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Will Organics take a bullet?
Washington lawmakers voted late last month to override a court
ruling that outlawed the use of any non-organic ingredients in the
production and distribution of products given the green "USDA
Organic" seal. At issue is consumer confidence in whether or not
organic products they might purchase at their local market are the
"Real McCoy" versus prohibitive costs involved in producing
technically "pure" organic goods.
In 1990, Congress passed the Organic Foods Production Act,
creating a national standard for the production and handling of all
products labeled as "organic" after nearly a decade of research and
discourse. Even so, the new code left plenty of wiggle room with its
provision that it be based on "minimal use of off-farm inputs" and on
"management practices that restore, maintain and enhance ecological
harmony."
The debate heated up in 2002, when an organic blueberry farmer
from Maine named Arthur Harvey filed suit against the US Department
of Agriculture (USDA) in Federal Court for allowing products
containing synthetic ingredients to be sold as 'organic.' Harvey
argued that the USDA's organic standards contained loopholes that
undermined consumer confidence in true organic products.
In January, the First Circuit Court of Appeals ruled in Harvey's
favor. The court gave the USDA one year to re-write the regulations.
The legislation passed in October was an amendment on the
Agricultural Appropriations Bill. It softens the appellate court's
ruling, making organic guidelines more in line with the original 1990
standards.
As Organics continue to be one of the leading growth areas in
foods, this issue will either propel the category's growth by
attracting new brands to produce "organic" products under the more
lax rules; or frustrate the consumers who are searching for a more
stringent set of criteria and force the creation of a "super-premium
organic" sub category.
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FMI's Speaks is the annual state of the industry report for food
retailers. Included are the latest trends in sales growth, general
operations, supermarket company operating costs, employee turnover
and advertising methods.
Click here.
This annual report provides you with a complete financial picture of
the supermarket industry as well as the external business
environment, including key ratios, balance sheet, income statement
and statement of cash flow. The results are provided for the entire
industry as well as by annual sales for more accurate benchmarking.
Click here.
This annual report presents five-year financial data on key pharmacy
topics such as sales, margins, generic drugs and third-party plans.
Click here.
The FMI U.S. Grocery Store Shopper Trends 2005 is available.
Click here
for more details.
The 14th Annual Trade Promotion Practices and Emerging Issues Study
is now available from ACNielsen. To purchase a copy,
click here.
The FMI/Rodale Shopping for Health survey of consumers is available.
Click here for more details.
ACNielsen's latest Private Label Trends Report is now available. For
information,
click here.
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November 14, 2005
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Profits, Back in Focus
In the Washington, DC area we recently went through a two-month
period without any measurable rain. The streak was broken with a
two-day stretch in early October, during which more than seven inches
of rain fell. As one weather forecaster explained, on average, we got
the right rainfall for the two months, only we got it in two days.
It's that way for industry profits at the moment. In the past
year, based on the new findings of FMI's Annual Financial Review
(done in cooperation with Financial Management Services) we get a
picture that's similar to the "average" rainfall we've had in
Washington, DC. On a post-tax net profit basis, chains outperformed
independent operators, and the entire industry produced net profits
slightly above 1%. (In fact, average net profit for the 12-month
fiscal year ending in mid-2005 was 1.16%) Based on the last three
years, all of those findings are incredible bits of news. Based on
any longer period, they aren't.
For the previous two years, the statistics moved in directions
that defied any conventional wisdom. Small companies ($100 million in
annual sales or less) vastly outperformed their larger competitors
and overall industry net profits dropped to 0.88% because the numbers
for that period (2002-2004) included the lengthy and painful labor
strike in Southern California and the following price cuts and other
promotional activities as large retailers struggled to regain market
share in the nation's largest market. Prior to this, the annual
financial review found large companies outpacing the small and
overall net profits climbing above one percent. So in essence, this
year's report finds the norm has returned.
Yet, there is much more to the story: it's clear that a
significant group of operators is finding a way to break away from
the pack and establish themselves as clear winners. FMI's Speaks
report found that in overall sales gains the top 25% of companies
grew at a pace more than double the overall average reporting average
net profits of 3.68%, three times more than the industry average of
1.16%.
The message from both reports - the Annual Financial Review and
Speaks - is clear: despite all the challenges on finding growth in
the industry today, many are figuring it out. The trick is using
these benchmarks and all forms of market intelligence to help get
your company there too.
Both reports are available at:
www.fmi.org/store/
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Category Management: Evolving Toward a More Consumer- Centric Approach
In a marketplace where the big are getting bigger and consumer
demands are becoming more complex, success still boils down to having
the right product at the right price with the right promotional
support.
Category Management, the process, has been part of the retail
lexicon for over a decade. But it continues to evolve as technology
improves and is becoming increasingly important as products
proliferate, retail channels blur, and consumer segments narrow.
ACNielsen's new book,
Consumer-Centric Category Management: How to Increase Profits by Managing Categories based on Consumer Needs,
published this month by John Wiley & Sons, examines the state of and
state-of-the art in this area.
Written for those at each end of the curve, the book contains a
review of the basic eight-step process, along with essays and case
studies from such industry giants as SUPERVALU, Hershey and
Hewlett-Packard--all designed to help readers get more out of their
category management programs. These and other companies have
recognized that the consumer must be at the center of their category
management approach.
When the concept first appeared on the retail scene, the
supercenter was in its infancy, dollar stores were strictly a local
phenomenon and ethnic marketing was barely a blip on the retail radar
screen.
Today, these are among the major factors impacting the
marketplace and have moved category management from a data-focused to
a consumer-focused process.
Whether category management evolves into "trip management,"
"aisle management" or some other descriptor, the overall objective
won't change-that is, to help drive incremental sales and profits.
Accomplishing this means constant dialogue between retailers and
manufacturers on marketing and merchandising the right selection of
products based on a complete understanding of the consumers they're
trying to serve.
With our new book, we are not attempting to reinvent the category
management wheel, but rather to keep the dialogue moving in a
positive direction.
To order,
click here.
Discounts are available for orders of 10 or more by contacting Jeff
Gould at Wiley at
jgould@wiley.com.
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A Look Inside the Bi-Cultural Consumer: Understanding the Largest Hispanic Consumer Group
Understanding the Hispanic consumer is one of the most difficult and
important challenges facing brand marketers. To help marketers meet
the challenge, Spectra has created a consumption-driven acculturation
model, the Culture Point ModelTM, which uses a combination
of nine demographic variables (including age, income, language
preference, and more) to identify three distinct consumer segments
within the Hispanic population:
Least Acculturated - have consumption patterns that are most
divergent from the general population, are primarily foreign born,
with a high percentage of adults with no high school education.
Most Acculturated - reflect consumption patterns that are
very similar to the general population, are primarily at least the
second generation to be born in the United States.
Bi-Cultural - the largest segment of the Hispanic population
(53%) and, rather than being an amalgamation of Most and Least
Acculturated Hispanics, comprise a distinct segment in their own
right. Bi-Cultural consumers are the most difficult to describe
because they are neither as culturally isolated as the Least
Acculturated Hispanics or as fully integrated as the Most
Acculturated.
Unlike Most and Least Acculturated Hispanics, Bi-Cultural
Hispanics do not tend towards a simple demographic profile. For
instance, while many Most Acculturated Hispanics have at least some
college education, and a majority of Least Acculturated Hispanics
never completed high school, the Bi-Cultural education profile is
less intuitive - about one-third have a high school degree and
another 22% discontinued their education before the eighth grade.
As one would expect from such a demographically heterogeneous
group, the consumption patterns within the Bi-Cultural segment as a
whole do not track as neatly as the consumption patterns of Most and
Least Acculturated Hispanics. As a result, a multi-dimensional
acculturation model is vital when targeting this consumer base.
Within the Spectra Culture Point Model, five urbanization and
affluence segments are used to help understand differences in
consumption behavior within the Bi-Cultural segment. An urban vs.
non-urban split is shown below for high indexing Bi-Cultural
categories: Sausage, Potato Chips and Sour Cream.
Bi-Cultural Non-Urban Hispanics are much more likely to purchase
all three categories than their Urban counterparts. For example,
Non-Urban purchasing of cheese-flavored potato chips (25% household
penetration/135 index, meaning 25% of Non-Urban Bi-Cultural Hispanic
households purchase this category and they account for 35% higher
household penetration than the total Hispanic population) matches
Least Acculturated Hispanics (26% household penetration/142 index)
most closely while Bi-Cultural Urban and Most Acculturated Hispanics
have relatively low levels of purchasing.
Click on thumbnail to enlarge, or click here.
Bi-Cultural Non-Urban Hispanic households are twice as likely to
purchase fat-free sour cream as their Urban counterparts (8% of
Non-Urban Bi-Cultural Hispanic households purchase the category,
compared with 4% of Urban Bi-Cultural Hispanic households. In
addition, the purchase patterns of the Bi-Cultural Non-Urban
Hispanics are clearly divergent from both Least Acculturated and Most
Acculturated Hispanics.
In these examples, purchase patterns are very distinct between
the three acculturation levels, and within the Bi-Cultural segment
itself. The lesson here is twofold:
Bi-Cultural Hispanics cannot be described as the mid-point
between the Least and Most Acculturated segments. The Bi-Cultural
segment is distinct from these other groups. As a result,
Bi-Cultural Hispanics merit their own, unique marketing plans.
Executional strategies that are aimed at Bi-Cultural segments
will be much more efficient when urbanization is taken into account.
Effective trade strategies will take both the acculturation and
urbanization of the shoppers into account.
As the purchase data above indicates, the Bi-Cultural segment is
a collection of smaller segments. Therefore, effectively targeting
this group requires the identification of the proper sub-segment
(urban vs. non-urban, in the case we're describing). For instance,
several cable networks have a strong urban Bi-Cultural Hispanic
viewer base, but these networks would not be a good choice for brands
driven by the non-urban segment.
Click on thumbnail to enlarge, or click here.
The importance of efficiently reaching Hispanic consumers
continues to grow everyday. A multi-dimensional approach to defining
acculturation allows the Bi-Cultural consumer segment to take form.
These consumers are grounded in both their cultural heritage and the
larger American population. Given that they are the largest of the
three segments, it is vital that marketers be able to efficiently
reach these Bi-Cultural Hispanics. Spectra's research has shown that
strategies focused on these individuals are most efficient when the
group is sub-segmented by urbanization or some other collection of
demographics.
For more information about Spectra's Culture Point Model, contact
Kylee Hall at
kylee_hall@spectramarketing.com.
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After The Storm: Charting the impact from disaster to recovery
A Million People Displaced, 502,000 Jobs Possibly Lost, Nearby Cities Hit with Influx of Evacuees, Many Permanent
While the full affects of Hurricane Katrina on the economy and
retailing nationwide are still being determined, the immediate impact
of the tragic events of August 29th on the Gulf Coast is catastrophic.
The human and financial losses are staggering. Estimated
insurance claims are expected to exceed $60 billion - triple the
damage caused in 1992 by Hurricane Andrew, the nation's next largest
natural disaster. Total insured and uninsured losses are expected to
reach $125 billion, about one percent of the total U.S. GDP
(equivalent to the size of the economy of Ireland).
A total of 431 mass, food, drug and club stores were brutally
battered in the city and the affected area represents one percent of
total U.S. retail sales for all classes of trade.
While the personal and local ramifications of the storm and its
aftermath are severe and tragic, Hurricane Katrina's impact on the
nation can best be described as an accelerator of deep-seated trends
already at work in the global economy. The supply disruption on top
of record demand created a perfect storm for higher energy prices.
Besides refined oil, consumer goods produced in the region are
also in short supply. Many commodities, such as coffee, for example,
are now on allocation.
However, it must be noted that rarely do these events create a
long term national economic impact on their own. Similarly, the
September 11 attacks directly impacted consumer spending in the month
following the attack, but in the months following there was very
little long term economic impact. These events tend to bend, but not
break U.S. and global conditions. The impact on spending is often
short term, while the psychological impact on confidence is often
long term.
Consumers continue to spend even with gasoline selling at $3.50 a
gallon in some regions although prices have dropped, alleviating some
of the concerns. However, the home heating season, affecting nearly
8.1 million households, will be a shock as prices have increased 25%
to 35% from the 2004 heating season. This will also tap consumers.
If history is any predictor, New Orleans will recover and
rebuild. The Florida panhandle has been hit repeatedly by hurricanes
over the past ten years, but today that region is much improved as
demonstrated by the record number of people moving to that region, so
expect the rebuilding of New Orleans to spur the local economy, bring
in new residents and create new opportunities.
There will be a population shift not unlike the Dust Bowl
migration during the Great Depression. Evacuees from New Orleans and
other Gulf Coast Cities have relocated, at least temporarily, in
Baton Rouge (500,000), Dallas (25,000), Houston (25,000), San Antonio
(25,000) and Memphis (10,000). Retail business should zoom in those
markets that have absorbed so many people.
Baton Rouge, with a population of 728,000 may almost double
in size! There are currently 219 food, drug, club and mass retailers
with sales totaling $1.8 billion in Baton Rouge. This will
potentially increase retail sales in that city by 25% to 30%. The
leading retailers that stand to benefit include Dollar General,
Family Dollar, Dollar Tree and Wal-Mart.
Many manufacturers may benefit from the expected strong
pickup in construction when rebuilding begins in New Orleans and
across the Gulf Coast. While it may take anywhere from three to six
months for reconstruction to begin, building materials suppliers and
construction companies are gearing up to increase inventory levels
for the expected work that will need to be done.
Gas prices will stabilize (expect $3 per gallon to become the
norm) as long as there is not another supply disruption.
Consumer spending will be adversely affected for this holiday
season but never count out the resiliency of the American Consumer.
We have spent through a recession in 2001, Sept 11th terrorist
attacks, unprecedented accounting scandals, war in IRAQ, historic
levels of energy prices and persistent uncertainty!
Information comes courtesy of VNU Executive Perspective, a new
information service from the VNU portfolio of companies, including
ACNielsen and Progressive Grocer.
For more information about the VNU Executive Perspective and how
you can receive ongoing access to monthly and weekly executive level
reports on the CPG industry, Please contact James Russo, Director &
Chief Market Strategist at 516-429-8086 or
james.russo@acnielsen.com.
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Beverage Alcohol Trends: the retail landscape changes and spirits move upscale
One third of every dollar that consumers spend in 2005 on alcoholic
beverages is forecasted to be going towards the purchase of Spirits.
There is a continued decline in Equivalized Volume of Beer and
Flavored Malt Beverages (almost 2.5 percent); while the change in
Spirits and Wines are up slightly (over 3 percent and 2 percent
respectively) from the previous year.
According to the Distilled Spirits Council's analysis from state
treasury tax collections and retail sales by state liquor stores,
Americans purchased 3.5 percent more spirits in 2004 than in the
previous year. It is interesting to note that in the 18 states in
which a government monopoly exists for off-premise sales of distilled
spirits, volume is actually above the average, at 4.1 percent.
But a shift in distribution is coming as Wal-Mart plans to step
up sales of distilled spirits in its stores. It's too early to tell
what impact this will have, but the world's largest retailer with its
powerful discount pricing and savvy merchandising has already
affected so many food, beverage, and health and beauty care
categories and distilled spirits won't likely be an exception.
Wal-Mart has set its sights on tripling the shelf space devoted to
distilled spirits. To meet its target, the retailer is partnering
with Diageo PLC, the world's largest liquor company.
Wal-Mart has sold a limited amount of distilled spirits for
years, along with wine and beer, and as it searches for growth the
expansion into distilled spirits, with its larger profit margins,
makes sense. One potential roadblock may lie in Wal-Mart's alcoholic
beverage strategy, which until this point managed to by-pass
distributors (keeping prices lower) but now will have to deal with
state and local laws that mandate that distribution.
According to the Adams Liquor Handbook, sales of distilled
spirits in the U.S. increased to nearly 166 million cases in 2004. In
the Total US Food/Chain Drug/Selected Liquor markets on dollars
ACNielsen Strategic Planner reports that for the 52 weeks ending
10/08/05, Vodka was the number one variety of Distilled Spirits with
almost $600 million in sales in the Grocery Channel (up 11.3% in
dollars and 6.9% in volume).
Click on thumbnail to enlarge, or click here.
Vodka's growth in Grocery has been fueled by the premium priced
segment (retail price of >$10 for a 750ml. bottle) growing 17% over
the same period in dollar sales and an increase in equivalized volume
of 15.8%.
But it's the "flavored spirits," which will reach $550 million in
sales for 2005, that have many analysts suggesting that this is the
next big trend. According to Danny Brager, ACNielsen's Vice President
for Beverage Alcohol, "flavored spirits should continue to be a hot
segment in 2006, given the number of new product introductions and
marketing support behind them. We are currently tracking over 800
Flavored Spirit upc's, an increase of 36% vs. the level two years
ago."
For a more detailed overview and forecast of the Beverage Alcohol
Category contact
danny.brager@acnielsen.com
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Fat Gets Less of a Chance in California
The California legislature has passed, and
bodybuilder-turned-actor-turned-politician Gov. Arnold Schwarzenegger
has signed into law, a bill that eliminates access to certain drinks
and snacks sold in vending machines and school stores. Said to be
the first bill of this extent, far stronger than what is being
considered in other states, the bill sets limits on the fat and sugar
content of meals and snacks sold on campus during school hours. The
new rules will go into effect on July 1, 2007. The beverage rules,
which basically prohibit the sale of sodas during school hours, go
into effect two years later.
Since state elementary and middle schools have already banned the
sale of sodas, the new beverage legislation would affect only high
schools. But statistics compiled by ACNielsen suggest that at least
when it comes to soft drinks, this legislation could have a profound
effect - because the existing prohibitions on soft drink sales to
younger students seems to parallel a remarkable softening of the soft
drink market in major California cities.
For the year ending September 10, 2005, according to the
ACNielsen numbers, the volume generated by total carbonated soft
drink sales in cities like San Francisco, Sacramento, San Diego, Los
Angeles, was significantly lower than the national average. (Similar
trends can be seen in cities like New York City and Hartford, where
there also have been moves to varying degrees of success to try and
limit soda and junk food consumption in schools.)
It seems reasonable to expect that when the rules get tougher and
apply to older students, consumption will go down even more.
The bill was passed in California despite the best efforts of the
American Beverage Association (ABA), which spearheaded a voluntary
series of restrictions on soft drink sales in elementary and middle
schools in the hope of heading off just such a law. It characterized
the California legislation as "well-intentioned" but "unfortunate."
Ironically, since California has a reputation for being a state
simply bursting with people who appear to be healthy and spend more
time outdoors, a new study by the nonprofit California Center for
Public Health Advocacy says that "childhood obesity has reached
epidemic levels, with more than 40 percent of the schoolchildren in
some communities overweight."
In Los Angeles, 36 percent of children are overweight, according
to the study. In Santa Ana, 35 percent of children are fat, and in
Anaheim, 32 percent of children are overweight. Statewide, 28
percent of children are overweight, a six percent increase since
2001.
So, what can soft drinks learn from this? It's clear that the
trend to modify consumption behavior will continue, albeit in varying
degrees state by state, and the long-term impact on health and
obesity is years away from being measured. However, it's a great
signal to the CPG world to get in on the nutritional correction
momentum and be proactive rather than defensive. Follow the path that
has been proven effective by others, in particular the cereal makers
who took action before it was required and reduced sugars and
improved nutritional content.
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Specialty Coffee Upsurge Inspires Boom In Flavored Ground and Pods
The upsurge in specialty coffee drinking - to $9 billion worth in
2003, says the Specialty Coffee Association of America - occurred
mostly in coffeehouses, but the trend shouldn't be ignored by
supermarkets, which can win in two ways:
Harvest sales of less pricey packaged alternatives: some true
specialty beverages made of nurtured, flavored beans grown in optimal
climates, and other simply flavored varieties. The exotic appeal of
these beverages, led by popular French Vanilla and Hazelnut, as well
as conveniently located nearby dispensers of fresh roasted beans for
easy grinding and brewing can entice customers.
Induce more frequent, lengthier store visits through coffee
bars that invite consumers to imbibe and refresh.
Which segments are percolating fastest on store shelves?
Flavored ground generated double-digit gains the past four years,
though it still posts a mere tenth the volume of regular ground. Its
food-drug-mass sales (excluding Wal-Mart) have leaped to $185.7
million in the 52 weeks ended Sept. 10, 2005, up from $85.3 million
four years earlier, show ACNielsen Strategic Planner data. On an
equivalized unit volume basis, yearly gains were a dramatic 20%, 66%,
19% and 18%; in the latest period, it was the only segment among
soluble, whole bean or ground prepackaged coffees to show an advance.
Pods are posting explosive percentage gains, their convenience
and novelty resonating with consumers. This innovative package grew
from zero sales in 2002 to $30.1 million in the 2005 period,
according to ACNielsen Strategic Planner. Equivalized pounds,
admittedly from a small base, soared an extraordinary 677,474% in
2004 and 1,296% in 2005. (A pod is coffee pre-packaged inside its own
filter, like a teabag, to minimize clean-up.)
Organic coffee has multiplied from $5.6 million in 2001 to $34.4
million in 2005.
Non-decaffeinated liquid coffee also climbed, by 21% in dollars
and 13% in equivalized units in the latest 52-week period, added
ACNielsen.
Click on thumbnail to enlarge, or click here.
It makes sense for food stores to cultivate these segments.
Sixteen percent of U.S. adults drank specialty coffee daily in 2004,
up from 9% in 2000, reports the latest National Coffee Association
Annual Drinking Trends Study.
It should be noted that people who drink specialty coffee don't
drink it exclusively. From 2003 to 2005, specialty growth came from
dual drinkers of both specialty and traditional coffees, says the NCA
study. Further analysis suggests that retailers who attract younger
coffee drinkers, age 18 to 24, will especially benefit since this
cohort drinks the largest amount of specialty coffee daily.
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Private Label: A U.S. View
In last month's issue of F3, Jane Perrin wrote about the expansion of
private label products on a global basis. This month, we take a
deeper dive into private label development in the U.S.
Between 1997 and 2004, private label dollar sales in the U.S.
grew at a rate that was more than twice as fast as branded items.
Private label products are purchased by nearly every U.S. household
and buyers are purchasing such products across more product
categories than ever before. As noted below, across about 120
mega-categories that ACNielsen tracks, 65% of households purchased a
private label product in 21 to 50 different categories. Almost 20%
of households purchased a private label product in 51 or more
different categories.
Click on thumbnail to enlarge, or click here.
While U.S. private label sales are strongest in the kinds of
households that you would expect (i.e., larger households, blue
collar households, and households with lower incomes), private label
products have shown very strong growth in smaller and more affluent
households. With increased focus on more premium private label
offerings, retailers are evolving their private label businesses
beyond traditional buyers.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/Nov05Hale2.gif) and this
link for graph two (
http://www.factsfiguresfuture.com/enlarged/Nov05Hale3.gif)
With greater retailer fragmentation in the U.S., private label
development is not as strong as we see in other countries. However,
U.S. private label development does vary considerably across retail
channels and individual retailers. Just like we see in Europe, Aldi
is a very strong private label player in the U.S. and it is leading
the way in how much of their product mix goes to private label.
Across the categories that ACNielsen tracks, 84% of Aldi's 2004
dollar sales went to private label products. Save-A-Lot, Aldi's lead
competitor in the limited assortment/low price retail format, drove
51% of their sales through private label. The following slide also
shows how lead retailers in the Grocery, Drug, Mass-Merchandise and
Club channel are leveraging private label products.
Click on thumbnail to enlarge, or click here.
With the release of a new ACNielsen Homescan service, Store
Brands, retailers can now understand how they stack up to their
competitors regarding private label development (in total and by
category). Store Brands can also assist either those manufacturers
looking to supply retailers with private label products or those
looking to determine how to coexist with private label.
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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Coinstar Deal Connects Amazon.com To Cash Economy
One of the things that has typified consumer transactions on
Amazon.com has been the need for some kind of credit card. If the
shopper doesn't have plastic, it is extremely difficult to shop at
Amazon. But now, for all practical purposes, Amazon will be able to
take cash - which in some ways closes the loop connecting the
Internet commerce and the brick-and-mortar economy.
Amazon.com has announced a deal with Coinstar - the company well
known for those green machines that count people's coins and give
them back either cash or gift cards. People can now put their
change, and even their bills, into any Coinstar machine and get back
a gift certificate with a redemption code that can be cashed on the
retailer's website. In addition, Coinstar won't be charging a
transaction fee on those exchanges, so customers will be getting full
value for their coins and bills. (Normally, Coinstar gets an 8.9
percent piece of the action on virtually all the coins deposited in
its machines.)
Coinstar has long offered consumers the ability to cash in coins
for gift cards at brick-and-mortar retailers, but this is the first
time it has made a similar deal with a pure-play online service.
This is not an inconsiderable deal for Amazon in terms of future
profits. While Amazon generates about $7 billion in annual sales,
there are estimates that there is something like $10.9 billion in
loose change in the US - which could add up to healthy incremental
sales for Amazon.com.
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Making Eggs Safer
The Department of Homeland Security has identified eggs as one of the
five most likely targets of agricultural terrorism. So while it may
sound like a scene out of Star Wars, a joint effort between
Massachusetts egg producer, Born Free, and a Colorado technology
supplier to laser-etch vital tracking information on individual eggs
just may revolutionize the marketplace for consumables in the U.S.
The program consists of etching codes directly on the shell of
each individual egg that allow for it to be tracked throughout the
supply chain. Current processes in the egg industry carry no such
assurance. While each carton carries a "sell by" freshness date,
there is no guarantee that the products contained therein have not
been tampered with, nor even that they were the eggs originally
placed in the cartons.
The etching process, which Born Free refers to as part of an "egg
safety action plan," is the result of a partnership between Born Free
and EggFusion, Inc. (Boulder, Colo.). In addition to the expiration
date and brand name, each eggshell is etched with an alphanumeric
code that allows the egg to be tracked straight back to the farm -
indeed, to the flock of hens from which it originated. Individually
coded eggs would be particularly reassuring to consumers and
retailers in the event of a recall.
Egg-borne illness (such as egg-associated salmonella) remains an
issue in the U.S., according to the Centers for Disease Control,
although the average person's risk is low if the eggs are cooked
properly. Federal agencies hope to reduce incidences of egg-borne
illnesses by 50 percent by the end of this year.
The ability to trace an individual item throughout the supply
chain holds immense promise not only for the egg industry, but also
for all consumable categories in the U.S. marketplace.
Click on thumbnail to enlarge, or click here.
"I like the fact that everything was right on the egg," Sara
Ferrara, a shopper from Redding, Mass., said in a recent National
Public Radio report, acknowledging that she is "probably paying more
for that." Indeed, at a Market Basket grocery store in the Boston
suburb of Woburn, Mass., Born Free Eggs carried a substantial premium
- $2.19 per dozen compared to $1.29 for store-brand eggs. However,
much of that cost is reflective of the brand's "designer" attributes
(cage-free, organic, vegetarian-fed, Omega-3 enhanced, etc.) rather
than because of laser technology. A recent study by the Strategic
Marketing Institute found that overall egg consumption is growing in
the U.S., and that designer eggs currently account for about five
percent of the total egg market.
Click on thumbnail to enlarge, or click here.
ACNielsen LabelTrends data corroborates that claim, showing that
eggs with vitamin claims on their labels account for 6.9% of all
category sales in the combined food/drug/mass channels for the
52-week period ending 10/08/05. Furthermore, while the overall
category has experienced a roller coaster ride filled with ups and
downs over the past four years, high-end eggs with vitamin claims on
their labels (i.e., "designer eggs") have shown solid dollar growth
each year.
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Hispanic Assimilation Translates to Movement on Retail Shelves
Without question, America is undergoing a Hispanic-ization. In some
major cities, such as Los Angeles, traditional Anglo-Saxons are now a
minority, thanks primarily to the large influx of Hispanics and
Asians. Many cable systems offer several different Spanish-speaking
stations, the radio waves are filled with Spanish-language programs
and newsstands have many Spanish magazines and newspapers to choose
from.
Obviously, this has had a significant impact on the entire
American culture and consumer choices at the local grocery store in
particular.
Click on thumbnail to enlarge, or click here.
"It's obvious when you're talking about Los Angeles, New York,
Miami, Chicago or Houston," says David Morse, President and CEO for
New American Dimensions, LLC, a Los Angeles-based marketing research
and consulting firm specializing in ethnic marketing. "But the
important thing to keep in mind is that this is going on in
Davenport, Iowa, too."
As such, tortillas have become as common as white bread, burritos
as common as cheeseburgers, and arroz con pollo as common as, well,
rice and beans.
"There's more salsa sold in American supermarkets today than
catsup," notes Morse. ACNielsen data supports that claim with salsa
outselling catsup by nearly $175 million over the 52-week period
ending October 8, 2005.
Click on thumbnail to enlarge, or click here.
But is the current Hispanic influx any more (or less) profound
than the arrival en masse of European immigrants (Italians, Irish,
Germans, Russians and Jews) in the late 1800s and early 1900s?
"There are many similarities," Morse points out. "It's hard to
believe today, but back then, Irish, Italian and Jewish immigrants,
in particular, were very much considered 'foreigners.' In fact, many
people were amazed that Joe DiMaggio - an Italian! - could
become an All-American hero."
Morse goes on to tell of a story that appeared in Life magazine
that expressed surprise that DiMaggio "speaks English without an
accent" and "never reeks of garlic." Imagine - at that point in time,
pizza and ravioli were considered "ethnic," and cheese blintzes and
apple strudel were "exotic" specialties.
The main thing to consider when comparing the current Hispanic
immigrants to their late 19th century and early 20th century
counterparts: the current migration is now in its second generation.
That means while many of the children born from the first wave of
Hispanic immigrants - now teens and young adults - understand and
speak the Spanish language and are comfortable eating Hispanic
cuisine at home, most prefer speaking English (an increasing number
understand Spanish, but do not speak it fluently). Furthermore, when
out of the home environment, they are far more likely to be eating
hot dogs, hamburgers and pizza than burritos, and ordering milk and
soda over horchata.
"We are becoming the ultimate melting pot," says Morse, adding
that the Asian influx is as great proportionally as the Hispanic -
although in terms of sheer volume, Hispanic immigrants outnumber
Asians by more than three to one according to the 2000 US Census
(35.3 million to 11.9 million). "All races are blending into each
other. As that happens, the cultures, cuisines, and consumer
preferences all tend to amalgamate."
At this rate, don't be surprised in 20 years or so if you hear
that something is, "as American as heuvos rancheros!"
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Understanding Consumer Habits In-store
The myth that supermarket customers shop the entire store was
dispelled a long time ago as nothing more than an old wives' tale.
Indeed, in today's ultra-competitive, channel-blurred retail
environment, expediency and efficiency are part and parcel of
improving the shopper's satisfaction level.
So if supermarket shoppers aren't traversing the entire
footprint, where, exactly are they going? And how much time are they
spending wherever it is they are going? The answers can bring a sense
of order to the merchandising process, and increase the profitability
of any store.
Enter PathTrackerTM, a system devised by Sorensen
Associates of Troutdale, Ore. PathTracker consists of a series of
antennae implanted in a store's ceiling that communicate with RFID
tags placed in shopping carts and baskets. The system, developed in
conjunction with WhereNet (Santa Clara, Calif.), tracks individual
shoppers as they travel around the store, and does so in real time.
About 300 carts and hand baskets at a given store are tagged and
monitored, which provides the critical mass needed to yield a
statistically significant analysis. PathTracker can identify the "hot
spots" and "cold spots" on the floor - where shoppers most often
travel and where they do not - by creating a schematic called
"Shopper Density."
One key finding by PathTracker: Most shoppers prefer to go down
the aisles, starting at the back of the store, and moving to the
front. The wise retailer, then, will focus toward the back of the
store - facing promotional displays toward the back and placing
products promoted in weekly circulars toward the rear of the aisles.
Another finding uncovered by PathTracker is the "counter culture"
of a typical supermarket.
"With everything being equal, shoppers prefer to shop
counterclockwise," explains Mark Heckman, VP of Retail Insights for
Sorensen Associates. "They're basically oriented that way, and stores
that are designed to accommodate a counterclockwise flow have the
best chance of creating a productive environment for the consumer."
 The typical shopper will only go as far down
the aisle as it takes to find the product she is seeking. Then she
will usually go back to the point of entry, and continue around the
perimeter. Heckman attributes this phenomenon to the desire by most
consumers to find relative open space.
The challenge, then, is for the retailer not to position all of
its weekly promotions on end caps. Those are usually low-margin
traffic builders, and while they may create excitement, they also
discourage passage through the aisle where more profitable SKUs are
usually positioned.
"That's one of the conundrums retailers typically have," says
Heckman. It's essential for retailers to create balance in terms of
how promoted items are merchandised vis-à-vis full-margin SKUs.
Merchandising is far more science than art.
"It's a balancing act," admits Heckman, himself a former retail
executive with Marsh Supermarkets and Randalls, "The data we provide
helps the retailer balance their flow of customers."
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Boxed In: Significant Shift Being Seen in US Wine Buying
Not only is "bag-in-a-box" beginning to gain acceptance as a
perfectly legitimate way to package good wine, but the three-liter
"cask" wine segment actually is growing 61 times faster than the
overall wine category. The American approach to wine actually is
mimicking that taken in Europe, where boxed wine is far more
mainstream and not marginalized by wine aficionados.
The fact is that, according to ACNielsen, the overall wine
category is up almost nine percent in dollar volume in the most
recent 52-week period, and almost every subcategory of boxed wine is
growing even faster.
Click on thumbnail to enlarge, or click here.
An ACNielsen Homescan(R) consumer panel "source of volume"
analysis found that while the majority (91%) of three-liter volume is
being generated by wine buyers who are shifting some of their
purchasing to three-liter boxes, nine percent is incremental volume
(seven percent is coming from wine buyers who are increasing their
wine purchasing; two percent is coming from first-time wine buyers).
Of wine buyers who are shifting some of their purchasing to
three-liter boxed wine, the vast majority are shifting from bottled
wine, not other boxed wines.
Now, it must be conceded that boxed wine remains a small part of
overall wine sales, generating just $231 million in annual sales as
part of a $3.9 billion category. But clearly a shift is taking place.
The other intriguing thing about the three-liter boxed wine
segment is the fact that it is in specific varietals - not the
ambiguously named "red table wine" or "white table wine" segments -
where the real growth is being delivered.
Click on thumbnail to enlarge, or click here.
ACNielsen also reports that much of the three-liter volume is
coming from new entrants to the size segment (brands introduced
within the last two years). In fact, more than half of the
three-liter volume is from such brands.
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Holiday time is upon us and busy people are taking short cuts when it
comes to baking. ACNielsen estimates that in 2004, over $1.7 billion
was spent across all retail channels in the refrigerated dough
products category, which includes dough to make biscuits, cookies,
brownies, dinner rolls, and sweet rolls. More than a third of these
sales occurred during the fourth quarter.
The following slides indicate the percentage of households who
buy each type of refrigerated dough products, a sampling of higher
indexing household types who buy products in the overall refrigerated
dough products category, and channel share of category dollar sales.
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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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