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January 13, 2002
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Pressed For Time...And More
Today's busy lifestyles crunch consumers in every way possible,
altering the picture of mealtime and supermarket shopping. Even the
Wall Street Journal is writing about the supermarket as a
kitchen now.
But as we look at helping shoppers simplify their lives, let's
remember that time poverty impacts far more than just high-income
shoppers. In FMI's Trends report on shopping habits in 2002
we profiled a group of time pressed shoppers who are also battling
economic pressures. For these shoppers, convenience and prepared
foods could be a big hit, but only if they are competitively priced.
The key in serving these shoppers is knowing who your shoppers
are and how they define value. Here are some characteristics about
this time pressured group that should be closely considered.
Time challenged shoppers made up 28% of the panel surveyed for
Trends. Shoppers in this group make more trips (2.6 weekly)
to the supermarket than any other group profiled. They are also
younger (mean age: 36 years) and have lower incomes ($39,300) than
other groups profiled.
Low price is important to them, but they don't have the time to
compare prices or clip coupons. They have a busy lifestyle and put a
high premium on fast or self-scanning checkouts. And they are
extremely likely to eat at fast food restaurants, to make meal time
easy and inexpensive.
As with all shopping groups, there is a large opportunity here.
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Happy New Year. And thanks for taking time out of your schedule to
read this newsletter. I know you're busy !
We all have a sense that people are busier than ever, but the
impact on our businesses has not been fully quantified. That's why
the pace of life was the focus of our most recent Homescan Consumer
Pre*View quarterly survey. The results shed new light on which
households are most time-pressed and what opportunities exist for the
CPG industry as a result.
You'll see details of the study in a story entitled "Consumer
Pre*View," but I'll share one insight that emerged from a comparison
between the product choices of the busiest households with those who
said they are not so busy. In most cases we found, as you would
expect, more purchasing of convenience-oriented products among the
busiest households. However, the difference between the busiest
households and others was not as great as you might think, which
leads to two conclusions: 1) convenience products appeal to a wide
variety of consumers; and, 2) determining which variables will be
most effective in building consumer segments has never been more
important or more challenging. Should you use demographics?
Attitudes? Media habits? Past behavior?
Answering those questions by providing the most comprehensive
understanding of consumers is what ACNielsen and VNU are all about.
That will be the focus of our upcoming Consumer 360 Conference this
March. Join us by clicking here to register online today:
www.consumer360.com.
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CONSUMER PRE*VIEW:
According to the most recent ACNielsen Consumer Pre*View survey of
consumer attitudes and behaviors, half of all heads of household are
too tired to put much time or effort into evening meal preparation,
and nearly two-thirds are constantly looking for faster ways to do
household chores. Such time-pressured sentiments are making
convenience-oriented food and cleaning items some of the
fastest-growing consumer packaged goods (CPG) products on the market.
The research showed that 50 percent of respondents (heads of
household age 18+) agreed that: "I am so busy and in such a hurry all
day that by dinner I'm too worn out to fix a meal that requires much
in the way of time or effort." As the chart below shows, those most
likely to agree with the statement were younger and had somewhat
higher incomes.
Click on thumbnail to enlarge, or click here.
In addition, 63 percent agreed that: "I'm constantly looking for
new ways to get the household chores (like shopping, cooking,
cleaning) done faster." Younger households were most likely to agree
with the statement.
The fast pace of life is translating into success for products
that promise to save people time. The chart below highlights six
fast-growing convenience-oriented product categories.
Click on thumbnail to enlarge, or click here.
Shelf-stable and refrigerated entrees are fully-cooked meals that
just need to be heated; boosting sales in the frozen
biscuits/rolls/muffins category are products that allow people to
select the quantity that they want to heat; pre-moistened cleaning
towels have cleaning or polishing ingredients already in them;
numerous new product introductions, such as "cereal-with-milk bars,"
are boosting sales of breakfast bars; and refills for popular
electrostatic floor and furniture cleaning products are driving
growth in the polishing/cleaning cloths category.
Consumer Pre*View conducts surveys once a quarter among members
of the ACNielsen Homescan(R) consumer panel. The most recent study
was conducted in September and October 2002, and included responses
from more than 21,500 demographically balanced U.S. households.
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ECONOMIC SNAPSHOT
With year-end 2002 upon us and the major stock indexes heading
towards their third straight year of declines which have not been
seen since 1939-1941, the question is.. what is in store for 2003?
Before we address that question, a quick look back across 2002
underscores several major events which weighed heavily on the U.S
economic recovery and consumer spending.
* We began the year on the heels and concerns of the 9/11
tragedy.
* The U.S was coming out of its 10th post war recession which
began March 2001.
* January 22, 2002 - Kmart files for Chapter 11 Bankruptcy
protection and has the dubious honor of being the largest retailer in
U.S history to file.
* During the first half of 2002, a deluge of corporate accounting
scandals shakes the markets, and devastates investor confidence.
Eventually Worldcom would file for bankruptcy (the largest bankruptcy
in U.S. history). Global Crossing, Adelphia and United Airlines would
follow suit.
* The Federal Reserve lowers interest rates once in 2002,
dropping a surprising 50 basis points during their October 2002 FOMC
meeting.
* Manufacturing activity remained sluggish and teetered on the
brink of moderate growth to contraction.
* Ongoing geopolitical uncertainty and the questions of a
resolution in IRAQ persisted.
Even with all of the above, United States GDP will most likely
come in at a respectable 3% for 2002. Clearly the main story for
2002, was the resiliency of the consumer driven by record levels of
housing activity.
While history tells us economic predictions often due not
entirely hold true, the macro level consensus from numerous economic
surveys is that economic activity (GDP, Business Investment,
lowering of unemployment rate and Fed rate tightening) will take
place in the second half of 2003. Bottom line - 2002 economic
activity was paced by consumer spending. In 2003 the baton needs to
passed to business sector to anchor a successful run in 2003.
- 2002 Holiday Sales Summary -
Click on thumbnail to enlarge, or click here.
With retailers counting on November and December sales for
approximately one-fourth of their annual sales, the 2002 season with
6 less shopping days, was a key performance period. The attached
chart, presents a topline summary of the macro level results.
- Economic Indicator Explained: Unemployment Data -
Click on thumbnail to enlarge, or click here.
With consumers representing two thirds of GDP, the unemployment
rate is a closely watched economic barometer. Defined as the number
of unemployed persons as a percent of the labor force, it evaluates
statistics from two major surveys, the Current Population Survey
(household survey) and the Current Employment Statistics survey
(establishment survey). The household survey of each person 16 years
and over provides the information on the labor force, employment, and
unemployment. It is a sample survey of about 60,000 households
conducted by the U.S. Census Bureau for the Bureau of Labor
Statistics (BLS). The establishment survey provides the information
on the employment, hours, and earnings of workers on nonfarm
payrolls. This information is collected from payroll records by BLS
in cooperation with State agencies. In June 2002, the sample included
over 300,000 establishments employing about 37 million people.
* 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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TRADE PROMOTION STUDY: Where Are Those Trade Dollars Going?
ACNielsen recently conducted its twelfth annual survey of
manufacturers and its sixth annual survey of retailers regarding
trade promotion practices of manufacturers and retailers during the
calendar year 2001.
About 65% of the surveyed manufacturers reported a measurable
increase in the total budget spending, including advertising and
promotional dollars allocated across trade promotion, consumer
promotion and media advertising over the previous year. Although
the total spending increased, an even larger proportion of surveyed
manufacturers in this study (58%) reported that their organization's
trade spending as a percent of gross dollar sales, decreased in 2001
compared to 2000. Just over 40% of surveyed retailers reported an
increase in trade promotion dollars received in 2001 over 2000. With
the manufacturers cutting back on the budgets, the promotional
dollars among the retailers were sourced more from Internal Retailer
funds than from Manufacturer or Coop funding.
The percentage of manufacturer respondents who perceive the value
of trade promotion spending to be "Excellent/Good" has declined to
less than one-fourth, from the historically high figure (37%)
achieved in the previous study. The shift can be attributed to an
increase in perceptions of receiving just "Fair Value" from trade
promotion spending (up from 40% last year to 53% in this study).
There is however, no change in the "Poor Value" perceptions (22%)
from the high levels reported in the past 2 years. The majority of
participating retailers perceive that the share of trade promotion
dollars that they receive is not enough. Fewer than one-fifth of the
study respondents reported that the amount that they receive is
sufficient. While the overall assessment of the share of trade
promotion dollars received by retailers, has over the years, remained
consistently "not enough", retailers surveyed in the past 2 studies
have been more unfavorable in their evaluation.
Increasing sales volume was the main reason given by
manufacturers for spending on trade promotions. Most retailers
reported increasing store sales and increasing basket size as the key
reasons. Other important reasons mentioned by a large percentage of
retailers included bringing in new customers and increasing store
traffic. Customer Retention (induce customer loyalty, induce customer
purchase frequency) appears to have become relatively less important
over the past two years.
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Line Extensions of Established Brands: How close is too close?
Manufacturers often capitalize on the equity of a successfully
established brand name by introducing line extensions (LX) of
different flavors, sizes, or complementary uses in a related product
category. Line extensions do tend to elicit more consumer appeal
than new brands, which can result in increased sales, greater
retailer interest, and better advertising and promotion
effectiveness. However, introducing a line extension can be risky as
well, because line extension purchases are frequently at the expense
of purchases of the parent brand. So the success of a line extension
must be evaluated not only in terms of its own sales, but also in
terms of its cannibalization of the parent brand and its overall
impact on the brand franchise.
In a study with 15 major CPG manufacturers, ACNielsen BASES
created a data set of panel data, consumer responses, and marketing
spending information across 70 line extensions that were tested to
determine which factors successful line extensions had in common.
Each line extension was placed in one of three categories:
-Brand Shrinkers - Line extension actually lowered franchise sales
-Brand Growers - Line extension grew franchise by 0-20%
-Mega-Successes - Line extension grew franchise 21%+
What factors made the Mega-Successes stand apart from the rest?
1. Mega-Successes were less likely to be viewed by consumers as a
substitute for the parent brand. They also elicited higher
uniqueness ratings than their counterparts. Mega-Successes are not
simply a substitute for the parent brand, but offer something new and
different.
Click on thumbnail to enlarge, or click here.
2.Mega-Successes tended to extend lower penetration brands - in
other words, brands where there was "room to grow." Such line
extensions added new buyers to the brand franchise by increasing
trial, rather than simply shifting the purchases of current parent
brand buyers to the new item.
Click on thumbnail to enlarge, or click here.
3. Mega-Successes borrowed only about 10% of their spending from
the parent brand, in contrast to Brand Shrinkers, which borrowed over
40% of their budget from the parent brand. In short, incremental
spending yields incremental volume, while cannibalized spending
yields cannibalized volume.
Click on thumbnail to enlarge, or click here.
The key to success with line extensions is a well-differentiated
consumer proposition that offers something new from the parent brand,
and is adequately supported by the manufacturer without cannibalizing
parent brand spending.
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WAREHOUSE THREAT: Which Categories Are Most At Risk?
The Warehouse Club channel sales reached $70 billion last year and,
with 900+ stores, is expected to grow 9-10% throughout the next year.
These sales pose a threat to the Grocery store channel particularly
in the top ten selling mega-categories. The chart below shows a
ranking of these categories based on absolute dollar sales in 2001.
The first two columns show the category all-outlet dollar share that
Club Stores command and a share point change versus year ago. The
second two columns show these same figures for the Grocery channel.
Click on thumbnail to enlarge, or click here.
Paper products is the top-selling category followed by
electronics, records and tapes, and vitamins. A significant point to
note is Club Stores are showing growth in eight of the ten categories
while the Grocery channel is losing share in all categories but two.
These share changes made a substantial increase or decrease in
absolute dollar sales; for example, the 1% share increase in the
Paper Products category will drive $137 million into the Club Store
channel and away from grocery.
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Why "Store Within A Store" Is Here to Stay!
More and more retailers are leveraging other retailers and/or other
retail formats to build shopper loyalty by keeping their shoppers
from spending their dollars elsewhere. In many instances Grocery
retailers are teaming up with retailers in other channels in ways
that benefit both.
Examples include:
Wal-Mart is testing a "Dollar Store" section within their stores
to stop the erosion of shopping trips to retailers like Dollar
General, Family Dollar and Dollar Tree.
Target is adding a Starbucks counter in every new or remodeled
store. This should help Target build upon their upscale positioning
and also enhance the shopping experience of the Target guest.
Starbucks should come out a winner too as they can leverage the
Target shopping trip to increase spending on Starbucks offerings.
Home Depot is testing a Dunkin Donuts store-within-a-store
concept. What a great way to cater to the needs of their heavy
shoppers (i.e., construction crews) and give them a taste of
one-stop-shopping.
Ahold is testing new store prototypes with Office Depot and Toys
R Us sections. Albertsons is also testing the Toys R Us concept.
Office Depot and Toys R Us get the benefit of higher shopping
frequency that Grocery Stores possess. Ahold and Albertson's give
their time-starved shoppers the ability to reduce their overall
shopping trips. These type of partnerships should help Grocery
retailers in the market share battle by not giving their shoppers a
reason to shop at a competitive retailer like Wal-Mart or Target.
Safeway was selling other retailer gifts cards during this past
holiday season. Again, this type of program leverages the inherent
frequency advantage of Grocery Stores to drive sales in other retail
channels (like Department and Specialty retailers) and helps promote
one-stop shopping and store loyalty to Safeway.
Look for these types of programs to continue as retailers look to
maximize their shoppers' shopping experience and overall spending.
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SHOPPING FOR BETTER HEALTH: Organics
More than 60% of American shoppers believe that organic foods are
better for their health, according to a study by the Food Marketing
Institute (FMI) and Prevention magazine. The report also finds that
consumers remain confused about genetically modified foods.
Although more shoppers purchased organic foods in 2002 than ever
before, less than 40% purchased the organic version of their favorite
foods, possibly due to the high costs of these products. "Food
retailers are increasingly incorporating organic sales into their
whole health marketing strategies as more consumers include organic
products in their dietary plan," adds Janice Jones, FMI director of
research. "As competition in this area increases, consumers will find
broader product selection and prices that are more comparable to
non-organics."
A majority of U.S. shoppers, 61%, feel organic foods are better
for their health. In fact, well over half, 57%, have bought organic
foods in the past six months up from 50% in 2001. Consumer
Pre*View's Homescan Panel reported that in March of 2002, 67% of
Americans indicated that eating healthier was a top priority for the
future.
Click on thumbnail to enlarge, or click here.
American shoppers are confused on the issue of genetically
modified foods, according to the report. Asked generally whether such
foods are acceptable, 37% said yes while 46% said they were not
acceptable. However, if as in last year's FMI survey the purposes for
genetic modification are included (such as raising crops that are
resistant to pests or less costly to grow), acceptance among shoppers
increases to between 60 and 70%.
Despite these acceptance rates, 65% still feel that scientists
don't know enough yet to control the effects of genetic engineering,
and 60% would like to know if the foods they eat have genetically
modified components. Younger shoppers tend to be more positively
inclined toward genetically modified foods, with 45% of generation X
and Y shoppers finding these products acceptable, compared with 37%
of baby boomers and 29% of matures.
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KINESTHETICS OF THE SUPERMARKET: Music
Music is a powerful tool that is now readily acknowledged by
retailers of all kinds for its impact on consumer behavior. While
brand advertising uses the power of music on television and radio;
retailers can use their PA systems to influence how long people stay
in stores and what they buy. The emotionality of a song can create
and strengthen a relationship between a brand and the shopper. Songs
in the major keys may provoke positive and uplifting feelings while
songs in the minor keys can create a sense of melancholy, sadness, or
mystery. According to Ronald Millman's studies (published in Journal
of Consumer Research) of the effects of background music in the
supermarket and restaurant setting, consumer traffic flow can be
controlled with an upbeat tempo or a slower tempo can affect patrons
by making them take more time and, as a result, spend more money.
Another study by Richard Yalch and Eric Spangenberg, "An
Environmental Psychological study of Foreground and Background Music
as Retail Atmospheric Factors," compared the effects of foreground
music (Top 40) and background music (instrumental "easy-listening")
to a no music control group in a department store environment.
Counter to what you may expect, the under 25 year olds reported that
they had spent more time shopping in the easy listening condition,
whereas older shoppers said they shopped longer when Top 40 music was
being played. Understanding who your shoppers are, and what they
listen to will build a brand relationship and maximize sales
opportunities.
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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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