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PL Buyer's eReport July 1, 2008

July 9, 2008
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When the Shopping Gets Tough …
Retailers can still bring in consumers during economic downtimes.

A new report from Rockville, Md.-based Packaged Facts takes a look at how consumers shop as a recession in the United States looms. Bargains are more important than ever, and the report -- “The American Value Shopper in a Down Economy” -- looks at the current state of the economy and its effects on the attitudes, behaviors and motivations of American consumers.
The focus is on modern-day value shoppers, broken down into four shopper groups: average value shoppers, extreme value shoppers, entertainment-focused shoppers and no-interest shoppers. The report states that 55 percent of households with $50,000 in annual income and 45 percent with more than $50,000 in annual income will shift their spending habits to reduce expenditures.
"The fact is that private label products now have certain strengths that transcend the overall state of the economy," Cara Morrison, founder of New York-based Cogitamus Consulting and author of the report, told eReport editors. "Certain private label brands have grown strong enough to be the dominant brand in many markets."
The report notes that retailers face the challenge of appealing to consumers across all categories of value shoppers, and controlling the conditions in which consumers shop is the locus of retail power. Retailers should keep in mind that they are dealing with informed consumers who are suspicious of sales and trust their own research to form ideas of what constitutes a "regular" price.
So how can retailers use a slumping economy to their advantage to increase sales of private label products?
Morrison said that after years of competing with national brands, retailers might want to refocus in-store rather than on national-level promotions against the big brands. Store circulars, sampling and coupons once again will major resources for millions of value-interested shoppers.
Also, retailers’ online stores can further promote private label offerings, as tough times mean Americans will be more likely to use coupons and increasingly make use of the Internet, Morrison noted.
She cited a February 2008 survey by Toronto-based ICOM Information Communications in which 45 percent of 1,529 consumers said they would be much more likely to use coupons during a downturned economy, while 22 percent said they would be somewhat more likely to use them. The survey also found that younger consumers were the most likely to use coupons in a recession, with 71 percent of respondents in the 18- to 34-year-old age bracket saying they would be much more likely or somewhat more likely to use coupons. In the 35- to 54-year-old bracket, that number was 68 percent, and it was 63 percent for consumers 55 years of age and older.
"Private label is in an enviable position during this down economy, because they are walking the middle path, straddling both benefit areas of higher-end branded, but still maintaining their historical dollar value benefit," Morrison said.

Our Take: Store brand products marketed via retailer Web sites likely will appeal to bargain-hunting shoppers during these difficult times. Retailers that provide online coupons, recipes and other promotions tied to private label products are sure to reap rewards at the register.



Eye on Health

Waistlines Weigh on the Workplace
As obesity increases, so does the cost of doing business.
 

A June 22 article in the New York Times reported that employers are paying heavily for obesity’s spread. The article cites statistics from the Centers for Disease Control and Prevention, which show nearly two-thirds of American adults are overweight or obese. And, according to research out of Emory University, obesity accounted for a 27 percent rise in medical costs between 1987 and 2001.
Moreover, an April 2008 report from the Conference Board, New York, and Research Triangle Park, N.C.-based RTI noted that obesity costs companies $45 billion a year. Although 14 percent of CEOs in the United States see obesity as a top health-care benefit concern, the report said, many see it as too sensitive an issue to discuss directly with employees. The report stated that American employers might also see obesity as not their problem to solve, as health-care costs don’t rise the minute employees gain weight. People also tend to change jobs every four or five years, taking their health-care costs with them.
But employers can take steps to encourage employees to lose weight and keep it off, the New York Times article said, including cash incentives, discounts at health clubs, or reduced insurance premiums.
Our Take: We smell opportunity here. The "yourwellness for life" program from Matthews, N.C.-based Harris Teeter, for example, takes participants through a 15-week regimen "designed to optimize health and wellbeing." A seven-day meal planner reveals breakfasts, lunches and dinners that call for healthful store brand products. Although this program is geared toward shoppers, why couldn’t grocery retailers devise a similar regimen to encourage employee weight loss?

 



The Green Scene

You Can’t Fake it
If retailers say they’ll go green, they have to follow through.
 

Speaking at a June 16 panel at the Food Marketing Institute’s Sustainability Summit, Roberto Munoz, director of neighborhood affairs and communications for the El-Segundo, Calif.-based U.S. division of UK-based Tesco, said retailers that fake concern for the environment will drive customers away, according to a June 25 article on www.thepacker.com. Munoz also added that it is important to empower customers without pushing an agenda on them.
When retailers speak about the environment and green technology, the article said, their words and actions should agree. Munoz also noted that Tesco has a "green" reserve of nearly $200 million to help fund sustainability and green technologies, allowing the chain to push the envelope on technology that might not be the best business sense. Tesco’s sustainable practices include plastic supplying bins in the produce department, placing nightshades on chiller cases at night, reusing display packaging up to five times, investing in secondary loop refrigeration systems and using LED lights.
Our Take: Back when "sustainability" was the new buzzword on the block, consumers tended to trust that companies’ words and actions here matched. But now that our society is awash with sustainability hype, consumers are beginning to question intent.

 



Bits and Pieces

What’s News in Private Label
Among the most notable retail and private label news:  
 
  • According to an article on GreenvilleOnline.com, sales of approximately 2,000 of Mauldin, S.C.-based Bi-Lo LLC’s Southern Home label products were up 5 percent through the first five months of the year compared to the same time period last year. Mike Mannion, director of sales planning and corporate brands for the chain, said the private label brand now accounts for 16.5 percent of sales at Bi-Lo’s 222 stores in the Carolinas, Georgia and Tennessee.
  • The Baltimore Business Journal reported that Giant Food, LLC, Landover, Md., will offer 350 generic drugs for $9.99 at its 165 pharmacies in Maryland, Virginia, Delaware and Washington, D.C. The company said it hopes to compete with retailers such as Wal-Mart, Target and Safeway, all of which offer $4 generic drugs. 
  • Bentonville, Ark.-based Wal-Mart launched a Web site to promote its new Marketside small grocery stores that will open this fall. The Web site, www.marketside.com, shows how the stores seek to create their own identity around the Marketside name rather than linking to Wal-Mart itself. The site also has pictures of the new store format and is branded in the colors of red, green, yellow and aubergine. 
  • The Great Atlantic & Pacific Tea Company, Inc., Montvale, N.J., said it would convert the majority of its SuperFresh store locations in Philadelphia to its Price Impact format under the Pathmark Sav-A-Center banner. The move is part of the company’s commitment to improve market share, sales and sustainable profitability. The dramatically redesigned Pathmark format provides customers an expansive variety of fresh products while offering substantially lower prices. Conversions will be focused on providing customers with a one-stop-shopping experience, the company said.

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