Representatives from 30 manufacturers as well as local trade media heard Hale's educated take on the winners and losers of the recession, as well as his advice for coming ahead, during Nielsen's Client Presentation on CPG Industry Trends held Tuesday in Schaumburg, [image-nocss] Ill.
First, the retail winners: "Value retailers are driving growth," Hale said, citing growth in U.S. store counts for warehouse clubs, supercenters and dollar stores, according to Nielsen's mid-year 2009 figures.
Not many retailers have escaped declines in same-store sales, as price cuts have made growth by this metric truly difficult. Even Wal-Mart posted a drop in its most recent earnings report. But from a chain perspective, retailers on the growth track included Kohls for department stores; Walgreens and CVS leading the drug-store chains; Family Dollar, Dollar Tree and Dollar General; and BJ's and Sam's Club among the club stores.
But it's not simply the value these retailers offer that places them in the winning category, Hale said. Rather, it's their constant re-investment in their businesses that is helping them grow even as consumers' discretionary dollars tighten. He cited Kroger, which was able to post a greater than 2% increase in same-store sales even as many of its supermarket competition floundered. The chain is reaping the rewards of a cost-restructuring initiative, marketing blitz, format experimentation and private-label excellence.
From a category perspective, "food really matters," Hale said, citing dollar and unit growth for edible departments, led by fresh meat, vs. non-edible, such as health and beauty aids and general merchandise. Interestingly, while 81% of categories have seen a price cut or marginal rise, according to Nielsen, unit growth has not been significant enough to make up for any loss in sales volume.
Beyond the winners and losers, Hale's other recession observations include:
Smaller isn't necessarily better. "I think the jury's still out on whether 'small' will win in any big way," said Hale. While acknowledging the creativity of concepts such as Tesco's Fresh & Easy, Giant Eagle's GetGo and Wal-Mart's Marketside, Hale said they seem to hold the best potential in urban markets. He also cited that as the greatest flaw of Fresh & Easy, which seems geared toward walk-up traffic but is situated in locales where a car is a necessity. Low prices spur...more low prices. While the Nielsen event was being held as a price war was under way between Chicago-area supermarket chains Dominick's and Jewel, research from Nielsen shows that such tactics may benefit consumers but not retailers and manufacturers in the long run. This is because once a retailer slashes prices, it isn't long before the competition meets the challenge, Hale said. Clip those coupons. According to research from Inmar, manufacturer-coupon redemption rates rose 33% in second-quarter 2009. But the true potential of couponing lies beyond traditional, freestanding coupons, which make up 90% of distributed coupons but only one-half of those that are redeemed, the research shows. Instead, savvy retailers such as Kroger are directing consumers to their Web sites and in-store kiosks to provide personalized promotions that result in greater redemption rates. Prepare for more private label. Don't expect private label to command 40% market share any time soon, as it does in the United Kingdom. Nielsen data places U.S. private-label market share at 21%. That being said, Hale said stable unit sales for private label in 2008 and 2009 suggest a genuine shift in consumer shopping behavior. As the trend takes hold, manufacturers must aggressively defend the worthiness of their brands on the store shelf; however, Hale warned that the best tactic is to suggest another brand for cutting, rather than to target a retailer's store brand. Get into the "solutions-selling" business. Take-home meals have been a popular focus for supermarkets during the recession, aimed at taking advantage of consumers' preference for at-home dining. It's a nice start, Hale said, but perhaps a greater opportunity for retailers and manufacturers exists in teaching customers how to put together meals, whether it's through generating shopping lists or providing instructional videos on assembling an easy, affordable weekday meal. It's an opportunity to build relationships with customers that goes beyond a simple transaction.
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