PL Buyer's eReport July 29, 2008

August 6, 2008
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Will Brake for Food

Gas prices put the brakes on discretionary spending.


A new survey from The Nielsen Co., New York, shows a significant number of consumers are changing where and how they shop in response to rising gas prices. The survey, based on responses from nearly 50,000 U.S. consumers, was conducted in June 2008.

"We're seeing more of the same of what we've seen before, but at an extremely accelerated rate," Todd Hale, senior vice president of consumer andshopper insights for Nielsen, told eReport editors. "Consumers have been telling us that the number-one way they've been cutting back to deal with high gas prices is combining trips, which is up 10 points from a year ago."

Hale also noted that 52 percent of consumers are eating out less, up 14 points since June 2007, and that 51 percent of households are doing more home entertaining, up from 39 percent in June 2007.

"They're also doing things to save money in terms of what and how they buy, and also how they shop," Hales said.

He said Nielsen noted a big jump in the number of consumers indicating they're going to buy less-expensive grocery brands -- from 19 percent in June 2007 to 35 percent in June 2008. Another third of households said they are going to use more coupons, and 28 percent said they will shop more supercenters.

While consumers tighten their belts on spending because of high gas prices, a door of opportunity opens for private label products.

"I think we continue to identify opportunities for private label, and I think we've seen more and more retailers in the press stating in their annual reports that they're going to be looking to leverage private label to help their shoppers in a time when economics are tough, as well as at a time when retailers are trying to improve their margins," Hale said.

While growth over the last year has primarily been due to inflation and occurred in categories in which private label already has a stronghold -- such as the dairy department -- growth in other private label categories is being seen, Hale added. Such growth will continue, but on a much smaller scale.

"I don't think this is a short-term issue at all," Hale said. "I think we're dealing with an issue of rising gas and rising raw material costs that are not going away for some time to come. We're not going to see gas prices go down, and we're not likely to see manufacturers and retailers reduce their prices on a lot of products because the cost to bring them to market is so much more.

"It's a long-term issue, and this is not something we're going to snap out of," he stressed. "This is something that retailers and manufacturers and consumers are going to have to deal with."

Our Take: With consumers having to cut back on myriad "luxury" purchases, it's up to retailers to make them feel better about buying necessities such as groceries and household goods. If shoppers believe a store brand provides a bit of the "indulgence" they're missing -- a value price -- they'll keep coming back for more. 

Economy Watch

Feds Pay Up, Consumers Don't

New survey reveals that stimulus checks weren't spent on groceries.


The majority of consumers who responded to a nationwide survey sponsored by Toronto-based retail analytics firm Precima indicated they did not use their stimulus check from the federal government to purchase groceries.

Despite rising food costs, low consumer confidence and grocers' mass-marketing push to attract economic stimulus spenders, 1,106 of the 1,948 people surveyed said they used the funds for other, non-grocery purposes.

"The grocery industry didn't convince the American consumer that maximum return on stimulus checks could be achieved right in the supermarket aisles," said Precima General Manager Brian Ross, in a press release. "The average family of four's $1,800 rebate equates to about three months of grocery buying, a prime opportunity for stores to influence shopping behavior. The rebate checks are a missed opportunity for grocers as consumers in this economic environment opted to earmark the funds for other uses -- paying down debt, spending on necessities like gasoline and utilities or putting into savings."

Ross offered tips for grocers to leverage their retail consumer data when developing promotional offers, including:

  • Develop compelling offers -- Analyze loyalty program data to identify store items that are most important to cash-strapped customers, and develop incentives that have the greatest cost-saving appeal.
  • Help consumers during tough economic times -- Support customers' desire for one-stop shopping and help combat rising fuel costs by providing offers tied to saving gas and to larger basket sizes.
  • Help consumers eat at home -- Capitalize on consumers' desire to save money by eating at home with offers tied to convenience items that replace takeout or restaurant meals.

Our Take: Consumers might not be using their stimulus checks on groceries, but they're certainly buying more groceries as their dining-out occasions become less frequent. Retailers' attempts to make at-home meal preparation easier and less expensive will not go unnoticed.

    Bits and Pieces

    What's News in Private Label
    Among the most notable retail and private label news:


    • Food Lion LLC, Salisbury, N.C., said its Surf Point private label wines won several awards during the recent San Francisco International Wine Competition. Surf Point's Pinot Grigio received the gold medal, while Surf Point Merlot and Surf Point Chardonnay received the silver and gold medal, respectively. The retailer said the wines are made and developed on California's mid-coast from grapes acquired from Sonoma Valley. They have been available in Food Lion stores for a month.
    • Minyard Food Stores Inc., Fort Worth, Texas, is selling its 23 Latino-themed Carnival supermarkets -- along with five Minyard stores, five fuel centers and nine Sack'n Save warehouses -- to The Grocers Supply Co. Inc. of Houston, the Dallas Business Journal reported on July 24. The Grocers Supply Co. already owns and operates the Fiesta Mart chain.
    • Nutrition 21 Inc. -- a Purchase, N.Y.-based developer and marketer of nutritional supplements that help consumers manage blood sugar levels, improve cardiovascular health, enhance memory and address chronic joint pain -- said it entered into an agreement with Deerfield, Ill.-based Walgreens whereby Nutrition 21 will supply three new chromium picolinate products for the Finest Natural retail brand and one product for the Walgreens Gold Seal private label. Nutrition 21 said it expects the products to be available late this summer or early fall.
    • According to a July 21 Boston Herald article, Quincy, Mass.-based Stop & Shop will unveil a refreshed look in August, including a new logo and redesigned store uniforms, an expanded prepared food section and more shopping assistance technology. The chain's range of prepared foods will grow significantly over the next two to three months, the article said, and will offer a value to customers. The chain also is testing a product line called "Choose and Cook," a refrigerated collection of fresh, color-coded food ingredients that can be combined into a meal for four in 20 minutes.

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