Shopping Habits Change as Consumers Adapt
By Rose Anthony
Shopping trips are changing. Due to the sour economy, shoppers are cutting back on the number of stores they are visiting, concentrating visits on stores known for lower prices, generally visiting stores less frequently, and spending less per trip. These are the principal findings of SymphonyIRI Group’s new Times & Trends report,
The New Path to Purchase: An Escalation of Channel & Consumption Migration.
“Shoppers are not enjoying the same financial success as corporations this spring and summer, and their continued search for lower cost retail channels reflects this,” said John McIndoe, senior vice president, marketing, SymphonyIRI. “In addition to potential pressure on retailer revenues and margins, these trends point to managers having fewer chances to ‘get it right’ with shoppers. If a shopper visits a store and is unhappy with the experience, she will quickly go elsewhere.”
Grocery remains the dominant channel, with 98.4% penetration during the 52-weeks ending June 27, 2010. Other leading channels include drug (77.0% penetration), mass merchandise (71.6%) and supercenters (69.5%). Supercenters enjoyed the largest penetration increase of 1.9 points, followed by dollar stores with a 0.5 point increase. Mass merchandise penetration decreased 2.3 points, while convenience store penetration declined 1.9 points and drug fell 0.5 points.
The number of shoppers visiting fewer than five stores has increased every quarter since the second quarter of 2009. In contrast, those shopping at 5-9 stores in the same timeframe has dropped every quarter but one. The number of people shopping at 10 or more stores has remained approximately the same.
Overall, trip frequency began to consistently decline starting in Q4 2009, and in Q2 2010, declined nearly 2 percent versus the same period the prior year, driven by declines in the convenience store and mass merchandise channels, which experienced slides of 9 percent and 7 percent, respectively. Across most other channels, average purchase occasions remained fairly steady.
Dollars per purchase occasion, which were growing at approximately 5 percent in Q3 2008 versus the same period the prior year, fell flat in Q3 2009 and are now declining by more than 1 percent. While grocery, supercenter and club channels have seen average basket size slide over the past year, convenience, dollar and drug stores enjoyed significant increases of 8 percent, 3.8 percent and 1.7 percent, respectively.
A majority of trip missions have seen total trips to retailers decline steadily for nearly all categories since Q2 2009. The exception is quick trips, or small “need it now” shopping excursions, which remained constant for the second half of 2009 and then jumped dramatically in Q2 2010. Similarly, basket size across trip missions has declined most quarters since Q2 2009. Once again, quick trips were the exception, consistently demonstrating increased basket size each quarter, beginning in Q3 2009.
Factors driving performance of these channels include:
- All retailers are instituting aggressive pricing, merchandising and promotion strategies to woo shoppers
- Channels known for low prices are tending to perform better
- Many mass merchandisers are shifting to a supercenter format, temporarily depressing trips and dollar share performance
- Convenience stores, known for carrying more discretionary items, are feeling the pinch as shoppers remain wary about non-essential spending
Lafley Honored
The Grocery Manufacturers Association (GMA) presented former Procter & Gamble Company Chairman, President and CEO A.G. Lafley with its 2010 Hall of Achievement Award before more than 700 industry leaders at the opening session of its annual Executive Conference. The Hall of Achievement Award represents the highest honor given by the more than 100 year-old association.
A.G. Lafley retired from Procter & Gamble in February 2010 after 32 years of service. He became president and CEO of the company in 2000 and was elected chairman of the board in 2002.
Joint Venture for Social Media Intelligence
The Nielsen Company and McKinsey & Company have formed a global joint venture called NM Incite that aims to help leading companies harness the power of social media intelligence to drive superior business performance.
NM Incite is designed to give companies the capabilities to better understand, value and take advantage of the rich insights made possible by social media. It builds upon the industry-leading social media and online brand metrics, consumer insights and real-time market intelligence of Nielsen BuzzMetrics to transform business operations including product development, marketing, communications and customer service. With the creation of this new venture, BuzzMetrics becomes wholly part of NM Incite.
Fighting Meth Production
The Consumer Healthcare Products Association (CHPA) has commended the California Senate Public Safety Committee for passing legislation that calls for the implementation of a statewide, industry-funded electronic tracking system (e-tracking) to monitor and block illegal purchases of over-the-counter cold and allergy medicines containing pseudoephedrine (PSE), a key ingredient that can be diverted to make methamphetamine.
The state’s retailers and pharmacists would have a consolidated, real-time electronic logbook—accessible only by law enforcement—that is more secure than current paper logs. “E-tracking is the only solution that will stop illegal sales of pseudoephedrine by providing a real-time, stop-sale function across all stores statewide,” said Linda Suydam, president of CHPA.
AUGUST 2010
CPG Industry Must Capitalize on Innovation, Growth Opportunities
By Rose Anthony
To preserve shareholder value as the economy recovers, consumer packaged goods (CPG) companies will need to employ different tactics than those used during the recession – divesting non-core brands, conserving cash, and cutting costs.
Moreover, to grow revenues in this new climate, CPGs will have to focus on innovation to encourage household spending, especially for products in mature segments and to offset reduced spending by Baby Boomers who are nearing retirement, according to the Grocery Manufacturers Association (GMA) and PricewaterhouseCoopers LLP (PwC) 2010 Financial Performance Report called Forging Ahead in the New Economy.
According to the study, many CPG companies are looking to innovate by reaching consumers in more places or tailoring products for local customer tastes in emerging markets. Additionally, understanding customer priorities is central to innovation as consumers in the United States are buying more carefully, buying different pack sizes, taking advantage of volume discounts, and trading down to non-premium brands.
The 2010 GMA and PwC Financial Performance Report is the latest installment of the annual industry report issued by GMA and PwC, now in its 14th year, and is compiled from interviews with senior leadership of GMA members (including members of the GMA CFO Committee), publicly reported company financial data, government statistics, analyst reports, and other published material on 152 companies in the food, beverage and consumer products sector.
“The CPG industry has a legacy of strong financial performance and resilience in the face of challenging economic times, and 2009 was no exception,” said GMA President and CEO Pamela G. Bailey. “However, restrained consumer spending and continued fears about the future of the U.S. economy mean that companies will have to harness the innovation for which they are known as they look to grow sales.”
The report found that establishing a foothold in emerging markets – especially in China, Russia, Brazil, India, and Southeast Asia – has taken on a sense of urgency for CPG makers as capital flows faster than ever and new competitors can ramp up quickly. The middle classes are growing and forming attachments to new brands and products just as fast. Consequently, product growth cycles in emerging markets have accelerated and the success or failure of a product launch or brand introduction now can be determined in a matter of just 12 or
18 months.
Additional key findings from Forging Ahead in the New Economy include:
- CPG company median shareholder returns stood out as strong relative to the rest of the market. With shareholder returns up 49 percent in 2009 and median EBIT (earnings from continuing operations before interest and taxes) growth jumping a remarkable 33 percent, the beverage sector had the best quantitative performance among the three major CPG sectors (beverage, food, and household products).
- Median net sales growth sank in all three sectors, and beverage's 1.6 percent decline was the first time in five years that the sector experienced negative growth.
- The food sector as a whole cut spending with a nearly 2 percentage point drop in median selling, general, and administrative (SG&A) costs as a percentage of sales.
- The food sector’s median five-year shareholder return metric of 6 percent led the way for all three sectors, with beverage coming in at 5.3 percent and household products at 2.7 percent.
While household product companies saw negative median net sales growth for the first time in five years, they mitigated this decline with the highest one-year median return on invested capital of any of the sectors, the highest median sales per employee, and the highest median gross margins.
The CPG sector lagged the S&P 500 by 5 index points and the Dow by 1 index point in 2009.
“These food, beverage, and household product companies are part of a true counter-cyclical industry, as it performs better than other industries during recessions, but tends to balance the scales with slower growth during expansions, as was the case in 2009,” said Susan McPartlin, U.S. consumer packaged goods industry leader, PricewaterhouseCoopers. “This may reflect the fact that CPG companies have been adapting to market conditions and sacrificing a bit of short-term growth to get their houses in order through increasing sales per employee, paying down debt, trimming workforces, and paring brand and product portfolios. We expect CPG companies to emerge much stronger as we move through 2010.”
“CPG companies are operating in a new environment, characterized by more cautious, value-driven consumers and volatile commodities,” added Lisa Feigen Dugal, North American consumer packaged goods & retail advisory leader, PricewaterhouseCoopers.
“It will be tough to succeed using the same tactics employed during the recession. Novel approaches will be crucial – and that includes creating new trade promotions programs for retailers, rethinking how they spend their media dollars, targeting coveted demographic groups like Generation Y with smart social networking campaigns, reaching customers in more places, and tailoring their products for local customer tastes in emerging markets.”
Forging Ahead in the New Economy will be presented via webcast by PricewaterhouseCoopers and GMA on Wednesday, July 14 at 1:30 p.m. EDT (click here for registration information: http://www.meetpwc.com/GMA_PwC_webcast). For an electronic copy of the complete report, visit www.gmaonline.org/publications.
Displaying Products Online
The United States Patent and Trademark Office has awarded a patent to the Grocery Shopping Network (GSN) for “Product Variety Information,” which includes GSN's processes for displaying product varieties from weekly ads, circulars, and flyers displayed online.
If a consumer is viewing an interactive flyer online, this patent covers the displaying of available varieties of
“on-sale” products. For instance, if a top selling product is on sale, the patented process is a method for taking a general sales item and helping shoppers find exactly the items they want by displaying all varieties of an available product at a specific brick and mortar location. This solution helps shoppers while significantly increasing basket size and sales for retailers.
The network offers retailers a broad range of services that are designed to interact with consumers via store websites and manages over 7 million unique visitors planning over 21 million shopping trips monthly, over 35 million loyalty cards, and boasts a survey/email panel of over 2 million users. Some of the solutions for retailers include a display advertising network with revenue share, food and wellness content, coupons, personalized offers, interactive circular creation, online planning as well as buying, and more. GSN is now in more than 6,300 retail locations across North America.
Eating ‘Spoiled’ Food
A new study reveals that three of four (76%) of U.S. consumers mistakenly believe certain foods are unsafe to eat after the date printed on the packaging has passed. In fact, food scientists agree that most foods, if stored properly, can be safely consumed for days or even weeks past the package date.
The survey was conducted online by Harris Interactive in March for ShelfLifeAdvice.com, a website that provides shelf-life data on hundreds of food products plus storage and handling tips that help consumers maximize longevity, safety and freshness of food.
The study asked 2,482 American adults which, if any, of 10 refrigerated food products were considered unsafe to eat past the printed package date. Almost half of the respondents believed eggs were one of those products.
More Nutrition Guidance
Guiding Stars, the world’s first store-wide nutrition guidance program, is partnering with Wellness Layers, a leading provider of health-related online and mobile portals for consumers. The new integrated service aims to provide seamless guidance to food selection at the store coupled with integrated personalized nutrition management online.
A new search engine, called the Guiding Stars “Food Finder,” will mark the first stage of the partnership. It will allow shoppers to search for any of 60,000 foods in the Guiding Stars database and view the zero, one, two or three star nutrition rating for that food. An online community will be created to support the “Food Finder” to encourage consumers to have conversations, exchange ideas and share ratings.
The second phase of the partnership, scheduled to debut later this year, will be an accessible portal with a smart shopping function plus a meal planner. As well as learning about healthier food choices, other topics will include: Medical condition related alerts, shopping on a budget and weight loss.
