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Consumer Convergence
A month or so has passed since the barrage of food and retail
trade shows, and my take-away from all of them is the same. No matter
what type of manufacturer or retailer, the light bulb has finally
been illuminated: we all need to know more about the shopper if we
are to be successful. And it's getting more difficult to do that each
day as shoppers become more channel and demographically diverse.
In this issue of F3 we bring you closer to today's shopper
through a breakthrough methodology that brings Category Management to
the next level - Trip Management. Health continues to be the focus
for many aging baby boomers, who by the way, begin to turn 65 less
than five years from now, and beverages (especially in milk, juice
and alternative beverages) are clearly reaping the benefits of the
trend. In our look at the Hot Dog category though, it's surprising to
note that the "healthier" offerings are actually showing declines and
proving once again that the American consumer is not willing to
sacrifice taste for health.
One of the next big ideas? It's all about Fair Trade - and now
that Fair Trade coffee has become mainstream, we predict that many
more categories will become globally responsible...and see their
consumer base expand.
It is BBQ time, and on a personal note, I urge you to share as
much food safety information as you can with your customers - for the
best info and downloadable point of sale and ad slicks go to
www.fightbac.org.
Have a happy 4th of July!
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The 14th Annual Trade Promotion Practices and Emerging Issues Study
is now available from ACNielsen. To purchase a copy,
click here.
ACNielsen's latest annual Consumer & Market Trends Report is now
available. For information and to order
click here.
ACNielsen's latest Private Label Trends Report is now available. For
information,
click here.
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June 13, 2005
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A Generation by Any Other Name...
A thirty-something member of my staff complained to me recently
that Generation X is completely misnamed. Rather than the bland "X,"
she suggested her age group should be called the "Apple Generation."
When I asked why, her response was simple: "because we didn't fall
far from the tree."
Her observation is extremely interesting when considering the
shopping behavior of the Xers. As shown clearly in FMI's
Trends of US Grocery Shoppers, Xers are behaving more like
their parents and grandparents and less like the younger Generation Y.
To those who can remember the wailing and hand wringing over Gen
X's behavior a decade ago, this might be a shock. Gen X was supposed
to be the slacker generation. This group was born into the malaise
and unrest of the mid-1960s and 1970s, and they were allegedly
entering adulthood with a firm grasp on doing nothing. Nothing has
been further from the truth.
Gen X is a generation of new technology and new realities. They
grew up where both parents (if there were two parents) worked outside
the home, and saw lifetime job security disappear.
It's no surprise they are different when it comes to food
shopping too. They came of age as retail channels blurred and eating
out became almost as large as eating at home. Now they've settled
down, are having children and they've become, well, their parents.
Trends finds they spend virtually the same amount of money
on food shopping each week as their parents: $97 overall and $74 in
their primary store, shop almost the same number of times (2.0),
select stores based on low prices and high quality perishables. They
eat out about as often as their parents and grandparents, yet
significantly less than Generation Y.
In the most important way, however, Xers are just like their
parents: they can't be easily defined into one shopping group. Just
as the "slacker" generation produced some amazing entrepreneurs, so
is it filled with all types of shoppers seeking a wide array of
experiences; underscoring the challenge for supermarket operators and
manufacturers to find the best way to serve them.
Trends is filled with great information about Gen X, and
all the other current generations of shoppers. Learn more about it
at www.fmi.org (check the FMI Store).
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Category Management: Dead or Alive?
Reports of the death of category management have been greatly
exaggerated.
According to the latest ACNielsen study on trade promotion
practices and emerging issues, manufacturers and retailers still view
it as one of the top five most critical issues in business today.
However, the study also found that many of the traditional
category management tools are being used less often by CPG retailers
and manufacturers.
And when they are employed, the two sides have somewhat different
reasons for doing so. While both sides use category management to
optimize item mix, manufacturers primarily want to influence
decisions on their categories, while retailers want to increase
overall store revenue and profitability.
In order to put retailers and manufacturers on the same page, and
to increase the value both parties derive from the process, category
management is evolving. Leading practitioners are moving it from a
product orientation into the realm of consumer dynamics where
lifestyles, attitudes and other factors that drive purchasing
decisions in different retail channels are the focus.
ACNielsen is helping its clients go even further, focusing on how
shoppers shop and how they utilize different channels.
Continuing the innovative work begun by Unilever and the
Coca-Cola Retailing Research Council, ACNielsen, via our Homescan
consumer panel, has analyzed millions of all-outlet shopping trips to
better understand four distinct types-convenience, fill-in, routine
and stock-up. Already, we are seeing a not-so-subtle shift in the
dynamics of the entire marketplace.
Conventional supermarkets, once a bastion of the routine, weekly
shopping trip or the bigger ticket stock-up trip, are being usurped
by supercenters and warehouse clubs. This is leaving supermarkets in
a dogfight for the fill-in and convenience business.
We believe that "Trip Management" has great potential to help
supermarkets focus on more convenient store layouts or merchandising
of categories that will drive consumers back into the stores.
You'll be hearing much more about this topic soon. For now,
there's more in Todd Hale's column in this issue of
Facts, Figures & the Future.
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Milk Sales on the Rebound
Talk about a category with a split personality! Milk, without
question, one of the essential staples in the American diet, has been
taking a hit in recent years. While the attention of the U.S.
consumer has been toward healthy consumption and dieting fueled by
low-fat, low-sugar and low-carb regimens, milk has been looked at
with a discerning eye by many consumers - primarily because of its
fat content (or perception thereof).
As a result, according to ACNielsen Strategic Planner data, while
consumers have been migrating toward beverages that carry the
perception of "healthy consumption" - such as bottled water, sports
drinks, New Age beverages and even energy drinks - refrigerated milk
has seen equivalent volume declines (on a 16-ounce basis) in three of
the past four years in the food channel. For the 52 weeks ending
03/19/05, equivalized volume was down 3.9% for the overall category.
No segment was spared, as whole milk (milk fat content of 3.25% or
greater) led the way with a 7.0 percent dip in volume, followed by
skim (less than 0.5% milk fat) down 3.2%, reduced fat (2.0% milk fat)
off 2.1%, and low fat (0.5% to less than 1.5% milk fat) dropping 1.7%.
Click on thumbnail to enlarge, or click here.
Over the four-year period, only the 52-week period ending
03/22/03 saw a marginal increase (0.7 for the entire category). That
year, three of the four segments saw minimal growth, while skim milk
saw a 1.5% dip. While skim milk lacks milk fat, making it a healthier
option for diet-conscious consumers, it does contain sugar and
therefore carbs, and also has an uphill fight in the popular
perception that it is a less appealing tasting product.
Click on thumbnail to enlarge, or click here.
Interestingly, despite the lower consumption of milk, dollar
volume has been up significantly, particularly over the 52-week
period ending 03/19/05 in the food channel. Aggressive pricing by
major grocery chains that often saw a gallon of milk approach - and
exceed - the $4 barrier in many metropolitan markets, has favorably
impacted dollar volume. Indeed, all relevant segments enjoyed dollar
growth. Reduced fat grew 9.8%, while low-fat increased 9.1%, skim
was up 6.5% and whole milk enjoyed a 6.4% gain.
So what can be done to increase overall dairy consumption? To
begin with, the perception that milk is somehow "unhealthy" seems to
be slowly changing. Several reports have come to light of late
suggesting that not only are those aforementioned negative
perceptions of milk not accurate - but that the calcium-rich fluid is
a necessary component of any healthy diet. For dieters, in
particular, new research suggests that the notion of milk
contributing to weight gain may be fallacious.
With milk dollar sales on the rebound, and a plethora of good
news about the product flooding the marketplace, marketers and
retailers alike might be well advised to communicate the positives
about drinking milk to consumers to affect a turnaround in overall
consumption in this all-important category.
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Beyond Category Management to Trip Management
Innovative research from both the Coca-Cola Retailing Research
Council and Unilever has helped to focus retailers and manufacturers
to better understand how U.S. consumers shop for small versus large
shopping trips and the role that categories, lifestyles, shopper
attitudes, time pressures, etc. play in driving those trips.
ACNielsen has been investigating similar issues and looking at
the differences in trip capture across retail channels and retailers.
Additionally, we have been quantifying the categories that are
strong drivers of certain trip types as well as identifying the
categories that are likely to be included in those shopping trips.
This work began by examining 7 million plus annual "all-outlet"
shopping trips captured from the ACNielsen Homescan Consumer Panel.
We segmented those shopping trips into the following four trip types:
Convenience: low value, immediate need driven baskets with an
average basket ring of $11 per trip
Fill-In: slightly higher value baskets averaging $44 per trip
Routine: weekly, high value shopping trips averaging $87 per trip
Stock-up: large trips averaging $219 per trip
As you might expect, given differences in product and service
offerings, consumer trip patterns vary greatly by retail channel.
The convenience-oriented channels (Dollar Stores, C-Stores, and Drug
Stores) are more reliant on immediate trips. Supercenters (defined
as Kmart, Target and Wal-Mart) and Warehouse Clubs, in particular,
are more dependent on stock-up trips. Mass Merchandisers and Grocery
trips are in the middle and capture a fair number of immediate,
fill-in and routine trips.
Click on thumbnail to enlarge, or click here.
As not all retail channels are alike, the same is true when we
compare trip capture across retailers. Within the Grocery channel,
some retailers are much better at immediate trip capture than others.
However, how much are Grocery chains driving the differences that
we see, or to what extent are they a result of the competition in
their markets? That is, are Supercenters or Warehouse Clubs gobbling
up the routine and stock-up trips and leaving Grocery retailers and
other Channel retailers to fight over the smaller immediate and
fill-in trips? Conversely, are Grocery retailers doing all that they
can to take advantage of their ability to drive immediate trips
through more convenient oriented store layouts or in merchandising of
categories best suited for those types of trips?
Next month we will share some of our learning around how we have
been able to mine the large number of shopping trips captured via
Homescan to define specific trip clusters based on the category
composition of those trips.
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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Fair Trade: A Major Trend Expands
In 1988 the first "Fair Trade" certification initiative was created
in response to falling world coffee prices. The following year, the
Netherlands became the first country to launch the Fair trade
consumer guarantee - the Max Havelaar label. According to TransFair
USA, which is the only independent third party certifier of Fair
Trade products in the U.S., Fair Trade Certified products surpassed
expectations for the fifth consecutive year.
Click on thumbnail to enlarge, or click here.
The Fair Trade Certified label guarantees that farmers and
workers received a fair price for their product. As a result of
receiving a fair price, the premise is that producers will avoid cost
cutting practices, which in turn produces a higher level of quality.
Most Fair Trade Certified coffee products, according to TransFair,
are also certified organic and shade grown, which provides shelter
for migratory birds and helps reduce global warming.
Since 1999, companies have imported over 41 million pounds of
Fair Trade Certified coffee. An average annual increase in market
growth of 75% from 1999 to 2002 and 91% in 2003 has established Fair
Trade Certified coffee as the fastest growing segment in the
specialty coffee category. Fair Trade Certified tea sales have
increased to almost 100,000 pounds, and Fair Trade Certified
chocolate products have increased to over 200,000 pounds. While Fair
Trade began with smaller more niche brands, today more than 300 U.S.
importers, manufacturers, and roasters have gotten into the fair
trade business - companies such as Dunkin' Donuts, Procter & Gamble,
and Caribou Coffee.
Socially responsible brands (led by Paul Newman and his Newman's
Own products) are continuing to attract a growing number of
mainstream consumers who are concerned about protecting farmers and
workers in countries where poverty is widespread as well as insuring
the quality of their foods. Expect Fair Trade to evolve and include
spices, produce, sugars and just about every commodity based imported
foodstuff over the next 12-18 months.
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Is One of America's Favorite Foods on a Path to Disaster?
The first Coney Island hot dog stand opened in 1871 and sold 3,684
dogs during its first year of operation. 134 years later, according
to the National Hot Dog and Sausage Council, Americans are expected
to eat 27.5 million hot dogs at major league baseball parks, 150
million dogs on July 4th, and seven billion dogs during the course of
the summer.
Retail sales in the Food/Drug/Mass Channels (excluding Wal-Mart)
for 2004 topped $1.6 billion according to ACNielsen Strategic Planner
- down .5% from the previous year.
Hot dog sales are easy to track inside the walls of a retail
store or restaurant, but the number of hot dogs sold at concession
stands and carnivals is harder to calculate. The National Hot Dog and
Sausage Council estimates that an additional 38% of annual hot dog
sales between Memorial Day and Labor Day occur in these locations,
and are unreported in traditional measures.
This category exhibits incongruous behavior from most of the
current fresh, refrigerated and processed meat trends: the "healthy"
hot dogs category (low-fat and fat free) measured the biggest
category decline of 14.2%.
While low-fat and fat-free dogs were on track with sales
increases in the mid-1990s, sales in recent years have been less
favorable.
Sales in 2004 showed beef dogs to be down 4%, meat combination
dogs down 1.4%, and turkey dogs down a surprising 5.7%. The only
varieties gaining ground last year were chicken dogs at a gain of
.2%, pork at 7.1% and bison at 1991% (bison dogs were introduced in
2003).
So what do these numbers mean for supermarkets and branded hot
dog manufacturers (and the related condiments and buns)?
The dip in sales of healthy dogs may be attributed to the
perception by many shoppers that a low-fat or fat-free hot dog just
won't satisfy. Both CPG and retailers will have to promote the
product through sampling.
The category's overall drop is more perplexing and should be a
warning alarm; especially when analyzed in the context of the Fresh
Meat Category Sales (dollar sales up 18.1% and unit volume up 15.1%)
and the continuing increase of year-round barbecuing.
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Alternative Drinks Energize Beverage Marketplace
Of one thing there can be no doubt: Alternative/energy drinks
represent a bull market. That the leader of the charge is the
long-time No. 1 brand Red Bull, which very much launched the energy
drink category in the United States, is fitting. And while Red Bull's
position as the market leader remains unchallenged, many other brands
are enjoying success in this age of prosperity for the alternative
drink category.
According to ACNielsen data, the alternative/energy drinks market
increased from $1.15 billion in the combined off-premise channels
(food, drug, convenience, mass, excluding Wal-Mart data) for the
52-week period ending 4/24/04 to $1.79 billion for the 52 weeks
ending 4/23/05. That represents an overall gain of 56%.
Click on thumbnail to enlarge, or click here.
The increase has been driven by several factors, including:
An "on-the-go" American consumer looking for quick bursts of
energy throughout the day;
The adoption of energy drinks by "Generation Y" - the
skateboard, dirt-bike, snowboard, X-Games set - as a drink they can
call their own;
The popular use of energy/alternative beverages as mixers for
alcoholic drinks, both in nightclubs and at home parties.
Unlike sports drinks and isotonics, which are all about recovery
from strenuous workouts, alternative/energy drinks are all about
quick bursts of energy. While all alternative/energy drinks contain
caffeine, most today also include a variety of exotic ingredients
including taurine, inositol, guarana, ginseng, vitamins B6 and B12
and the not so exotic glucose (sugar).
Retailers are pleased with the category because of its profit
potential: Most leading brands retail for $1.99 per 8.8-ounce
slim-can, and specially designed suction-cup racks that attach right
on cold doors free up cold shelf space for other products. Several
new products have been introduced in larger SKUs - primarily 16-ounce
cans - but at the same profitable $1.99 price point.
Most energy/alternative drinks are lightly carbonated, though
some are non-carbonated. The carbonates dominate the marketplace,
however. According to ACNielsen data, the carbonated segment
accounted for 96.6% of all-channel category sales (food, drug,
convenience, mass excluding Wal-Mart data) for the 52-week period
ending 4/23/05.
Besides Red Bull, Pepsi has two brands in the category (Amp from
Mountain Dew, SoBe Adrenaline Rush and SoBe No Fear), while Snapple
(i.e. Cadbury Schweppes-Dr Pepper/Seven Up) has its Elements line.
Hansen's, the New Age company from California best known for its
natural sodas and fruit beverages, is heavily vested in the category
with several brands including Hansen's Energy, Monster and Lost.
Other New Age players include AriZona, Fuze and Jones Soda. Even
brewing giant Anheuser-Busch has ventured into the category with 180.
The energy surrounding the category can best be illustrated by
looking at Red Bull, which lost market share last year, all the while
increasing its own sales by over 40%. Perhaps with this in mind,
Coca-Cola, which had very limited success in its initial foray into
the category with KMX, has launched a new brand in 2005 - aptly named
Full Throttle - in hopes of grabbing a larger slice of what should
soon be a $2 billion pie.
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Pomegranate Juice Steps Up to the Plate
Of all the new-fangled beverages on the market today, one variety in
particular - pomegranate juice - is making a big splash in the New
Age pool. The pomegranate is a fruit indigenous to the Middle East,
with crunchy seeds surrounded by juicy pulp. As a food, it is a rich
source of potassium, vitamin C and antioxidants. All those health
attributes are transferred to the beverage when the product is
rendered in juice form.
According to ACNielsen Strategic Planner data, while still a
niche segment, pomegranate juice is showing great potential. For the
52-week period ending 4/21/01, pomegranate juice had generated just
$84,507 in sales in the food, drug and mass channels (excluding
Wal-Mart data) - entirely based on shelf-stable sales. Four years
later, for the 52-week period ending 4/16//05, the entire category
(now including both shelf-stable and refrigerated) had swelled to
$66,240,767 - a 783.85% increase.
Today, sales of chilled pomegranate juice far outpace those of
shelf-stable, with nearly $63 million being generated by refrigerated
pomegranate juice for the 52-week period ending 4/16/05, compared to
just about $3.5 million for shelf-stable pomegranate juice. However,
shelf-stable's growth line is steeper, having gained 335.2% for the
52-week period ending 4/16/05, compared to 145.8% growth for
refrigerated.
Click on thumbnail to enlarge, or click here.
The health attributes of pomegranate juice are myriad and seem to
be increasing by the day. A study in the current issue of
Proceedings of the National Academy of Sciences reports that
pomegranate juice helped keep fatty deposits from collecting on the
artery walls of mice - specially bred to have high cholesterol levels
- and also kept human heart cells healthier.
Previous studies have suggested that the high level of
antioxidants found in pomegranate juice - higher than in red wine -
might reduce plaque build up on artery walls and help prevent
hardening of the arteries. Indeed, it may even reverse the
progression of the disease. Hardening of the arteries refers to the
build up of plaque in the walls of arteries, which causes a decrease
in blood flow that can lead to heart attacks and strokes. It also
lowers blood pressure in patients with carotid artery stenosis.
Last but not least, pomegranate juice may help thwart the return
of prostate cancer after surgery or radiation for the disease, says a
new study presented at the American Urological Association's 2005
Annual Meeting by a group of researchers from UCLA. Prostate cancer
is the No. 2 cause of cancer death among men in the United States and
is men's most commonly diagnosed cancer after skin cancer, according
to the American Cancer Society.
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ACNielsen estimates that in 2004, $2 billion was spent across all
retail channels in the pickles/olives/relish category, which includes
chilies, black/green olives, peppers, dill/sweet pickles, canned
pimentos, and relishes. The following slides indicate the percentage
of households who buy each type of pickles/olives/relish, a sampling
of higher indexing household types who buy products in the overall
pickles/olives/relish category, and channel share of category dollar
sales.
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Click on thumbnail to enlarge, or click here.
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Click on thumbnail to enlarge, or click here.
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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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