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AS PRICES RISE, SHOPPERS WILL REACT
Lately, it seems that every shopping trip and fill-up at the gas
station is costing a lot more. The folks in Washington concede that
food prices are likely to go up as much as three percent this year,
while other surveys including the American Farm Bureau are finding
prices for an assortment of groceries (including cheese, eggs,
chicken, bacon apples, potatoes and vegetable oil) up 6 percent from
the forth quarter of last year, and up 10 percent from the same
period a year ago.
As an industry we seem quite prepared to answer the cry from
consumers and the media by declaring that food prices have been
relatively stable over the past few years; which is true. December
2002 pricing was up just 0.8 percent over 2001's prices which adds
even more 'sticker shock' each time shoppers head to the checkout
lane.
However, we seem to forget that many of products on the
supermarket shelves have 'downsized' in order to keep their prices at
the same levels. While we may forget (or want to forget) this, our
shoppers have not.
The reality is that at the time of this writing, the national
price for unleaded regular gasoline is now more than $2 per gallon,
which is having an adverse effect on the economy as a whole. Any
company that has to move any kind of merchandise is now paying far
more in transportation costs than just a few months ago...and that
cannot help but have an impact on prices.
According to the University of Michigan's Index of Consumer
Sentiment, consumers are taking an increasingly dim view of the
economy largely because of gas prices and the war in Iraq; consumers
also estimate, on average, that they are spending roughly $90 more on
gasoline a month than they were a year ago. More than four out of
ten consumers surveyed by the poll said that the increase in gasoline
prices has caused their families some sort of financial hardship.
Dairy supplies, hurt by the rising overall cost of farming, a
drop in milk production output of 0.9 percent, as well as fears about
mad cow disease, also cost more - which impacts not just milk, but
ice cream and cheese. If cheese gets more expensive, that means
foods that use cheese as a main ingredient, like pizza, will also
start to cost more. U.S. Department of Agriculture reported that
April 2004's dairy prices went up 4.5 to 5.5 percent and eggs were up
6 to 7 percent.
Due to increased demand for beef because of consumers' interest
in low-carb diets, and a relative shortage of beef because of limits
on imports from Canada because of mad cow disease concerns, prices on
beef also have been on the rise. A little opportunism combined with
a little shortage has translated to price increases of 3.5 to 4.5
percent on meats just in April. Also driving up the cost of beef has
been the increase in prices for agricultural commodities such as
wheat, corn, and soybeans - all of which are fed to cattle, and which
cost more.
And even the price of chocolate is up due to the civil unrest in
West Africa which interfered with the cocoa harvest last year.
Individual companies are bringing their messages directly to
shoppers and have started to announce price increases, and coupled
with the increased cost of gasoline, many consumers are cringing...or
changing brands...or looking to store brands.
No one likes higher prices, especially Washington as they gear up
for an election in 140 days; but this time with the price of energy
and other agricultural costs skyrocketing there may be little the
Feds can do to help us.
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FMI's annual Trends survey of shoppers is now available.
Click here
for more details.
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The FMI/Rodale Shopping for Health survey of consumers is available.
Click here for more details.
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ACNielsen's 13th Annual Survey of Trade Promotion Practices is
available for $495.
Click here for more
details.
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June 14, 2004
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Who's Cookin'?
If a shopper says the answer is "always me," then they're at risk
of being called "dinosaur" or "old school." With time being a
precious commodity, eating out has become a staple in most shoppers'
lives. FMI's Trends 2004 finds that 70 percent of shoppers eat their
evening meal out at least once a week. Not surprisingly, the rate
grows with younger shoppers (about 75 percent of shoppers aged 15 to
49), but even more than half (55 percent) of the shoppers aged 65 or
more also say they eat out at least one evening a week.
Many consumers - when not eating out - are bringing prepared
meals home. Almost one-third (31 percent) say that, at least once a
week, they eat meals at home that were not prepared at home. Close
to 10 percent say they bring home take-out food three or more times
each week.
The increasing availability of take-out food from supermarkets
has increased the competitive playing field with fast food
restaurants. In January 2004, when we asked consumers where they most
often get the meals that are prepared elsewhere but eaten at home, 27
percent told us supermarkets and 35 percent said fast food
restaurants. Another 18 percent said full-service restaurants are the
source of such meals. This is quite different from what Trends showed
in 2003, when 19 percent named supermarkets, 33 percent named fast
food restaurants, and 15 percent named full-service restaurants.
It will be especially interesting to see which channel succeeds
with different age groups. FMI research shows that consumers under
age 50 are the most frequent diners at fast food restaurants and the
most likely to eat meals at home that were not prepared at home. This
is not contradictory; it simply means that consumers above age 50 are
most likely to eat meals they prepare themselves. In this past
January's survey, consumers under 50 also were more apt than others
to buy those take-home meals at fast food restaurants than at a
supermarket. With many fast food chains now offering healthier
alternatives on their menus, and many supermarkets introducing a
large array of low-carb items, the industry is watching eagerly -
this time to see what's cookin' instead of
who's cookin'.
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News Flash: Boomers Spotted in the Supermarket
A recent BusinessWeek article included a disturbing graphic. It
showed the percentage of the U.S. workforce that consists of Baby
Boomers-the 75 million Americans born between 1946 and 1964. What
was more than a little disconcerting to this 40-something-year-old
was that, while it began with the current picture (over 50 percent),
by 2050 the trend line fell ominously all the way to zero. That's
when it's assumed that all of us Boomers will be either dead or
retired!
But reports of Baby Boomers' deaths have been greatly
exaggerated. While they're not making any more of us, we are still a
very important segment and will continue to be for the next 40 to 50
years. With the leading edge of the Boomer bulge slated to turn 65
in 2011, any weaknesses in a company's approach to serving older
shoppers will soon be magnified.
The key question is this: How are you doing at serving the aging
Baby Boomer population? Watching an older shopper navigate a large
supermarket on a crowded Saturday recently, the store seemed too
large for her, the products too difficult to find and reach. The
lone motorized cart parked in a dusty corner seemed a token gesture
of the store's commitment to its older shoppers.
To be fair, many marketers are doing a fine job of serving aging
Boomers. Teeth whitening products that help Boomers' keep up a
youthful appearance have been very successful; younger Boomers with
kids are finding convenient meal solutions with shelf-stable and
refrigerated entrees; and departments devoted to healthcare products
are expanding.
But there are many other needs that have not been addressed, such
as helping older shoppers sort through the dizzying array of product
choices, decode confusing product health claims, and more easily
handle containers. From a retail perspective, stores may need to be
redesigned, and pharmacy staff may need additional training on how to
relate to older shoppers.
Given the 18-year age range within the Boomer segment, savvy
marketers are further segmenting this group. One thing is certain,
however: The current lack of adequate attention to the needs of the
oldest Boomers is still far too evident. Just try looking for
prepared or easy-to-prepare foods that are low in sodium.
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Redefining Acculturation to Uncover Opportunities Among Hispanics
Over the years, retailers and manufacturers have achieved sizable
growth by creating Spanish advertising and merchandising in an
attempt to market to the Hispanic consumer. But this approach --
segmenting Hispanic consumers using language spoken as a proxy for
acculturation -- allows CPG companies to only break the surface in
terms of sales.
By taking a more comprehensive approach to defining
acculturation, marketers can begin to understand all of the variables
that drive Hispanic consumption behavior and uncover critical new
sales opportunities.
Working off this approach, Spectra has released new research, the
Culture Point Model(TM), which explores the differences in
consumption behavior between Hispanics and non-Hispanics to redefine
acculturation.
This new definition of acculturation captures demographics and
other cultural variables in addition to language spoken. In total,
Spectra identified nine variables that predict acculturation,
including household income and presence of kids.
Spectra assigned an acculturation score to each respondent in the
survey and segmented them into three categories: Most Acculturated,
Bi-Cultural and Least Acculturated. To put the Hispanic population
in perspective, it was discovered that 33% of Hispanic consumers in
the United States are Most Acculturated, 53% are Bi-Cultural and 13%
are Least Acculturated, although that varies by metro area.
Let's compare what some categories look like through the filter
of this new acculturation segmentation. As the graphic below shows,
the Bi-Cultural Hispanic consumer skews high for light domestic beer,
but the Least Acculturated Hispanic consumer skews significantly
lower.
Click on thumbnail to enlarge, or click here.
These insights aren't useful if marketers don't have the means to
tie acculturation insights to actionable strategies. To bridge this
gap, Spectra created acculturation-based trade areas to allow
marketers to reach their Hispanic consumer in the stores and accounts
they shopped. Then, Spectra developed an acculturation-based profile
for each product, media preference, lifestyle activity, and
attitudes/opinions. Using these, marketers can identify which media,
for example, should be incorporated into their marketing strategy.
Click on thumbnail to enlarge, or click here.
Acculturation is a very important factor when marketing to the
Hispanic population. To successfully reach Hispanic consumers,
marketers must adopt a comprehensive approach to defining
acculturation.
To learn more about Spectra's new acculturation based
segmentation, Spectra HispanIQ, contact Sean Jafar at 312-583-5335 or
sean_jafar@spectramarketing.com.
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Channel Blurring Yes - But Shoppers Usually Look to Grocery Stores First
Our analyses in the area of "channel blurring" have shown that
consumers take advantage of their channel buying options. For
example, an examination of four large product categories (Snacks,
Frozen Prepared Foods, Paper Products, and Hair Care) using Shopper
Optimizer, a tool we imported from ACNielsen Europe, shows that
shoppers who buy these popular categories make category purchases
across a wide range of channels.
Click on thumbnail to enlarge, or click here.
As noted above, the vast majority of buyers in these four
categories buy in the Grocery channel, but the other channels drive
significant levels of household penetration as well. Because of
limited freezer space, household penetration for Frozen Foods is
concentrated in Grocery, Supercenters and Warehouse/Clubs. However,
more and more freezer space is creeping into the Drug, Dollar and
Mass channels.
In terms of channel incrementality (total unduplicated reach and
frequency), we see that the Grocery channel is the big winner. Many
consumers are buying in multiple channels, but Grocery is the primary
choice for most - likely due to the number of convenient locations
that the channel offers and the shopping frequency advantage that
"food-centric" Grocery stores hold. Hair Care shows a different
pattern as the Mass and Supercenter channels do provide relatively
strong levels of incremental penetration.
Click on thumbnail to enlarge, or click here.
With the exception of Frozen Foods, there are very few consumers
who are exclusive category channel buyers. For manufacturers, this
might suggest that having wide channel coverage may not be necessary,
but it is also important to understand channel distribution for
competitors and how consumer spending and/or loyalty compares across
channels.
Click on thumbnail to enlarge, or click here.
Within the Paper Products category, we see that the Grocery and
Club channels drive the highest loyalty levels. For example, among
the 89% of households who buy Paper Products in the Grocery channel,
49% of their total category spending comes from the Grocery channel.
However, the other channels drive significant loyalty levels as well.
For retailers and manufacturers, therefore, it is very important to
understand which category assortment is most important to meet the
needs of category buyers in each channel and how price might drive
cross-channel buying behavior.
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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Fresh Foods Category Snapshot: Cheese
Americans love their cheeses, and with 98 percent household
penetration and Total US Sales now topping $8.4 billion across
supermarkets, drug stores, and mass merchandisers (excluding
Wal-Mart), retailers are paying more attention to this category than
ever before. Overall cheese volume is up 3.5 percent, but there is a
shift towards shoppers buying more natural cheeses. Dollar sales of
processed cheese (bulk and sliced combined) are showing a decline of
a little over 3 percent, with almost $2.2 billion for the 52 week
period ending April 17, 2004; while natural cheeses are on the
upswing, with a dollar gain of 11.5 percent, bringing the same period
total dollars to nearly $2.7 billion.
Click on thumbnail to enlarge, or click here.
While the "low-carb" dieting frenzy has helped to drive growth of
natural cheese sales over the past 6 to 9 months, the positive
trending of the past four years reinforces the stability of the
category's growth.
Shredded cheeses also continue to grow their base (originally
promoted strictly for convenience) by adding new combinations of
different varieties and more packaging sizes and closures. Look for
further packaging and size innovation to spread to chunks and slices
to try to capitalize on shredded's success.
The demographics of the "cheese consumer" are as distinct as the
varieties now offered. While in general terms, we can say that random
weight cheeses skew towards a higher income ($70,000+), empty nester
professional and prepackaged UPC-coded cheeses appeal to larger
households, the reality is that each type, taste and variety (e.g.,
imported vs. domestic, brie vs. camembert, NY State Cheddar vs.
Wisconsin Cheddar) has appeal to a distinct consumer and may shift
based on the foods and wines served at a particular meal or party
occasion.
Less than 3 percent of Total Cheese is purchased with a
manufacturer's coupon while 31 percent is purchased "on deal".
However, the exact percentages vary by variety and random weight vs.
packaged (for example: Mozzarella is purchased with coupon 4.5
percent and "on deal" 30.6 percent vs. Swiss cheese with coupon 1.8
percent and "on deal" 21 percent) the topline is that there is an
opportunity for more effective branding in the high volume and high
growth natural cheese category by shifting these promotional dollars
towards more branded advertising and public relations efforts. Many
of the smaller specialty imported cheeses have done an excellent job
of establishing their brands and have created a loyal consumer
following by actively promoting their product in mainstream
supermarkets and other outlets without using the "on deal" strategy.
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ECONOMIC SNAPSHOT: Closing the Gap of Economic Insights
In developing the insights behind the Economic Snapshot article for
F3, over 100 U.S and Global economic datapoints are analyzed to
determine the macro level trends and their implications on consumer
spending. While it is evident that the preponderance of these
datapoints point to sustainable growth well into 2004, there are
concerns -- most noticeably the rising gas prices and geopolitical
unrest. The former has the potential to impact the consumer's level
of spending in the coming summer months. The improving labor market,
which has added close to 1 million jobs as well as low interest rates
and inflation, should minimize that impact.
That being said, noticeably absent from the existing economic
datapoints is a reliable and trendable review of the retailers'
assessment of current and future business conditions. With Retail
Sales representing close to 50 percent of the $11 trillion dollar
U.S. GDP, insights into what is driving consumer spending are
critical. To close this gap, VNU Business Media & ACNielsen launched
a Retailer Sentiment Index in December 2003. A robust panel of over
500 retail participants across each class of trade continues to
uncover insights into the following areas:
Current business conditions
Business conditions in the next six months
Expected changes in store counts
Hiring expectations
Open-ended questions focused on operational challenges
Challenges to earnings growth
Evident in the following slides is that retailers across the
board are becoming more optimistic regarding economic conditions
going forward. Although, they do share the same level of concern
that consumers have regarding high gas prices, which affected the May
results. The slide on business goals for 2004 points to a return of
the revenue generation to drive earnings as retailers try to move
past cost control initiatives. Interestingly, a common theme became
apparent in the analysis of 2004 goals; namely, retailers are
concentrating on new ways to "wow" the customer and establish clear
and sustaining points of differentiation.
Click on thumbnail to enlarge, or click here.
Click on thumbnail to enlarge, or click here.
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.
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Everyone wants to know...what's the next diet?
While it seems that almost everyone is focused on Atkins-like diets
these days, results from a new Homescan Panel Views survey indicate
that reducing carbohydrate intake may not be consumers' highest
priority. When ranked by importance in deciding which new products
to purchase, consumers place foods "low in fat" as number one, with
products that are "high in protein" and "low in carbohydrates" way
down the list tied for sixth place. Results from this survey also
show that fully one-third of consumers actively limit the amount of
fat or cholesterol in their diets.
Click on thumbnail to enlarge, or click here.
The survey also found that consumers are paying attention to the
Nutrition Facts label on foods, with almost 60 percent reporting that
they read the Nutrition Facts label either "always" or "usually" when
buying a product for the first time. With the new Dietary Guidelines
and Recommended Daily Allowances (RDA) scheduled to be released to
consumers in January of 2005, smart manufacturers will use these new
guidelines as a way to reinforce their products' positioning and gain
added attention.
Click on thumbnail to enlarge, or click here.
Expect to see healthier foods' brand advertising shift, at least
for the first quarter of 2005, to a more direct and focused messaging
which directs shoppers to read the Nutrition Facts label and adds
more importance to the package design itself.
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2004 Growth Drivers for CPG Companies
When we look at CPG performance across FDM (excluding Wal-Mart), we
see dollar sales growth across all departments except HBA & non-food
grocery, which includes paper products, detergents, and diapers.
Click on thumbnail to enlarge, or click here.
In the latest ACNielsen BASES analysis, common growth themes are
apparent. In food and beverage, convenience and health & wellness
have driven the majority of growth. The Atkins diet phenomenon and
consumers' ambition to eat healthier are major contributors to these
trends. Much of the health & wellness growth is from mature
categories, such as cheese, eggs and bacon, that are "riding the
wave" of the current interest in low-carb/high-protein diets. Heart
health -- including a general trend towards eating well to keep the
heart healthy and taking low dose aspirin -- continues to drive sales
as well.
Convenience is being driven by all shoppers, who seem to be on
the go constantly, needing to eat and snack on the run. Packaging
is an important component, with tuna in shelf-stable aseptic packs,
single-serve snack food canisters, ready-made salads, meal starters
and shelf-stable entrees all fitting in with the convenience trend.
It is noteworthy that while all Food/Beverage departments are
growing, they are doing so while the number of new items being
introduced is declining.
Click on thumbnail to enlarge, or click here.
Perhaps the CPG industry's quest to launch new products with a
more thorough understanding of consumer needs and desires is
beginning to pay dividends.
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The Asian Foods Marketing Opportunity
For the past 20 years, American shoppers have added more flavor to
their kitchens by expanding their palates through ethnic cuisines.
And most shoppers are discovering that they don't have to go to
Chinatown for Chinese food anymore. Local supermarkets are now
stocking most ingredients used to prepare Asian foods, as well as
frozen prepared Asian foods.
Clearly, grocery retailers are benefiting from this trend. While
75 percent of respondents to a recent SupermarketGuru.com Quick Poll
said that they currently purchase Asian foods from their
supermarkets, only 29 percent said that they ate at an Asian
restaurant twice a month.
Click on thumbnail to enlarge, or click here.
One opportunity for further expanding the appeal of Asian Food
rests in raising its profile as a healthy food.
Click on thumbnail to enlarge, or click here.
As consumers' diet and health conscious shoppers move beyond "low
carb", many of whom have been disappointed or bored with the taste
profile or monotonous menus of this diet, there is an opportunity to
promote the high flavor and good health profile of many ethnic
cuisines - in particular, Asian. Soy, a core ingredient in Asian
cuisine, has now become one of the favorite ingredients for lots of
Americans looking to improve their dietary health. According to the
United Soybean Board, soy protein provides numerous health benefits.
The Food and Drug Administration (FDA) officially recognized the
cholesterol-lowering effects of soy protein in 1999, and the American
Heart Association followed suit one year later. The FDA-approved
health claim states that 25 grams of soy protein per day may reduce
the risk of heart disease. Recent research suggests that soy may
lower the risk of prostate, colon and breast cancers as well as
osteoporosis and other bone health concerns. Emerging research also
indicates that soy protein may reduce high blood pressure and some
symptoms of menopause.
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COUNTRY-TO-COUNTRY: A Look at the Fastest Growing Categories in the Danish Grocery Channel
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/June04c2c2.gif) and this
link for graph two (
http://www.factsfiguresfuture.com/enlarged/June04c2c2.gif
)
As we compare and contrast the fastest growing categories in both
of these countries what is obvious is the Danes' purchasing of
healthier and less processed foods.
As of the end of December 2003, both diet chocolate and diet soft
drinks continue to make the top ten list in the US, with Asian foods
the sole ethnic cuisine making the list.
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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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