February 2012
Are Increased Food Prices At Odds With Increasing Innovation
Earlier in the week, I attended the Food Marketing Institute’s Midwinter Executive Conference in Orlando. It is the annual gathering of the top tier management of supermarkets, wholesalers and food manufacturers who gather to discuss the most important issues they face.
Health and wellness, sustainability, job creation, the economy, the opportunity of social networks and meeting shopper needs were certainly discussed at length – but probably the most important discussions overheard everywhere was about the impacts of rising food costs.
?In 2011, we saw food price inflation at the retail level at 4.8 percent for the year, and the USDA’s Economic Research Service is projecting no more than a 3.5 percent rise this year. To the average shopper that is a bit hard to fathom as they have been stretching their budgets to pay those double digit increases on everyday essentials like beef, pork, coffee, cooking and salad oils and peanut butter. In fact, recent headlines have been blaring how beef prices will continue to rise, and the cattle supply is down.
Supermarkets, rethink trip appeals
Which kinds of trips do your stores attract – and which kinds of consumers?
Since the recession hit and recovery has been at snail speed, members of all demographic groups have reset the ways they plan to shop, actually shop and consume goods. What retail marketers thought they knew about segments of the buying public they draw, and the kind of buying they do, has changed.
“The American shopper has many faces today,” says a SymphonyIRI Group report, The CPG Basket: Fostering Growth in a Time of Conservation, which describes three kinds: the downtrodden, who are pessimistic about their financial situations; the optimistic, who feel they’re better off today than a year ago; and the savvy, who feel about the same as a year ago and enjoy seeking deals.
Earn shoppers’ Valentine’s Day embrace
Want to help shoppers light their fire this Valentine’s Day?
Set up an endcap of ‘love foods’ or aphrodisiacs that expand your store’s appeals beyond flowers and boxed candy. To appeal to sweethearts of both genders, assemble and display these at full margin, with signs stating their romantic benefits.
Some foods associated with love since ancient times (some of this is lore rather than science) include:
What African-Americans prefer
If Black History Month is an opportunity for supermarkets to show they appreciate the business of 42 million African-Americans with about $1 trillion in buying power, only some get it right.
The Jewel-Osco division of Supervalu is one example. During February, it honors its African-American vendors, increases the in-store sampling of their products, and makes grants to community organizations.
More important, this Chicago leader is committed to serving this market and tailors assortments to shoppers in its stores year-round. “We’re only as strong as the communities we operate in,” Melissa Pursley, the chain’s director of marketing, told Today’s Chicago Woman.
Move Over Pomegranate, Beet Juice Is About to Take Over
I grew up in a family with Eastern European roots, so borscht was a staple in our home and that of my grandmother.
For those not familiar with borscht it is reddish-purple in color with beetroot as its main ingredient and is usually consumed as a hot or cold beverage or soup. There are many variations depending on the European culture, but here in the United States the borscht found in jars on supermarket shelves is a simple recipe of water, beets, sugar, salt and citric acid. That is, if you can find it in your supermarket. You may have to search for it in health food stores, kosher supermarkets or have it made fresh at a juice bar.
But all that is about to change, and it is not about nostalgia or the rise in ethnic foods. It is about health.
Food promos rule at Super Bowl
So much Super Bowl buzz each year centers on the themes and effectiveness (or ineffectiveness) of commercials aired during the game, including many from food and beverage brands.
However, 111.3 million people did watch the New York Giants beat the New England Patriots on February 5 – and ate and drank plenty during house parties that were largely supplied by supermarkets. Therefore, F3 contends that retailers and CPG brands already emerged as winners or losers before the game was played – based on their penetration into America’s homes for one of the biggest food days of the year.
Much was at stake. Approaching the gridiron battle, 71.3% of U.S. game watchers expected to spend $63.87 each on foods and beverages, apparel and related merchandise, an amount to exceed $11 billion in total spend, reported the National Retail Federation’s Retail Advertising and Marketing Association.
Fresh foods are trip magnets
Consumers want to eat healthier, and fresh foods are key to achieving this. Led by produce, fresh perimeter departments are the key traffic-building attractions to supermarkets, reveal findings of the 2012 National Grocers Association-SupermarketGuru Consumer Panel Survey Report.
By a commanding 2:1 margin, consumers say that fresh foods (66.4%) drive their supermarket trips, compared with shelf-stable foods (27.8%) and frozen foods (5.8%). Since heavy spenders ($101 and over per week on groceries) say this in an even higher frequency (68.3%), the consequence of not satisfying this desire could be particularly damaging to a supermarket.
Who else said this the most? Boomers age 50-64 (68.9%), who increasingly strive to eat smarter as they get older to help prevent or fend off health conditions – and who will account for more than half of grocery purchases by 2015.
Beef’s Shrinking Environmental Impact
The carbon footprint of beef is shrinking, according to a study from Washington State University. The study compared today’s beef production impact to that of the production system in 1977, revealing some striking improvements in current practices.
Published in a recent issue of the Journal of Animal Science, the study found that, compared to beef production in the 70s, each pound of beef raised in 2007 used 33 percent less land, 12 percent less water, 19 percent less feed and 9 percent less fossil fuel energy. Waste outputs were similarly reduced, shrinking the carbon footprint of beef by 16.3 percent in 30 years.
In contrast to the 1977 beef production system, where all calves went through a stocker stage before entering the feedyard; in 2007 about 1/6 (16.5%) of beef calves by-passed the stocker phase and went directly into the feedyard. This allowed them to grow faster and, as total resource use is partially dependent on the time that animals take to grow to harvest weight, it reduced resource use.
Does J.C. Penney pricing change the game?
The new Apple-bred CEO of J.C. Penney Ron Johnson thinks shoppers have had enough of artificially high price points followed by incessant discounts that make shoppers scramble to get the values they seek. To provide shopper relief, the chain institutes today (Feb. 1) three kinds of prices – everyday (at least 40% lower than last year’s prices), monthly specials on seasonal merchandise, and “best prices” deals that rotate on the first and third Fridays each month.
Among results the chain seeks: more trips (more than its latest average of four times a year), larger baskets, less marketing costs, and more “everyday” price selling.
The Lempert Report wants readers to think about how today’s food price inflation follows a period of food price volatility, which caused CPG and retailers to manage pricing and promotions in ways to retain “price integrity” while showing value. These pricing-promotion strategies strained relationships between retailers and CPG, partly because chains were often left to absorb CPG price hikes in order to look competitive in the eyes of shoppers.
