend to experience greater retailer support in terms of availability,
with clear resulting benefit to volume performance. Tracked
distribution in year one for innovative new products reaches over
90%; even the first follower in a new product category achieves
distribution approaching 90%. This is impressive when you consider
that the average new product achieves only about 70% distribution.
Click on thumbnail to enlarge, or click here.
Incremental Volume
Introducing more unique or better differentiated new products
also pays out in terms of creating new volume rather than simply
stealing share from existing brands. In-market data show that brand
extensions that are better differentiated in BASES testing show
greater ability to grow overall franchise volume. While this may not
be evident in topline "concept purchase intent", it should be
recognized and valued.
Click on thumbnail to enlarge, or click here.
Not all new product ideas are created equal - anticipating the
differences in marketing efficiency by the degree of innovation is a
useful way to ensure that we are making smart bets on the highest
potential new products. A thoughtful and accurate evaluation of new
product sales potential requires an understanding of the
circumstances that fuel these sorts of marketing issues and a process
for estimating the impact.
For further information about ACNielsen BASES, please contact Rob
Mooth at
robert.mooth@bases.com or
859.905.4000.
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ECONOMIC SNAPSHOT: Crossroads of a recovery
While key economic holdouts exist, namely strengthening labor
conditions and manufacturing activity, the overall economy appears to
be firming up just as the tax credit checks hit the homes of U.S.
consumers. No doubt that for this trepid recovery to take hold and
achieve the expected 3% gains in GDP, hiring must improve. Although
unemployment is at nine-year highs at 6.4%, there are signs of a
gradual pickup. Specifically, there has been an increase in temporary
workers, and the weekly unemployment claims have been trending
downward. While we do have a way to go to reach the desired point of
adding 150,000 jobs a month (for comparison, June payrolls declined
30,000), there does appear to be a gradual strengthening of
manufacturing conditions and earnings which are crucial for hiring to
take place. The chart below presents an aggregate view of Leading
Economic Indicators, and serves to illustrate the points mentioned
above.
Click on thumbnail to enlarge, or click here.
It is essential to not focus on one singular data point when
analyzing the economy and prospects for growth. If that were the
case, the 76.6 reading on Consumer Confidence for July would have
economists and businesses very concerned. The other proven theory is
"what consumers say and what they do" are often very different. So,
while consumer spending is expected to increase, it will be driven by
the continuation of aggressive, bottom line hurting promotions and
pricing, both of which negatively impact earnings.
Clearly with a pendulum shift of positive economic news and the
necessity of strong earnings to stimulate hiring and a sustainable
recovery, we find ourselves at a crossroads for this recovery within
the 2nd quarter earnings season. With about ½ of the S&P 500
companies reporting there is some good news, average revenues are up
3%, 2/3rds of companies have exceeded forecasts, S&P 500 earnings
forecast upgraded from 5.2% to 6.9% driven by
improved topline revenue gains and impact of a weaker dollar.
For our purposes we will be focusing on the upcoming retail
earnings. The charts below offer a comprehensive earnings snapshot of
leading retailers accounting for over $629 billion in sales. With the
majority of retailers reporting qtrly earnings over the next several
weeks this will serve as a benchmark for performance.
The key questions are;
Will Wal-Mart continue its record gains?
Can Walgreens and BJ's control high operations costs?
Will dollar stores continue strong sales and earnings growth?
Can food retailers survive their aggressive promotion tactics
to stave off the onslaught of competition?
We will spend the next several weeks watching these results very
closely and will report those key findings in the upcoming issues of
F3.
Click on thumbnail to enlarge, or click here.
Click on thumbnail to enlarge, or click here.
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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Online Food and Beverage Sales
One recent study says that online food and beverage sales this year
should be up 40 percent over last year, to approximately $3.7
billion. While that is just a small percentage of the nation's total
food and beverage sales, it reflects a growing willingness on the
part of consumers to use non-traditional means to acquire food.
In a SupermarketGuru.com Quick Poll, results suggested
that almost six out of ten respondents have ordered food over the
Internet.
What's most telling is that 80 percent of those who ordered food
on the Internet rated the experience as excellent, with few (less
than 12%) having strong negative feelings.
Click on thumbnail to enlarge, or click here.
Eleven percent said they ordered their "e-food" from their usual
supermarket, and 13 percent said from a supermarket other than their
usual store. A whopping 77 percent said they ordered online from an
outside service (like NetGrocer.com).
Expect these results to change significantly as folks like
Albertson's and Safeway roll out their Internet based programs, and
independents like Fresh Direct continue to grow. Underscoring the
fact that e-food does have a potential when priced correctly and the
customer convenience is number one.
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Dollar Store Channel Update
While most retailers have been looking over their shoulder at
Wal-Mart's store expansion, retailers in the Dollar Store channel
have been opening new stores at a pace that makes Wal-Mart's efforts
look rather tame. Since the end of 2000, Wal-Mart Corporate opened
357 stores. Over that same time period five retailers in the Dollar
Store channel added over 3,200 stores. And, in the first 6-months of
2003, store count across these retailers grew by another 600 stores.
Click on thumbnail to enlarge, or click here.
This rapid store growth has led to a large increase in the
percentage of households who shop the channel. In 2002, 62% of U.S.
households shopped the Dollar Store channel at least once during the
year. Since 1999, the shopper base within the channel grew by more
than 10,000,000 households. While retailers in the channel have been
focused against low to middle income consumers, we are seeing strong
increases in shopper penetration across both low and high income
households. As Dollar Store retailers continue to move into larger
markets, you can expect to see continued penetration across a wide
range of U.S. consumers. U.S. consumers do enjoy variety, value, and
convenience in their shopping options, and the Dollar Store channel
is well positioned in all three of these areas.
Click on thumbnail to enlarge, or click here.
Relative to the other primary retail channels selling
consumer-packaged-goods, shopping trips within the month of December
are particularly strong. I wonder how many of our reader's received
a stocking stuffer from a Dollar Store retailer during this past
holiday season?
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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COUNTRY-TO-COUNTRY: A Look At The Fastest-Growing Product Categories Across The Entire Store
This month's country-to-country looks at the fastest-growing product
categories across the entire store (large grocery chains in the U.S.,
supermarkets and hypermarkets in France). Sales for the U.S. are in
dollars; sales for France are in Euro.
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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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