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The Fountain of Youth Discovered in Chicago
The FMI's Annual Convention this past week in Chicago will go
down in food history as one of the most impactful conventions ever.
As always, the FMI Trends Report, presented each year at the
commencement of the convention, will be the bible for our next year
in supermarketing - but this year the report's findings have to share
the spotlight.
Walking up and down the miles of exhibits it was clear that there
is a convergence taking place. Retailers, brands and shoppers are all
coming together to focus on a healthier way to eat. The indications
have been there, many of which we have reported in F3 for over a
year, and the time is right for what I am calling "America's
Nutritional Correction." More products are revising their
ingredients, limiting sugars and removing trans fats.
One of my most valued meetings at the FMI this year was with Eric
Hentges, Ph.D., the Executive Director for the USDA's Center for
Nutrition Policy & Promotion, and the man responsible for the new
Food Guide Pyramid and revisions for the Dietary Guidelines (RDAs).
Hentges leaves little doubt in my mind that not only will these be
ready for publication in January 2005, but that they will also be the
tools our industry needs to help re-educate our fellow Americans to
better understand which foods we should be eating.
A week after we met, I also realize that in the center of this
convergence is the USDA, a welcome partner who in 2005 will set the
direction for our nation's health.
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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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The Dollar Store Consumer, is available for $595.
Click here for more
details.
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May 10, 2004
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When Shoppers are Overwhelmed by Information
Many American consumers probably wish they could bury their heads
in the sand when it comes to eating healthily.
FMI's Trends report indicates that six in ten consumers
admit that their diet could be better - though only two in ten go so
far as to say it could be "a lot" healthier. This attitude cuts
across most demographic segments, although women are a bit more
likely than men to cite room for improvement (65% vs. 54%).
Many consumers may be confused by the sometimes conflicting
information that exists as to what is or is not good for them. And
though they say they obtain nutritional information from a wide
variety of sources, including both the media and medical
professionals, no single type of information source is trusted by
anywhere close to a majority of shoppers.
Most often mentioned are doctors, yet only 28 percent cite this
as the source "they trust the most."
One source of information is the grocery store, and almost seven
in ten express some satisfaction with the nutrition information
available there. However, satisfaction is not strong. Many more are
'somewhat' satisfied than are 'very' satisfied (42% vs. 27%).
Of course, having something available does not mean it's
automatically used. Most shoppers admit that they do not consistently
consider health claims or preservatives/additives when deciding
whether to purchase a product for the first time. Only about three in
ten say they almost always examine health claims, and the same
proportion emphasize preservatives/additives in the new purchase
shopping process. Organic claims are considered by nearly one in
five.
Despite some potential confusion and/or foot dragging, virtually
all shoppers surveyed in January 2004 claim to have made some changes
to ensure their diet is healthy. Topping the list: eating more fruits
and vegetables - at a whopping 62 percent. A very distant second are
the one in four who say they are eating less sugar and a similar
number who say they are consuming fewer fats/oils. At the time of the
survey, 13 percent volunteered that they are eating fewer carbs.
FMI's Trends report is now available. I urge you to go to
www.fmi.org and
review it's highlights and purchase your own copy. Understanding
consumer desires and behavior is the single most important way to
keep our industry healthy.
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Solving the Information-Sharing Dilemma
The ink has dried on the 13th annual ACNielsen Survey of Trade
Promotion Practices (TPP), and it contains an early read on a
potentially troublesome trend related to frequent shopper programs
(FSPs).
The survey showed a decline in the number of manufacturers who
are participating in FSPs - 76% participated in 2003, down from 80%
in 2002. It was the second straight year in which the number
slipped.
What's driving the trend? The answer seems to center on access
to the data.
Most manufacturers (74%) report that retailers share their
frequent shopper data with them occasionally or never. As a result,
manufacturers are much less likely than retailers to use FSP data in
their everyday decision making, driving their perceived value of such
programs down.
Retailers readily acknowledge their lack of information sharing
with manufacturers. It's proprietary information, many say. And
they are fully justified in being careful with their FSP data. Their
customers sign up and are promised confidentiality. If in any manner
customers feel this confidentiality was breached the retailer is
likely to lose those customers.
When it comes to retailers sharing their frequent shopper data
with marketing information companies, the story is quite different.
Sixty percent of retailers say they now share FSP data with their
marketing information company partners - up from just 41% in 2002.
This is done, of course, without identifying any specific customer by
name or address. That cooperation is fueling new loyalty building
programs like Consumer Direct @ Retail, an ACNielsen/Spectra
initiative that analyzes FSP data in conjunction with ACNielsen
Homescan consumer panel data to measure how much of each shopper's
total category-specific spending a retailer is capturing. This new
share-of-wallet metric enables retailers to build loyalty one
category at a time.
Through Consumer Direct @ Retail, a win-win model for sharing FSP
data is emerging. By sharing the data with marketing information
companies, allowing for tight retailer controls over the data,
loyalty-building initiatives can be developed that benefit retailers
and manufacturers alike without compromising the confidentiality
agreements retailers have with their customers.
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Will the Low Carb Phenomenon Have Staying Power?
In the latest ACNielsen Homescan Panel Dietary Awareness Survey, 17
percent of Households report that someone in the household is
currently on a Low Carb Diet. However, more telling is that 19
percent report that someone in the household "tried and quit" such a
diet regimen, raising the question of whether this is the end of what
has become the fastest growing on-shelf diet products phenomenon in
recent history.
Click on thumbnail to enlarge, or click here.
These findings bring to light where the real opportunities for
retailers and manufacturers might exist. While the largest number in
the below chart shows that 40 percent of the country is just simply
not dieting; let's remember that conversely, the majority -- 60
percent -- ARE DIETING.
The reality is that Americans have become more obese over the
past 25 years, and since the late 1970s, the number of obese adults
has doubled and so has awareness of this potentially catastrophic
situation; which is certainly fueling sales of both Atkins and The
South Beach diet books.
One of the most important findings in the survey is that 28.9
percent of the respondents said that they are on a diet, but using a
"diet of own design."
Click on thumbnail to enlarge, or click here.
Does this mean they are eating "healthy"? Who has their share of
mind? Where are these consumers getting their information? Brands
and retailers need to understand this even larger consumer
opportunity which could be achieved through better educating
consumers on the "whole health" aspects of a product, regardless of
the specific single benefit of a particular diet program such as low
carb or low fat. Bottom line is that, if effective, consumers will
include that product as part of their "custom diet."
Several effective strategies to note:
Publishing the "Truth" about certain contents of your product.
Example: Bud Light stating, "All light beers are low carb."
Advertising copy that has a "Healthy" theme. Examples: Tropicana
with oranges working out (small tag line, "Carb friendly"), Dannon
Yogurt showing a very fit woman riding a bicycle through the hills
with a yogurt bottle on the handle bars, and vending machines that
include "healthy" products. Kudos to McDonalds for getting rid of
the infamous supersize.
Directly talking to your consumers about healthy living tips.
Example: Minute Maid showing the Healthy Living guides from the Mayo
Clinic on their products.
ACNielsen has been helping manufacturers and retailers understand
how their brand buyers answered these questions to in turn launch a
product that will directly cater to their needs.
We may well be at the beginning of a turning point in dieting;
leading to a more nutritionally balanced approach.
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Do We Need More New Food Products?
Each week, the average family makes 2.0 visits to a supermarket and
spends $90, according to the FMI Trends 2004 Survey. The
amount spent ranges from $59 for one person to $115 for households of
five people. The overall number of products available in the median
average size supermarket (now 44,000 square feet) hovers at around
22,000 SKUs. But it may not be enough.
Twenty-five percent of shoppers, according to the Survey, report
that they shop at a "second" store for more variety of products than
are available at their primary store.
New supermarket product introductions last year topped 20,000,
the highest in years. In ACNielsen's
13th Annual Survey of Trade Promotion Practices, more than
half of the retailers surveyed reported that they increased the
amount of new products that they introduced in 2003 over the previous
year.
Click on thumbnail to enlarge, or click here.
As store size remains relatively constant, retailers will have to
de-list products or categories that don't perform well to make room
for new innovations; adding further challenges to existing brands to
keep up with consumer tastes and to evolve as their shoppers do, or
be banished from the shelves. A perfect example is how many food
brands are now removing trans fats from their ingredients, far sooner
that the 2006 Federal Labeling requirement to list the content of
this fat. The conventional wisdom is that few consumers will
knowingly want to purchase any product that contains this ingredient.
Rather than having current users seek out new brands, most
manufacturers are re-engineering their product recipes instead of
introducing a "trans fat free" brand extension - a trend which may
well broaden to all food categories, as the costs of new product
introductions skyrocket.
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Location, Location, Location - Part Two
In last month's issue we shared insights related to how far
households travel to shop their favorite retailer within a number of
our industry's key retail channels. From an ACNielsen Homescan Panel
Views survey, we learned that the vast majority of households travel
relatively small distances to shop their favorite Convenience/Gas,
Drug, Grocery and Dollar Store retailer. However, significant
percentages of shoppers in the Mass Merchandiser, Supercenter and
Club channels travel six miles or more to shop their favorite store.
Retailers in these three channels have obviously learned how to
leverage their value proposition to over-shadow the importance of
convenience.
As a follow-up to these learnings, we wanted to see how retail
channel shares varied within households who traveled short versus
long distances to shop their favorite channel retailer. That is,
does the share that households devote to the Grocery channel or to
the Drug channel increase or decrease as households travel farther
distances to shop their favorite Grocery or Drug retailer? And, if
shares do change, which retail channel
benefits the most? Here is what we found:
1. For the Grocery channel, we see that U.S. households devote
fewer retail dollars to the Grocery channel as distance to their
"favorite" Grocery retailer increases. The Supercenter channel is
the primary winner in this case as most of the decline in Grocery
channel dollar share is gobbled up by the Supercenter channel. This
impact, however, is only felt by the 20 percent of Grocery channel
shoppers who travel six or more miles to shop their favorite Grocery
retailer. Nevertheless, as Wal-Mart and Target Supercenters move
into new areas and those stores become more convenient in terms of
location, then there is the real possibility of continued share loss
for the Grocery channel.
Click on thumbnail to enlarge, or click here.
2. We see similar patterns as consumers travel farther distances
to shop their favorite Drug and Club channel retailer. Supercenters
are the benefactors of the share declines, but a disturbing finding
is that the Grocery channel suffers a substantial share decline too,
and those declines are more dramatic than the share losses
experienced by the Drug and Club retail channels. This finding is
probably a result of the fact that many Grocery retailers share
similar market space as these two retail channels. For the Drug
channel, just under one-fifth of channel shoppers travel more than
six miles to shop their favorite Drug retailer. For the Club
channel, two-thirds of shopping households travel over six miles to
shop their favorite Club retailer. As such, the jury is still out as
to how much impact further expansion of Supercenters will have on the
Club channel.
Click on thumbnail to enlarge, or click here.
Click on thumbnail to enlarge, or click here.
3. For the Mass channel, where 43 percent of shoppers travel
more than six miles to shop their favorite Mass retailer,
Supercenters benefit. However, shares devoted to the Mass channel
don't change. Rather, it is the Grocery channel again that suffers
the brunt of the share loss. For the Supercenter channel, the Mass
channel is the benefactor, while shares to the Grocery channel are
rather stable.
4. So what? For Grocery retailers with frequent shopper/loyalty
card programs, these findings suggest the need to include the capture
of street address for their members so that they can devise
merchandising activities to attract increased shopping trips among
high spenders who live further away from their stores. Additionally,
it would be worthwhile to know the kinds of category purchases being
made (within the Supercenter channel) by those households who are
traveling farther distances to shop Grocery stores. We know that
categories that exhibit high purchase frequency are the kinds of
categories that Wal-Mart shoppers will make considerable trips
outside of Wal-Mart to buy. A solid understanding of category
importance among competitive shoppers is critical for Grocery
retailers to devise appropriate merchandising efforts for trip
capture.
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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ECONOMIC SNAPSHOT
It can be said that all other economic measures are only significant
in terms of how they affect the jobs market. This is especially true
given our reliance on Retail sales for U.S. and global economic
growth. Our analysis of over 100 economic datapoints offers a clear
picture that the quality (those exceeding economic forecasts) and
quantity of results are continuing their upward trend which began in
the 3rd qtr of 2003. With a preliminary reading of four percent
economic growth in the first qtr and job growth gearing up, the
attention this month has been on corporate earnings. The story this
quarter has been one of improving expectations as results have been
rising from an expected 13 percent gain in January to the current 27
percent gain across the S&P 500 at the end of April. Given the focus
on earnings, we thought it would be interesting to present our
analysis of 35 leading retailers across 13 classes of trade whom
represent over $860 billion in FY sales or 30 percent of the total US
retail sales.
Key Takeaways:
Qtr Leaders:
Headline Result: Petsmart earnings +133 percent in
their most recently reported 4th qtr
Earnings Dollars - Wal-Mart $2.72 billion.
Percent Change in Total Sales - EBAY +57 percent,
Amazon +36 percent, Whole foods 21 percent, Lowes 20 percent and CVS
17.5 percent.
Total Sales Dollars - Wal-Mart $74.5 billion, Target
at $15.57 billion
Same Store Sales - Whole Foods 14.7 percent and
Walgreens at 12 percent
Food Class of Trade - Reported the most challenging
results, with three of out the five reporting a net loss in their
most recent qtr and four out of five reporting declining or single
digit same store sales. Whole foods was the standout performer.
Dollar Class of Trade - The leading four retailers all
reported double digit sales gains reflecting aggressive store
expansion, however single digit same store sales.
Mass Class of Trade - Target exceeded expectations
driven by Target division sales, and Wal-Mart met expectation driven
by international division sales +17 percent.
Drug - With the exception of Eckerd, the leading drug
retailers reported the most balanced earnings and sales gains across
any class of trade analyzed.
2003 leader in stock price - Delhaize +183 percent!
For further insight into the State Of The U.S Economy and its
implications on consumer spending or the full release of the earnings
analysis, Please contact James Russo at ACNielsen at 516-429-8086 or
james.russo@acnielsen.com.
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The Convergence of Technologies and Shopper Needs
The annual Food Marketing Institute (FMI) MarkeTechnics show, held
this past February 29-March 2nd, is where retailers were able to
preview the future of the industry through technology spectacles.
2004 seems to be a year in which many retailers are treading water
and not making enormous technological advances that will be
immediately beneficial for shoppers.
While no one doubts the impact that RFID or Electronic Product
Coding will have once established, there are other somewhat less
advanced technologies that seem to be gaining traction quickly. What
follows are a few examples.
MyWebGrocer.com provides an online shopping option to retailers
than cannot afford to provide this service on their own; it also
allows supermarkets to offer what it calls an "Endless Aisle,"
allowing retailers to offer customers tens of thousands of items that
cannot be carried in-store because of space considerations.
Coinstar has a new, expanded coin-counting machine that adds
prepaid cash cards, prepaid wireless airtime for cell phones, the
ability to pay bills, and even the option to download games to one's
cell phone. There's even the ability to create a pre-paid debit card
that acts like a MasterCard.
CBORD is a computer-based service for weight-and-health-conscious
consumers to access nutritional information about prepared food
products sold in supermarkets. The supermarkets provide the
ingredient information; CBORD analyzes it and posts the information
on the retailer's website.
But the question begs to be asked... what do shoppers REALLY want
from technology in their supermarkets?
Click on thumbnail to enlarge, or click here.
In a SupermarketGuru.com Quick Poll, participants were asked
"What technological elements they would like to see included in the
supermarket?" The number one answer was "Shopping cart-mounted
interactive information center" underscoring the consumer's desire to
be able to access more information about particular products and
categories as they shop.
Click on thumbnail to enlarge, or click here.
When asked what is the ONE major benefit they would like to see
technology bring to the supermarket experience. Fifty-seven percent
answered "lower prices," and 20 percent said "faster checkout,"
reminding us that if we want these technologies to become universally
accepted we must focus them on meeting consumer needs. Let's remind
ourselves about the ATM introduction. Initially located just outside
of banks, few consumers actually used them; it wasn't until the
entrepreneurial spirit took hold and independent business people
started to put these machines where people couldn't otherwise get
cash that the ATM became mainstream.
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What Does The End Of Super-Sizing Mean For The Food World?
In a surprising, impactful and important announcement, McDonald's has
discontinued offering the option of super-sizing its meals. How are
consumers viewing the decision?
Almost one in seven of our panel believed that McDonald's move
was predicated on losing too much money. A tiny percent felt that it
was a mistake for McDonald's to eliminate the offering.
Click on thumbnail to enlarge, or click here.
In a second question, survey participants were asked what
super-sizing means to them. "More food," was the number one response
followed by "making Americans fat." Only six percent said that
super-sizing meant "saves money," which is noteworthy as this clearly
was the marketing strategy used to introduce America to the concept.
Click on thumbnail to enlarge, or click here.
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Beverages and the C-store
As we have reported in past issues of F3, our nation's C-stores are
increasingly attracting more and more demographically diverse
shoppers. One of the core offerings of this channel continues to be
Malt Beverages, and as the shopper base continues to expand we must
ask how C-stores can do a better job of merchandising and selling
this category beyond the traditional seasonal peaks.
The biggest sales dips occur in February after football season
and in deep winter. The traditional outlets -- Food, Drug and Mass --
experience more lift over the Christmas and New Year holidays than do
C-stores as indicated in the chart below.
Click on thumbnail to enlarge, or click here.
Demographically, we must take into consideration the shifting
population. The size of the important 25-34 year old segment is not
expected to grow very much over the next five years. The good news
for Malt Beverage brands is that at that point there will be an eight
percent rise in young adults coming of beer drinking age. So will the
C-store capture this consumer group's Malt Beverage dollars?
Malt Beverage shipments are on the rise even though per capita
consumption has become more moderate over the past five years. In
2001, per capita consumption was 21.6 gallons vs. 24 gallons in 1990
(clearly a result of the current younger drinking generation that is
more moderate than their boomer predecessors). The rise in popularity
of wine is also a likely reason we see a moderating per capita
consumption of malt beverages.
Sales and traffic in C-stores mirrors beer seasonality; C-store
holiday lows/highs in July with warm month sales 20 percent higher
than cool month sales. In contrast, traditional outlets (FDM) report
warm month sales only five percent higher than cool month sales.
C-stores have been gaining market share of Malt Beverages over the
past two years, with share ranges from 26-30 percent (half of all
beer sales).
Bottom line is that the right people are in the right stores at
the right times. What will induce them to purchase?
A look at the entire category of packaged beverages further
emphasizes the importance for C-stores to meet the expanding consumer
base needs as well as using a more diverse alcoholic beverage
selection to attract non C-store shoppers. Aggressive pricing,
discounting and competition continue to erode beverage sales profit
growth. New growth opportunities may well be in take-home family
packs, up front location and merchandising for warm package sales as
the C-store customer broadens beyond its historical demographics;
insuring that those beverages which this new customer base wants
(such as organic beers and wines) are available.
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COUNTRY-TO-COUNTRY: A Look at the Fastest Growing Categories in Germany
Seven out of ten of the fastest growing categories in the German
Grocery Channel are beverages, with the largest base being Iced Tea.
Drinkable Yogurts continue their worldwide growth even in Germany
where this category is well established. Refrigerated beverages
(Shakes & Drinks) show an increase of almost 20 percent in US Grocery
and may well exceed that number as Priobiotics, while not yet
mainstream in the United States, make their impact in our
refrigerated cases as more brands include them in their product
offerings. Probiotics actually means "for life," and this
nomenclature is now being used to refer to concentrated supplements
of beneficial or good bacteria which products are adding as an
ingredient to promote the body's natural immunity and help our
digestion.
Fresh egg sales continue to grow as more branding and value added
features (including cage-free and hormone-free) drive up prices at
the same time as devotees of the low carb diets, particularly South
Beach, begin to include hard boiled eggs as a key snack ingredient,
although overall volume is flat.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/Apr04c2c1.gif
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/Apr04c2c2.gif
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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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