2008 was a stellar year for store brands in the U.S., with both dollar and unit growth outpacing branded offerings across consumer packaged goods (CPG) categories. Store brand dollar sales within food, drug and mass merchandisers grew 10.2% for the year, while branded dollar sales grew by just 2.6%. Although the gap in unit sales was not as wide, indicative of how store brand dollar growth resulted from inflationary pricing across a number of commodity-based categories, store brand units grew 2.6% for the year, but branded units were off 2.2%. And what should be keeping many branded marketers and sales execs up at night is how store brand unit sales performance was better in the last quarter of 2008 and even better in the last period of the year. This is a pattern which has continued for the first quarter of 2009 and should continue throughout 2009 as our economy continues to struggle with high unemployment and a tough housing market.
Client questions we are frequently being asked these days concern the current and future performance of store brands. The most prominent questions are:
1. Does this growth rate reflect what we typically experience in a recessionary period?
2. Will store brand growth slow once the economy improves or are we entering a new era of store brand development in the U.S.?
Store brand growth during 2008 is very similar to the gap in sales growth during the 2001 recession. However, with the additional efforts retailers are making to improve store brand packaging, quality and on-shelf presence, we do see store brands being better positioned for growth when the economy improves than they were at the end of previous economic downturns. What may be even more indicative of future performance is the marketing brains and muscle many retailers are putting behind their store brand go-to-market efforts. So consumers forced or enticed to purchase store brands during this recessionary period may be more likely to add store brands to their preferred set of brand choices on a go-forward basis—particularly given how complete and absolute loyalty to a brand is a rarity, usually coming from a small percentage of infrequent brand and category buyers. Most households trade off across a select number of brands depending on their propensities toward flavor, form or size mix and/or the importance they place on promotions and price specials over brand choice.
Now more than ever, marketing to the average consumer or shopper will yield little benefit, as understanding the extremes provide real insights for action. With that in mind, we created a store brand segmentation scheme among our Nielsen Homescan consumer panel. The scheme used actual brand and store brand buying behavior; actual behavior regarding retail channel and retailer shopping preferences; and consumer attitudes towards store brands to identify six unique store brand segments. Understanding which of the segments are drivers of store brand share growth, and the attitudes of those consumers, can help predict the degree of longer-term impact (at a macro and individual category and brand level) and should weigh heavily into plans for how both manufacturers and retailers should plan future growth.
The above graphic (click, it will expand) lists the six store brand segments our modeling efforts identified. The first two segments, downscale value committed and downscale price committed, are very similar in terms of the volume they devote to store brands; the type of store brand offerings they purchase; the retail channels and retailers they shop; and their demographics. However, they are very different attitudinally in terms of how high they rate store brand quality versus branded products. For example, 80% and 77%, respectively, of the downscale-value-committed consumers agree or agree strongly with the statements that store brands are a good alternative to name brands and store brands offer extreme value. This compares to response levels of 67% and 63% for the downscale-price-committed segment. The biggest difference between these segments is how 64% of the value-committed segment stated a willingness to pay more for store brands, while only 5% of the price-committed segment made this claim.
While grocers might see these two groups as important to their store brand business, these two segments make fewer trips to the grocery channel. They are extremely frequent shoppers to limited assortment deep discount grocers like Aldi and Save-A-Lot. Also, these two groups are big fans of supercenters, as 37% of their total outlet sales are allocated to that channel. These segments devote about 80% of their store brand purchases to low-end or value tier store brands and because of their low income skew, they may have no choice but to spend disproportionately on lower-priced products.
The third segment, mainstream loyals, is the most important segment when it comes to shopping and store brand spending within traditional U.S. grocers. Almost half (45%) of their all-outlet dollar spending is allocated to the grocery channel, and across most categories we see the highest relative levels of annual store brand household penetration and dollar buying rates (versus brands) among this group. Almost three-fourths of their store brand volume is in the mid-tier segment. They hold high regard for store brands and are more likely to be a little older and also from mid- and low-income households.
Consumer in the fourth segment, upscale premium, spend over half (53%) of their store brand dollars on premium tier store brands, are more likely to shop upscale retailers and are big fans of the warehouse club channel. Not surprisingly, this segment has attractive demographics, as they tend to be larger, more affluent households. Our research shows how retailers like Costco, with their Kirkland Signature brand, can yield strong store brand buying behaviors among these consumers.
The last two segments we labeled low spend potentials and low spend rejecters. These two groups don’t spend a lot on store brands, but they do have attractive demographics, shopping habits and spending levels across a number of retail channels. The low spend potentials have very high regard for store brands from an attitudinal perspective, while the low spend rejecters have very negative attitudes toward store brands. Both groups spend a disproportionate amount of store brand dollars on mid-tier store brands. Retailers should look to entice the low spend potentials with trial programs and with premium-tier store brands and ignore the rejecter group. Manufacturers should continue to innovate to win the lion’s share of spending from both groups and do all they can to understand who these households are, where they shop, their brand preferences and what media vehicles can be used to reach them.
Brand marketers, don’t panic; brand offerings still drive 83% of CPG dollar sales and 79% of CPG unit sales. But now is not the time to sit on the sidelines and think your brands will not be impacted by store brand initiatives. Be proactive in defense of your shelf space and collaborate with your retail partners on how to maximize both branded and store brand assortment in your categories.
Retailers should not get too far out over their skis with store brands; new product innovation is a space owned by manufacturers. Don’t drive your shoppers to shop a competitor because you de-listed a brand or branded item with a strong niche connection to an important contingent of your shoppers.
For further information or to arrange a comprehensive presentation on consumer shopping patterns, please contact Todd Hale at 859-905-4615.
- Todd Hale, TheShopperWonk
-email: todd.hale@nielsen.com
The Continued Rise of Customer Centricity Shoppers have more choice & convenience than ever. They are inherently impulsive and loyalty varies significantly by segment and category. As a result and with the advent of more granular data sets (loyalty, tlog and even better panel access), category management has evolved from a product-centric process to a more comprehensive shopper-centric framework. In this session, we will show you how we have integrated consumer and shopper insights to drive strategic collaboration between retailers and manufacturers to answer the most important questions related to shoppers: who they are, why they shop, where they shop, what influences them (pre-store/in-store) and how they respond. You will be able to more clearly view shoppers and develop insights using powerful new lenses developed with segmentation layers including affinity, attitudinal and behavioral lifestyle to build robust programming. Food Lion and Dr Pepper Snapple Group will share how they bring value to their customers by bringing their shopper segments to life to drive more top and bottom line sales for Dr Pepper and their retail partners. Kraft, Unilever & PepsiCo will join Dr. Pepper & Food lion for a panel discussion to share their unique perspectives on their own paths to customer centricity. Panel participants include: Melissa Zip, Manager of Collaboration and Innovation, Food Lion Rob Colarossi, Vice President, Customer Development, Dr. Pepper, Snapple Group Lisa Klauser, Vice President Consumer Insights, Unilever David Newman, Vice President Insights, Capabilities and Training, PepsiCo Diane Harper, Vice President, Shopper Insight, Kraft See you at C360! -Jay Stockwell, TheShopperWonk -email: jay.stockwell@nielsen.com
Do you know what’s in your closet? A friend once showed me her two oversized walk-in closets, packed from top to bottom in complete disarray. Thousands of dollars worth of tops, skirts, pants, suits, dresses, scarves, shoes… you name it, it was squished in –there… somewhere. Oddly enough, she typically wore the same old pieces in regular rotation… while continuing to buy more stuff! I asked why she wasn’t using the extensive wardrobe she owned. She rolled her eyes and groaned, "Ugh, I can never find anything in there… I don’t even know what I own."
Sound familiar? Now, picture those closets stuffed with data. Nielsen Homescan’s syndicated Consumer & Shopper Insights Suite consists of over 10 billion data points per update. How on earth can a brand manager or sales rep be expected to extract just the right information to help drive better business decisions from 10 billion data points? Never fear, Nielsen’s new Answers Shopper Management roadmaps (consider it the "California Closets" of consumer insights) now organizes, retrieves, and helps interpret the most critical findings about shoppers and their purchasing behavior. The roadmaps leverage pre-processed data sets derived from the most robust consumer panel available today, to help quickly and easily find a story, determine next steps, and drive business growth (creating that perfect outfit!)
Answers Shopper Management roadmaps break down this wealth of information into a set of Consumer Diagnostics (Market Level) reports for brand marketers, and a set of Shopper Diagnostics (Chain Level) reports for sales and category management applications. The analyses are logically organized into a list of concise business questions. One click brings you immediately to the relevant graphic, smart text, highlighted insights and recommendations to address your question. Within any report, lies the ability to change data selections re-populating all of the above dynamically! Cool stuff -- and the fastest, most comprehensive way to better understand shopping behavior across a vast set of categories and brands, channels and retailers,
markets and trade areas, consumer segments and shopper groups.
View sample screenshots here (click and they will expand), and be sure to check back for future posts on how Answers Shopper Management roadmaps bring clarity to the world of shopper insight.
Email Peter Huisman @ peter.huisman@nielsen.com for a demonstration.
- Janice Linnane, Co-founder, The ShopperWonk
-email: janice.linnane@nielsen.com
Wal-Mart recently filed its annual 10-K report with the U.S. Securities Exchange Commission. This is the financial document is used to build Wal-Mart’s annual report which will be available soon. For your convenience, The Nielsen Company has condensed this information into an easy-to-read executive summary for CPG industry leaders.
Download Wal-Mart Financial Review FYE-09
Highlights include:
· Share of Store by Department for Sam’s Club and Walmart U.S.
· Store Counts and Growth for Sam’s Club and Walmart U.S.
· International Store Counts by Country
· 25 Years of Store Count and Sales Trends
· Sales Trends Per Store and Per Square Foot for Walmart U.S.
A Few Notes:
· "Wal-Mart" (hyphenated) refers the corporation while "Walmart" (one word) refers to the U.S. operating segment excluding Sam’s Club.
· Grocery now represents 49% of sales reported by Walmart.
· Curiously, the new Marketside banner is not mentioned in Wal-Mart’s 10-K report.
· Although total corporate sales growth declined to +7.2% vs. year ago, Walmart growth in the U.S. accelerated for some key measures. Growth rates increased for (1) total U.S. sales, (2) same-store sales, (3) average sales-per-store, and (4) average sales-per-sqft.
Click here for Wal-Mart’s full 10-K report (117 pages) and other SEC filings:
- Tom Pirovano, TheShopperWonk
-email: tom.pirovano@nielsen.com
I continue to see countless articles on how the U.S. economy is affecting everyday purchases – especially groceries. But very little is written about how shopping patterns are tied directly to paychecks. This started me thinking: Do paydays at the start and end of each month create spikes in supermarket sales? How much of a lift can retailers expect on the first week of each month? Which categories are most likely to spike at the beginning of the month? Has the average first-of-the-month spike increased in recent years?
Fortunately, I have access to Nielsen’s Strategic Planner database, where was able to measure weekly sales over time. Although many months begin in the middle of the week, it was clear see the supermarket sales spikes at the start of each month. Of course Thanksgiving and Christmas drove their own sales spikes, but nearly all other months started stronger than they finished.
The chart clearly shows a first-week-of-the-month lifts, but the next step was to quantify these sales spikes. By calculating the average weekly sales for the first week of the month vs. other weeks (excluding November & December) I measured a lift of 4.3%. It was sometimes higher, sometimes lower, but there is clearly a spike for each non-holiday month.
I wanted to be able to show how this first-week-of-the-month effect has grown as the economy struggles, but the year-ago 52-week period shows a slightly higher lift at 5.2%. The lift was only 3.5% two years ago. These differences may be attributed to months starting on different days of the week each year, making it difficult to measure this sales lift over time.
So how does this vary by category? I found that by tracking weekly category sales, several Nielsen categories showed much higher sales spikes. Categories with the strongest first-week-of-the-month spike include food staples and ingredients for cooking from scratch. Many of these skew to lower income or older or Hispanic households.
See supermarket products most likely to sell first week of month at right:
*Index reflects average weekly sales for first week of the month vs. remaining weeks. Excludes last 8 weeks of 2008 (holiday season). Download First-Week-of-the-Month
So now what? Both retailers and manufacturers can use this information to fine tune their promotion strategies. Some brands may want to adjust their timing for FSI drops, advertising, and in-store promotions. This average 4.3% lift may not seem like much, but smart CPG leaders are looking for any advantage they can find as our industry continues to get more competitive.
- Tom Pirovano, TheShopperWonk
-email: tom.pirovano@nielsen.com
While sitting on a flight to Chicago from London yearning for the old boom days of business class transatlantic travel, I started thinking about Loyalty, as you do when you've tired of the too few decent movie.
So many airlines could do so much better if they captured all of the flights I could make with them, but don't know (or it seems don't even care) how loyal I really am and how much business I take to their competitors. Airlines know that their real money comes from a relatively small number of business travelers, particularly those who can fly in Business or First. Yet they don't appear to do too much to encourage or reward greater loyalty beyond free miles, that you can never seem to redeem due to blackouts when you want to use them, or provision of lounge facilities full of curled up sandwiches and potato chips.
You'd think in the current economic climate they'd be fighting much harder for customer loyalty and share of wallet - it could amount to $10's or even $100s of thousands of dollars per customer for them. If they knew how much each of their customers spent with competitors they would be able target their offers and rewards more efficiently.
When looking at grocery retailers, most tend to lose out on business to any number of competitors. The opportunity for them is that they could get a much better picture of customer loyalty than by just relying on their loyalty card data and the commonly used Loyalty segmentations (such as Recency Frequency Value) built from it.
Although a grocery retailers top 30% of customers typically account for 70% or so of its overall sales, the majority of its customers are spreading their grocery purchasing across a number of other retailers. The potential $ opportunity they miss is huge. With better insight on where they're losing business and to who, they would be better placed to win a greater share of their customers total spend.
The irony is that Loyalty data alone cannot actually define a customer’s loyalty to the retailer. There are varying ways of estimating it through modeling/inferring with Household data, however this only works to a degree when trying to estimate a cardholders total grocery spend.
When you want to know what customers spend on different products or Categories (coffee, detergent, beer etc) or know which competitors they are buying these products from, you really need to ask them. This is where market research and consumer panels like Nielsen Homescan add value and deliver a more complete picture on real customer loyalty, than with loyalty data alone.
As an example, on examining a major European retailer and their customers using Nielsen Homescan panel data, it was found that over half of their total grocery spend was with other competitor retailers. This represents a huge opportunity to build custom from in a planned, targeted, and measurable way. Category level opportunities are even more significant. If the retailer knew that certain customers were buying the majority of their coffee or produce from a competitor down the road, they could develop and target relevant actions to win this business (e.g. promotions, targeted discounts, samples, or even introduce new products).
It is true that it is easier to retain and develop an existing customer than acquire a new one. But it would be more effective and profitable if you knew which of your customers you're losing sales from and to whom.
As David Ogilvy said "A blind pig can sometimes find truffles, but it helps to know that they are found in oak forests."
-Nigel Paice, Co-Founder TheShopperWonk
-email: nigel.paice@nielsen.com
Rob Colarossi, VP Customer Development, Dr Pepper Snapple Group.
Rob and his team work with the company’s top 40 customers to develop core competencies that provide DPS competitive advantage in the area of shopper insights and custom marketing activation. They follow a defined process that starts and ends with the customer’s shopper. The four phase process includes: shopper insight assessment, building 3 year strategic business plans, developing custom shopper activation and agreeing upfront on measurements for success. Rob is a 20+ year veteran joining Dr Pepper Snapple in 1987, following six years at Pepsi-Cola in various sales and trade marketing positions. Rob has had the fortunate experience of crossing over into multiple sales and marketing roles leading to his current position in customer development. He earned a BS with honors in business management and risk management from Syracuse University.
Hear and meet Rob at Nielsen's upcoming Consumer 360 conference. He will be providing a case study with retail partner Food Lion in a concurrent session entitled "The Continued Rise of Customer Centricity". Note: Scroll to bottom of page.
Dr Pepper Snapple Group, Inc.
(NYSE: DPS) is an integrated refreshment beverage business marketing more than 50 beverage brands to consumers throughout North America. In addition to its flagship Dr Pepper and Snapple brands, the company's portfolio includes 7UP, Mott's, A&W, Sunkist Soda, Hawaiian Punch, Canada Dry, Schweppes, Squirt, RC Cola, Diet Rite, Penafiel, Rose's, Yoo-hoo, Clamato, Mr & Mrs T Mixers and other well-known consumer favorites. Based in Plano, Texas, Dr Pepper Snapple Group employs approximately 20,000 people and operates 24 bottling and manufacturing facilities and more than 200 distribution centers across the United States, Canada, Mexico and the Caribbean For more information, please visit www.drpeppersnapple.com.
-Jay Stockwell, TheShopperWonk
-email:jay.stockwell@nielsen.com
Tom Pirovano, a fellow Nielsen associate with a thirst for creating thought leadership content for the CPG industry, shared the following slide with me showing how sales growth of organic products have taken a nose dive as our economy has worsened. For the 4-week period ending 3/21/2009, dollar sales of upc-coded products with an organic label claim grew by just 1%, quite a dramatic shift from the 24% growth rate in March of last year and the 30% + growth rates experienced in many periods in 2005 and 2006.
So with that information in hand I wanted to share insights on whether or not the economy has had a similar negative impact on products with other healthy label claims.But before doing that, let me set the stage on how food products are doing as of late.
This next slide shows trends in food department dollar and unit sales for a recent 52-week period along with the last 13-week and 4-week period in that time span. With inflationary pressures easing somewhat in recent weeks and months, all of these departments experienced positive annual dollar sales growth, but we do see softness in the most recent 4-week period (versus growth rates for the latest quarter).
We see lower growth rates on a unit basis and some departments posted more positive trends in the most recent period. Across all time periods and departments, there was an average growth rate of 5.3% in dollar sales and 1.1% in unit sales (remember these figures).
These next three slides compare dollar and unit growth for 25 health & wellness claims. These claims come from Nielsen LabelTrends where we code specific health claims on product packages and then link that with Nielsen retail measurement content to track retail sales. I decided to create three separate slides where health claims were ranked based on product sales of health claims that exhibited the fastest year-over-year growth in dollar sales. The 1st tier growth claims group had annual growth rates of between 15% and 26% in dollar sales with omega claims representing the fastest growing segment. The 2nd tier exhibited annual dollar sales growth of between 8% and 12%, while annual growth for the 3rd tier was between a negative 4% and a positive 8%.
As you examine these slides you will see that the growth of products with healthy claims is definitely slowing. But which healthy label claims are still posting growth and are growth patterns similar or different to total food trends? Here are a few comments about each tier: 1. For the 1st tier, omega claims was the only segment (across all 25) with both positive and improving dollar and unit sales growth. Every other 1st tier segment posted declining dollar sales growth in the latest 4-week period from what was posted in the latest quarter and growth levels dropped precipitously. However, growth rates for a just a few these segments fell below the average food department growth rates mentioned above. Those segments with less than stellar performance were products with flax or hemp seed, plant sterol, less sugar claims and probiotic claims (unit basis).
2. There were less severe declines overall for the 2nd tier grouping, but again we see weaker performance in the latest period, suggesting that consumers are making some tough calls on where and how they spend their food dollars. Although organics experienced a sharp drop in dollar and unit sales, levels were above the average growth across all measured food departments and time periods. The segments which performed the worst were low glycemic (unit basis), hormone antibiotic free (dollar basis) and antioxidants.
3. Within the 3rd tier, claims performed generally worse than the other tiers and versus the average food department growth rates. The only claim in
this group to perform better than the market average on both a dollar and a unit basis was reduced calorie claims, but latest period trends were soft. Segments with the biggest declines included cholesterol, soy and gmo free.
So what can you make of these trends? Without question this economy is getting many consumers to think about almost every shopping or purchase event and tough calls are being made. Better-for-you products were in great popularity when consumers weren’t in panic mode regarding their current and future state, but times have definitely changed and some consumers are opting to buy products that don’t serve up all of the healthy claims that were of interest to them a year or more ago. Manufacturers and retailers with focus on better-for-you foods need to work harder to drive sales success and value messaging along with value pricing, in addition to healthy claims, are now important aspects of actions required to keep existing consumers and/or win new consumers. With continued disturbing news regarding obesity rates in this country and a large population of aging consumers, health & wellness is still a needed and opportunistic platform for both manufactures and retailers to innovate and differentiate.
Channel Watch Update: Some Unexpected Positive News
As reported the Department of Commerce, retail sales (ex-automobiles) in the U.S rebounded in the first two months of the year to register sales levels that at least weren’t in the red. January sales grew unexpectedly by 1.0% and February sales were up 0.7%. Certainly not the kind of growth needed to get us out of our current economic funk, but a lot better than sales levels posted in the last four months of 2008.
As we drill down into the other retail formats generating trip growth, as measured by the Nielsen Homescan Consumer Panel, we see a good start for 2009 on this metric too. Most retail channels saw better trip performance in the first two (4-week) periods of 2009. That is, if you were a retail channel with trip growth in the last 4-weeks of 2008, then you registered stronger trip growth in 2009. If you were a retail channel with declining trip growth at year-end, then at least trip declines were not as steep. The exceptions were drug stores (validating recent reports regarding a weak flu season and a strong performance in selling flu vaccinations in the 4th quarter of 2008), department stores and toy stores. However, as seen for most of last year,
U.S. consumers are still shying away from discretionary retail channels.
While this represents a small ray of sunshine peeking through the dark recessionary clouds, with Easter falling later this year, we will likely see more negative patterns in the month of March. Hopefully though, this represents signs that we are near the bottom of this economic downturn and a return to economic growth is not far off.
- Todd Hale, Co-Founder TheShopperWonk
-email: todd.hale@nielsen.com
-Jay Stockwell
email: jay.stockwell@nielsen.com
