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Election 2004: Will FAT Be The Deciding Vote?
America is FAT ... and being too fat is a national epidemic and
it appears that both the folks in Washington DC and food
manufacturers are ready to do something about it. Last month there
were two major "fat" declarations by two of America's highest profile
health professionals. U.S. Surgeon General Richard Carmona termed
obesity as "the terror within" (obviously trying to bring our fear of
fat to the same level of our fear of the Taliban). Julie Gerberding,
director of the Centers for Disease Control and Prevention (CDC),
announced that the Centers has recalculated the actual causes of
death in the U.S. and found that obesity moved up very close to
tobacco, and is almost the number one health threat.
It's time. Expect "America is too fat" to be one agenda buzz from
many politicians as elections near. The government is reacting
quickly (as they should) with the labeling of trans fats as more
communities are pushing "fat taxes" and banning certain foods from
schools. Fat makes great headlines. But after we read the headlines
and hear all the grandiose schemes for more walking paths, better
labeling, new genetic discoveries, it still comes down to eating
better, eating less and exercising more...and having a world with
less stress and a better economy would certainly help.
Leading retailers are working with manufacturers to come up with
new products that are low in calories and sugar. Kraft Foods
announced that it is creating a major global initiative to address
fat issues, with virtually every product in its considerable stable
reviewed to meet stricter nutritional guidelines including reducing
portion sizes and adjusting their marketing practices towards
children. McDonald's is testing a Happy Meal that replaces fries with
fruit. And PepsiCo is within weeks of eliminating all
artery-clogging trans fatty acids from its chips and snacks.
It isn't like everything is going to change overnight, though.
The US Food and Drug Administration (FDA) announcement that food
labels will need to declare the amount of trans fat in products
includes a deadline of January 1, 2006.
But how will our shoppers react? Nutrition information continues
to be confusing to many consumers; clear, honest communication is
needed by both retailers and brands ... and affords the opportunity
to build strong consumer relationships.
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July 14, 2003
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The Retailer As A Brand
Earlier this year, ACNielsen released its annual "Trade Promotion
Practices Study." Within the context of the survey, both
manufacturers and retailers were asked to rate a number of critical
issues facing the industry today. Both agreed that the two most
critical issues to their business are promotion efficiency /
effectiveness and category management.
In fact, manufacturers and retailers are in general alignment on
the top 10 critical issues, though they differ slightly on the
hierarchy within those lists.
However, there are some differences that emerge:
Manufacturers view the ability to market at store levels and
efficient consumer response to be more critical issues than retailers
perceive;
Meanwhile, retailers are more concerned than manufacturers
regarding issues more relevant to their business...making the
retailer a brand, customer loyalty/retention, food safety/security
and the growth of private label.
In the late eighties / early nineties, consumers (and retailers)
equated Generic with Private Label. Either term was used to talk of a
non-branded product that tended to have a cheaper price and reflect a
lower quality good.
Today, Private Label has established its own identity as one of
high quality products that meet high consumer expectations. A recent
Gallup poll found that nearly seven out of ten consumers rated store
brand products equal to or better than the national brands.
Retailers have come to recognize that the sales of Private Label
items can certainly add to the bottom line profit margin. More
recently, retailers view the presence of Private Label products as a
contributor to retailer loyalty.
It is also clear that retailers invest considerable dollars to
create a store brand name with equity, find a supplier that
manufacturers quality goods, and design packaging across categories
so that the brand is recognized from margarine to canned peas to
frozen pizzas. In essence, store brands now help retailers expand
their identity. No longer is Retailer X just "the most convenient
place to shop," or "the store that still has baggers;" it may now be
know as "the store that carries President's Choice, or Kirkland
Signature."
To the manufacturers of national brands, I submit that private
label and national brands can co-exist. Click on the links for two
charts illustrating how the demographic skew of private label is
toward larger households(
Chart 1)
; while the skew for the leading national brand in the categories
that we examined points toward the more affluent (
Chart 2)
. The implication being that having national brands alongside
private label allows a retailer to broaden its demographic appeal.
To learn more about the emerging growth of Private Label, look
for our annual U.S. Private Label Study due out later this month; and
a soon to be released ACNielsen Global Services Executive News Report
investigating global trends in Private Label. In this year's U.S.
Private Label study, we looked at correlations to understand how
Private Label sales impact retailer loyalty. We found that there is a
correlation between Private Label loyalty in a retailer and consumer
loyalty to a retailer. Leading to the conclusion that Private Label
is important to a retailer's more important customers. The
implication: creating a Private Label program focused on building
loyalty will help overall retailer loyalty.
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The Boomers' Dieting Craze
You can't pick up a newspaper these days without reading some new
take on dieting or obesity. One segment of the population that is
particularly affected by these topics is the Baby Boomers.
We've noted in past FMI research that the Boomer group is not
likely to quietly accept the aging process, which for many folks
includes a tendency to grow around the middle. Whether the solution
may be found in low fat or low carb diets, our research suggests that
Boomers will be looking for more information about how to slenderize
and maintain good health.
According to
Shopping for Health 2002, Delving Deeper: Shopper Subgroups from FMI and Rodale Prevention:
More than three-fourths of Boomers say their purchase
decisions are influenced by their desire to reduce the risk of
developing specific health-related conditions or illnesses.
Six out of 10 Boomers say they are overweight - even though
only 51 percent of them qualify as overweight according to BMI scale.
Six out of 10 Boomers say that grocery store prepared meals
are healthful.
Boomers are more likely than younger and older age groups to
use information available in store displays.
Seven out of 10 Boomers are using fortified foods to maintain
health.
As Boomers get older, they face the inevitable increased
likelihood of illness. During the past year nearly one out of three
Boomer shoppers has been told to change their eating habits by a
physician. More than half of Boomers strongly agree that in most
cases eating healthfully is a better way to manage illness than
taking medications.
Yet Boomers find obstacles to eating as healthfully as they would
like. One obstacle is the desire for "fast food" whether from a
fast-food restaurant or other source. Both Boomers and Generations X
and Y shoppers say this is a major obstacle, yet for supermarkets
this can be a great sales point. Because Boomers do perceive prepared
foods from grocery stores as "healthful," retailers can stress the
healthy aspect of these food offerings to target their needs for both
convenience and health.
Boomers have always exhibited a desire to self-educate. They are
heavy users of a variety of information sources for health and
nutrition. Half or more of Boomers seek information from healthcare
professionals, books, magazines, friends/family, or pharmacists. They
are also more likely than other groups to turn to store displays for
information. On average, Boomers show a high interest in having
health-related services in their "ideal" store including
knowledgeable staff, health services such as flu shots or cholesterol
screenings, organic foods, herbal and natural remedies and counseling
from a nutritionist or dietician.
As for keeping that weight off, conflicting information is
another obstacle for three out of 10 of those who say their diet is
not as healthy as it should be. Although Boomers acknowledge that
being somewhat self-indulgent may be contributing to their diet woes,
three quarters of Boomers agree that they eat foods they enjoy, even
if these foods are not so good for them.
Boomers use fortified foods, organics and herbal remedies to
supplement their health care. The supermarket is the number one
choice when these shoppers are ask asked which retail venue best
serves their self-care needs, but only barely edges out discount
stores with 28 percent naming supermarkets best compared with 27
percent saying discount stores. Can supermarkets do a better job of
targeting self-care to Boomers? We say, they can and should.
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How Effective Are Nutrition Labels?
What do shoppers want on their labels is top of mind these days both
in Washington D.C. and in most CPG company boardrooms. We polled
nearly 2,600 of our readers on SupermarketGuru.com about the
effectiveness of the nutrition labels on the nation's food products -
and 90 percent of our users said that the labels as they exist today
"are helpful."
When asked to rank the importance of the various items that could
be listed on food product labels, the responses:
Click on thumbnail to enlarge, or click here.
When we asked which "hypothetical" (at the time) listing would be
the "most useful," the number one response was the listing of trans
fats, followed by percentage of GMO ingredients in the product,
percentage of artificial ingredients and the number of hours it would
take to burn off calories consumed by eating the product.
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Is Soy Mainstream At Last?
Known for its health benefits, soy has been popping up as an
ingredient in more and more products on the supermarket shelves
lately. In a SupermarketGuru.com Quick Poll, we discovered that more
than two-thirds of our users have made soy a regular part of their
diets, with more than eight out of ten people buying their soy
products in the local supermarket - a sure sign that it is becoming a
diet staple.
There was a pretty good spread among the products in which our
users consume soy: milk (31 percent), snacks (27 percent), tofu
entrees (19 percent), raw tofu (16 percent) and breakfast cereals
(eight percent).
Click on thumbnail to enlarge, or click here.
When people make choices other than soy, they said that almost
half the time it is because of the taste of a specific item; other
than that, obstacles were price (25 percent) and variety (10
percent). Just 18 percent said they'd never tried soy.
Click on thumbnail to enlarge, or click here.
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The Evolution (?!) of Private Label
Private Label has come a long way from its generic heritage. When it
first appeared on the scene over a decade ago, Private Label was
known for low price, low quality products available in only a few
food commodity categories. Today, many consumers feel that in a
growing number of categories Private Label quality is on par or even
above that of nationally branded products - while still offering such
quality at a "value" price. In the past 5 years Private Label dollar
sales growth has been two times the rate of branded growth as store
brands have seen their sales volume expand nearly 40% over this time
period. As Private Label continues to upgrade its quality consumers
have responded favorably, opening the door for Private Label to
expand into more and more categories.
In the same period, Private Label has expanded into 75 additional
categories - now having a presence at shelf in nearly three-fourths
of all consumer packaged goods categories. Some of these "new"
Private Label businesses are focused around small household
appliances (toaster ovens, carpet cleaners, food steamers & woks).
Others have capitalized on Americans' efforts to be healthier
(antismoking products, diet aids, & trail mixes).
More than just introducing itself to new categories, Private
Label has also taken the #1 brand share position in one-fourth of all
the categories in which it competes. It may come as no surprise that
Private Label is the market leader in Milk & Eggs; however, Private
Label also stands as the largest brand in categories such as Frozen
Vegetables, Canned Fruit, Bottled Water, and Plastic Bags & Wraps.
In well-developed Private Label categories, Private Label is
upgrading itself into premium lines in some retailers and offering
products in more and larger sizes, helping sales within existing
Private Label categories drive the majority of overall Private Label
sales.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/JulyPL1.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/JulyPL2.jpg
)
As consumers continue to gain trust with Private Label products
and extend trial of the store brand to additional categories, Private
Label sales will thrive. Just like any brand, however, Private Label
can not be all things to all consumers and thus proper positioning,
pricing, and promotional planning of Private Label vs. national
brands must be considered by both manufacturers and their retail
partners.
For more information about private label trends or to arrange for
a presentation on the topic, contact Gail Zielinski, Account
Director, ACNielsen Homescan Consumer Insights at
gzielinski@acnielsen.com.
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COUNTRY-TO-COUNTRY: Will Non-Food Sales in Mexico Predict U.S. Sales?
As the Latin population continues to increase in the U.S., we are
witnessing many leading retailers develop "Hispanic formats." This
month in Country-to-Country, we compare the fastest growing non-food
categories between the U.S. and Mexico.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/JulyC2C1.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/JulyC2C2.jpg
)
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ECONOMIC SNAPSHOT - Mid Year Report
With the highly anticipated Federal Reserve meeting behind us, which
resulted in a ¼ point rate reduction along with the 2nd quarter
earnings season firmly in place, the majority of economic factors are
now in place that will determine whether the U.S. will strongly
reemerge from this sluggish period or continue to languish in a slow
growth mode. Therefore in this issue of F3 we will concentrate on the
economic conditions that shaped the first half of 2003 with
commentary on the factors driving the prospects for second half
conditions.
Before we begin, it is worth noting that at this time last year,
economists were foretelling of a second half recovery as the
fundamentals were in place for a rebound. Sound familiar? What
occurred to suspend the recovery? Primarily an unprecedented level of
accounting scandals, which resulted in several of the largest
bankruptcies in U.S history and unseated investor confidence in
corporate earnings for the remainder of the year. With renewed
confidence that reported earnings are not fraudulent (one hopes), the
focus turns to the economic fundamentals.
Economic Conditions - Prospects For Growth
The Positives:
Broad Based Gains In The Equity Markets: As evidenced
by the DOW, NASDAQ, S&P and S&P Retail Index all up 12%, 21%, 15% and
20% respectively since the end of 1Q03, a sustained rally has
occurred which appears to have shifted investor sentiment. This is an
important indicator as the market historically leads the economy.
Aggressive Monetary Policy: While the Fed has been
aggressive in setting monetary policy conducive to long term growth
since 2001, The 45 year low Federal Funds Rate at 1%, should further
stimulate consumer and corporate spending.
Simulative Fiscal Policy: The $350 billion tax cut
plan, which will reduce payroll taxes and provide child tax credits
will most likely be used to pay down debt or increase household
spending.
Low Inflation: Although the Fed and Corporate America
are increasingly concerned about deflation or disinflation, consumers
are in an advantageous position as the core rate of inflation rose
1.6% in May vs. year ago.
Rising Consumer Sentiment: With consumer spending
accounting for over 2/3 of the U.S GDP, measures into future spending
are closely watched. While both indexes (Conference Board and
University of Michigan) have expectedly dropped since their post IRAQ
highs, the future expectations index or the consumers outlook for
spending in next 3-6 months continues to improve.
No Signs Of A Housing Slowdown: Refinancing
Applications, New Home Sales, Existing Home Sales, and Building
Permits - No matter how you view it, the latest housing measures
continue on their record levels which should further stimulate
spending.
Retail Sales: Total sales, as reported by the Dept of
Commerce, have rebounded from their 1st qtr lows and exceeded
forecasts for the May period.
Productivity: Although a contributor to a hiring
slowdown, the continued strong productivity gains boost corporate
bottom lines, which should increase spending as the output per
man-hours worked increases.
Leading Indicators: Pointing to an overall
strengthening of economic conditions is the following summary of the
leading indicators.
Click on thumbnail to enlarge, or click here.
The Negatives:
Suffice it to say, not all indicators are positive, in fact the
two noted below continue on their sluggish path and can themselves
cause a slowdown to occur.
Labor Market: Although the unemployment rate reported
at 6.4% for June, is the highest in nine years, the payroll data is
much more representative of the current employment conditions.
Briefly, hiring clearly remains subdued, but the drop in payrolls may
be declining. Further, temporary jobs are increasing and the factory
workweek has extended slightly. Both point to a potential
strengthening of labor conditions.
Manufacturing activity: Although small, there are
signs of a pickup in business investment as future orders reported by
the Institute for Supply Mgmt and Industrial Production have
increased. However overall gains in manufacturing remain sporadic.
Retail Sector:
An analysis of the first half of 2003 would not be complete
without several comments on the retail sector as a number of
strategic trends are developing which will shape retailing going
forward:
Corporate Profits: The overall profit picture
improved across most classes of trade primarily driven by cost
cutting initiatives. However Dollar Stores lead the way on solid
revenue and margin gains. Generally Food retailers met their lowered
expectations but continue to downgrade forecasts for the remainder of
the year.
Disinflation: While existing for over 10 years, the
steady decline in the rate of price increases continues to present
challenges to most retailers as the impact is felt on their bottom
lines. With excess capacity, delayed consumer spending, open trade
and the Wal-Mart factor, this will not go away anytime soon and true
innovation will be one of the keys for growth.
Kmart's Ability To Execute: Can Kmart effectively
execute its stated strategies in a post bankruptcy era? The second
half of 2003 will be the make or break period.
Ramifications From Ahold: While Ahold's $800 million
earnings overstatement was probably the biggest retailing news in the
first half of 2003, the next big question is what will the SEC turn
up as its attention shifts to other leading Food retailers?
Convergence of Corporate Needs and Consumer Lifestyles:
Coming from two ends of the spectrum, 1) corporations' desire to
manage costs and 2)consumers' desire for increased convenience...
services such as self checkout, self scanners and in store services
will be increasingly tested.
Shifts in The Retail Landscape: Historically as the
economy improves, merger and acquisition activity increases. Given
the amount of acquisition rumors occurring and financial challenges
facing retailers, a shuffling of the retail players may occur in the
second half.
2nd Half 2003 Forecasts:
With all of the above, plus the economic slowdowns occurring in
Europe and developed Asia, the second half of 2003 will prove to be
one of the most interesting and trend setting as economies and
retailers begin to set themselves up for another period of positive
economic growth and increased consumer spending.
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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Using Consumers to PROVE the theories
The recent Food Marketing Institute (FMI) convention in Chicago
highlighted the disconnect between what the future looks like
according to the retailers and consumers. At one of the FMI's
workshops, a variety of experts suggested different "roles" that
consumers are looking for food stores to fill.
We wanted to 'test' the experts, so we asked our SupermarketGuru
Consumer Panel (SG) just what they thought about the ideas that were
presented, and results showed that as well intentioned as many of
these experts may be, they may not be entirely in synch with what
today's shoppers are really thinking.
Here is the consumers' reaction to the experts' ideas:
EXPERT THEORY: The Supermarket As Fountain Of Youth,
providing products to keep baby boomers youthful in mind and body.
SG SHOPPERS:
29 percent of said that the "fountain of youth" seemed like a
good role for the supermarket to play.
EXPERT THEORY: The Supermarket As Wellness Provider,
providing products and services that cater to women's health needs.
SG SHOPPERS: About 14 percent liked this idea, which
obviously has some relationship to the "fountain of youth" concept.
But, what were survey participants really interested in?
Forty-three percent said they just wanted the store to be
clean, and 14 percent said they just want the
cheapest prices.
Click on thumbnail to enlarge, or click here.
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Toys in the Grocery Store?
Toys R Us and Albertsons reportedly have signed a deal that will have
the toy retailer establishing "Toy Box" shops inside almost all of
Albertsons' food and drug stores nationwide.
Based on a SupermarketGuru Quick Poll, this seems to be a good
decision, since 54 percent of participants said that they have bought
toys in a supermarket. Participants said their choice to purchase
toys in the supermarket was swayed by price (48 percent), convenience
(36 percent) and selection (16 percent).
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/JulyToys1.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/JulyToys2.jpg
)
However, there have been reports that Toys R Us was thinking of
putting groceries in its toy stores...but they may want to think
again, since 84 percent of participants said they would never buy
groceries from a Toys R Us.
Click on thumbnail to enlarge, or click here.
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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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