“It was resoundingly clear from the presentations that we have a new consumer on our hands, one that has emerged from the financial crisis with what could be a permanent shift in their values, spending habits and lifestyle choices and affecting the way they consumer and purchase alcohol.  They are more frugal and demanding value.  Investing in new product development should be an essential part of any suppliers’ strategy in counteracting consumers’ heavy reliance on price discounts as a key purchase driver,” said Michael Walton, Executive Director, Nielsen Liquor Group in the Pacific.

Nielsen’s regional experts also provided a snapshot of trends in their respective markets.  The four key topics that were common across regions were:

• Low carb and low sugar: new products and brand extensions in this category are performing relatively well.
• Marketing to the over 50s demographic: This group makes up between 40-50 percent of alcohol consumers in the UK, US, Australia and New Zealand, yet are often overlooked when it comes to marketing in favor of a millennial focus.
• Online consumers: New ways and approaches to marketing to the technologically savvy consumer.
• New product development: A critical pathway to improve returns and drive real category growth.

Gavin Humphreys noted that just 57 percent of British beer drinkers popped over to the pub in 2009, compared to 70.5 percent in 1998.  In fact, the off-trade sector looks set to overtake share of beer consumption over the next two years.  While beer remains the favorite, wine is rapidly gaining share, driven by its link with in-home entertaining and also the availability of cheaper South African, Italian and Chilean varietals.

In the U.S., Danny Brager noted that more than 50 percent of Americans choose to entertain and eat at home more often.  Consumers are often trading down in an effort to find the best value, favoring domestic offerings and sticking with brands they know and trust.

Paul Kirby said that almost half of Australian drinkers claimed to be going out less often compared to last year, but are actually trading up when they do go out, sparking growth in premium and super premium alcohol segments (imported beer, international wine and bottled wine priced over $20).  Almost half of all packaged liquor was sold on promotion and 77 percent of alcohol consumers selecting their choice of outlet because it offered great promotions.

Just to the southeast, 60 percent of New Zealanders claimed to be going out less often compared to last year, according to David Hanson.  Annual sales for the off-premise market grew by 10 percent in value terms and 7 percent in volume.  More than three-quarters (77%) of all beer sales were sold on promotion.

Value has become a main focus for Asian shoppers, partly driven by the economic situation and partly as a result of increased retailer activity focused around price and promotions. According to Nielsen’s Asia Pacific Retail and Shopper Trends 2009 Report, more than 70 percent of shoppers claim to have become more price sensitive compared to last year. The effect: shoppers are more inclined to buy only what they need, spending their money on essentials rather than on treats or what they now consider ‘nice-to-haves’. They’re also consciously trying to cut down on the quantity purchased and are actively seeking out products on promotion.

Over the course of 2008 in Asia, grocery markets continued to show volume growth, led by India (+9%), China (+9%) and Vietnam (+18%), with only Taiwan (-7%) experiencing a decline in sales. Value sales increased by double figures in many markets on the back of high inflation for key food categories. But with inflation falling in all markets, we have seen value growth drop sharply in 2009, although overall volume growth in many markets has held up reasonably well with shoppers not cutting back significantly on grocery categories.

Traditional trade continues to lose share

As expected, the traditional counter service trade continued to lose share in Asia, with overall share of trade dropping another percentage point to 47 percent in 2008. At the same time, the absolute number of traditional grocery stores in the region grew by one percent to over 12.3 million stores. In most developed countries, traditional store numbers fell by five percentage points or more. In Korea, where traditional store numbers dropped by nine percentage points, the share of trade decreased from 15.9 to 13.9 percent, while in Taiwan the traditional trade now accounts for just over six percent of sales, having lost 1.5 percent share in the last 12 months.

The retail landscape looks very different in Southeast and South Asia, however, where traditional store numbers actually grew year on year, and even though share of total grocery sales continues to decline slowly, the majority of shoppers in all markets continue to shop at this trade channel. The traditional channel continues to meets shoppers’ needs for everyday convenience, personal service and affordability – being able to buy the smallest sizes and quantities.

Growth of small modern trade outlets

Globally, many large retailers such as Wal-Mart, Tesco and Carrefour have embraced a multi-format strategy that includes the development of smaller neighborhood stores. Similar growth in small modern trade outlets is also being seen across Asia, with mini-markets/small supermarket store numbers increasing by 17 percent in 2008 to over 100,000 stores.

Indonesia has led the way over the last 10 years and in 2008 more than 1,500 new stores opened, taking the total to over 10,500. These stores now account for more than 16 percent of total packaged grocery sales. Shoppers in Indonesia are continuing to embrace the convenient location, relatively good service and acceptably low prices offered at mini-markets.

Retailers in China are also investing in this store format, with store numbers growing by 22 percent in 2008 to more than 70,000 stores, accounting for more than three-quarters of all modern self-service outlets.

In South Korea we are also seeing the leading Hypermarket operators expanding into small supermarket formats, or ‘Super Supermarkets’ as they are known in South Korea. Samsung Tesco is now operating over 150 SSM Homeplus Express stores and E-mart is planning to open 30 or 40 small, 300 square meter E-Mart Everyday stores. The expansion of these large chains into the small store arena has led to concerns regarding competition with small store owners, and the South Korean government is considering introducing a bill to regulate the opening of small supermarkets.

“While most overseas advertising markets were already in meltdown by mid 2008, the impact was not clearly evident in Australia until later in the year. When consumer and business confidence was declining in late November and exports /commodities trading were drying up, rapidly softening economic conditions led to more cutbacks in jobs, and for many organisations, forensic cutbacks in advertising activity,” said Peter Cornelius, Managing Director Media for The Nielsen Company Pacific.

Not surprisingly, main media ad spend activity reflected this spiralling demand trend, with the financial year finishing an estimated 6.2% behind the corresponding period in 07/08.  However, the 08/09 financial year was really a tale of two halves. The first half (July – Dec ‘08) was down only 2.3% on the same period in 2007. The second half of the financial year (Jan -Jun ‘09) took the full brunt of the economic downturn with a decrease of almost 11% versus the same period in 2008. It is this ‘low’ base the industry will be watching very closely as media trading improves in line with the much anticipated future economic recovery.

Ad Spending in Australia’s main media, FY 08/09 vs. FY 07/08

Major Advertising Categories Overview

The top 10 Major advertising categories account for 71 cents in every main media ad dollar invested and provide vital indicators on the health of the advertising and media markets.

This is particularly significant when reviewing retail, Australia’s largest category which accounted for more than 21percent share of media spending. The Government’s stimulus packages in early 2009 helped renew confidence among retailer advertisers who promoted heavily to encourage consumer sales. Remarkably, in this economic downturn, retail advertising recorded a minimal 1.1 percent decline YOY to $2 billion.

Australia’s Top Advertiser Groups / Advertisers Overview

The Top 25 advertisers accounted for 21 cents of every main media advertising dollar invested in the financial year. The sectors which were most representative of this elite group of advertisers were Retailers (5), FMCG (4), Motor Vehicles (4), Governments (4) and Telecommunications (2).

The country’s dominant media advertiser group was Wesfarmers Limited, incorporating some of Australia’s foremost retail chains including Coles Supermarkets, Target, Kmart, Bunning’s Hardware, Officeworks and Liquorland. The group finished the financial year with an estimated $220 million spend, just 2.1percent behind 07/08.

Harvey Holdings was the 2nd ranked top Advertiser and performed strongly in what was considered a difficult year for Retailing and advertising generally. With a 4.6 percent increase to an estimated $135 million spend, the group lifted 2 spots from 4th position last year. Also stepping up two positions was 3rd ranked Woolworths Limited, substantially increasing their main media advertising presence by 8.7 percent to $134 million.

Will there be an early Australian advertising recovery?

At the time of writing in September 2009, the financial analysts’ debate continues as to whether Australia ever was officially in recession, although strong retail figures suggest that this may have saved the economy from tipping into one. However, Australia’s economy appears to have begun to rebound with greater speed and resilience than most overseas markets. There remains a cautious attitude among media and marketing sectors about a significant recovery before the end of 2009.  However, as our fiscal year ad spend estimates reflect, and taking into account a soft first six months of 2009, advertising activity may need time to recover and rise into the black.

Certainly, our studies support the theory that those who advertised through the tough times have maintained their competitive advantage as the economic climate improves. Marketing dollars spent during a downturn have less competition for eyeballs, so those who cutback may face even bigger challenges winning back consumers’ hearts and minds.

A scouring of blogs and message boards across Australia found that Aussies were surprised how much they enjoyed New Zealand, particularly its scenery and adventure activities.  And despite a few gripes about insects and gentle mocking of Kiwis’ “eccents,” Australians have taken to New Zealand with gusto.

“This goes to show that despite the traditional ribbing of New Zealand by Australians, they’re coming around to what we have to offer as a destination.  We seem to be winning in the all-important category of word-of-mouth advertising,” said Tony Boyte, research director for Nielsen’s New Zealand online division.

Queenstown was by far the most talked-about tourist destination among Australian bloggers, followed by Milford Sound and Fiordland.  Skiing and snowboarding were the most popular activities in terms of blogs and message boards, followed by surfing and windsurfing, hiking, visiting wineries and bungee jumping.

In a June 2009 survey, 57 percent of consumers said that they had been switching to private label goods over the past year, and more than a third said that they would continue to purchase them even when economic conditions improve.  Younger households were most likely to indicate an affinity for private label products.

“The younger generation would probably not have experienced the old world of private label with questionable quality, limited range and bland packaging. They see private label as a very compelling alternative to proprietary branded goods.  Private label products have yet to realize the gains experienced in Europe and North America, but this generation is likely to drive growth in the sector in the coming decades,” said Kosta Conomos, Executive Director – Retailer Services, Nielsen Pacific.

Read the full press release.

Australia ranked fifth of the 28 markets Nielsen measures, just behind fast-growing developing countries Indonesia, India, the Philippines and Brazil, and well ahead of other developed nations.

Forty-four percent of Aussies believe “now is a good/excellent time to buy the things they want,” second highest of all nations surveyed, and 59 percent described their personal finances as good or excellent.  According to Nielsen Online’s Buzzmetrics service, the number of online discussions mentioning the word “recession” dropped 56 percent between February and June this year.

Despite growing levels of optimism among Australian consumers, there remains an air of caution, with 41 percent saying that they would put extra cash aside in savings and another 40 percent focused on paying off debts.

“Despite increasing confidence, Australians will still think twice about the way they spend their spare dollars until the economy has completely recovered.  The positive news is that Australia, when compared to other developed nations, is in a better position for faster economic recovery,” said Chris Percy, Managing Director – Consumer Group, Nielsen Pacific.

Read the full press release with more results from the survey.

These changes present a range of challenges for retailers and consumer goods manufacturers, namely, how to adapt to the new environment and continue to grow while watching costs. 

“The industry is at an inflexion point — a time when new habits are being created — and the next 12 months holds both challenges and opportunities in the grocery channel,” said Chris Percy, Managing Director – Consumer Group, Nielsen Pacific.

Nielsen’s Special Report: Forces of Change explores the changes sweeping the Australian grocery channel. Pulling together a range of exclusive data, the report analyses how Australians are spending their money in a difficult economy, which product categories are showing growth and how marketers and manufacturers need to fully understand their customers, the changes taking place and how to reach their targets more effectively.   

Read Nielsen’s Special Report: Forces of Change, which appeared in the July 20-31 edition of Retail World.

Toward the end of 2008, the global downturn was adversely impacting advertising spending throughout many key markets around the world, with Europe and the Americas struggling more than others.  The exception to this was Asia Pacific (APAC), which appeared to be relatively impervious to the worst of the downturn. Beginning in late 2008, and escalating as the first quarter of 2009 unfolded, the majority of APAC markets were finally succumbing to declining economic conditions with substantial declines in advertising activity. Hand-in-hand with consumer confidence declining further in the new year, most APAC countries witnessed substantial ad spend cutbacks; although still not resembling the severity of those experienced in some other regions.

“While the flow on effect of the financial meltdown on individual countries’ advertising was beginning to bite across several markets late in 2008, it is the sobering results for the first quarter of 2009 which present a clearer picture of how advertising expenditure across the region was faltering. Main media measured across all markets, defined by Nielsen as free to air TV, newspapers and magazines, stalled at 0 percent growth compared to the first quarter of 2008. Even China, the juggernaut of advertising growth globally over recent years, was not immune to the faltering economic outlook, recording just 2 percent growth over the same period in 2008 and recording 17 percent growth in the fourth quarter of 2008,” said Richard Basil-Jones, Managing Director for Asia Pacific, Nielsen Media International.

“Although six markets recorded declines in the fourth quarter of 2008, overall growth was 10%; however, with nine countries now in decline in 2009, the zero growth in ad spending was not unexpected. On a slightly more positive note, all “other media” tracked by Nielsen across various countries (radio, outdoor, pay TV, cinema and other combined) posted an overall 1.3 percent increase in Q1 2009,” he added.

 Nine countries recorded declines in Q1 ‘09 ad spend versus Q1 ‘08:

• Thailand        -1% 
• Malaysia        -3%
• New Zealand  -4%
• India             -6%
• Australia        -11%
• Singapore      -14%
• South Korea   -19%
• Taiwan          -22%
• Hong Kong     -5%

Just three countries showed growth in Q1 ‘09 ad spend versus Q1 ‘08:

• Indonesia (20%)
• China (2%)
• Philippines (8%)

Other key findings:

•  Across the twelve markets monitored, a total of US$23.5 billion was spent on advertising in Q1 ‘09
• A total of US$109.16 billion was spent on “Main Media” advertising in the 12 months to March ‘09 (+9%) YOY, with television comprising 71 percent of expenditures.
• FTA Television ad spending grew 9 percent YOY; with six countries posting double-digit growth as four countries recorded declines.
• Newspaper ad spending recorded a modest 2 percent growth YOY, even though the medium experienced declines in six countries.
• Magazine ad spending, despite declines in 7 countries, increased 2 percent YOY, with high double digit growth in 4 countries.
• Radio dominated the “all other media” tracked by Nielsen, with a 51 percent share of spend and a 5 percent increase YOY.

Imported and domestic premium beers posted growth of 15.3 and 18.6 percent, respectively, over the same period last year, while sales of premium spirits rose 21.3 percent.  Cheaper beer and spirit segments also showed growth, but not at the strong levels posted by their more expensive counterparts.

Overall, wine continued to experience volume losses, although increased demand for bottles costing $10-$20 was up 5.6 percent while bottles costing more than $20 showed growth of 4.1 percent.

“Instead of trading down when it comes to buying liquor, Australian consumers are becoming more sophisticated and are choosing high quality spirits, premium wines and a growing variety of premium or artisan-style beers,” said Michael Walton, executive director of Nielsen Australia’s Liquor Services Group.

Read the full press release here.

In Australia, estimated ad spend in main media for the year was up 2 percent over 2007.  Year on year comparisons saw the first two quarters of the year posted growth of 14 percent and 5.5 percent, but by the third quarter, spending declined 0.5 percent while the fourth quarter saw a decline of 3.5 percent.

Retail remained the largest advertising category in Australia, accounting for more than 20 percent share of spending and posting solid 5 percent growth over the previous year.  Motor vehicles (+4%), and entertainment and leisure (+2%) rounded out the top three.  The travel and accommodation category posted 13 percent growth for the year, while media posted 6 percent growth.  Not surprisingly, decliners were led by recruitment (-6%) and finance (-5%).

The top 10 product advertisers in 2008 were dominated by 8 retailers and 2 telecommunications firms, marking no change from 2007.  The top two product advertisers substantially increased their ad spends in 2008: Harvey Norman Discount Stores (+26%) and Woolworths Supermarkets (+43%).

In New Zealand, after posting modest growth the first three quarters of the year, the fourth quarter marked the first signs of the impact of the global downturn in New Zealand.  On a quarterly basis, ad spend increased 3.4 percent, 2.7 percent and 1.1 percent in the first three quarters, only to drop by 3.2 percent in the fourth, resulting in an annual growth in ad spend of just 1 percent for 2008.

The top ad spend category was leisure and entertainment, which posted 6 percent growth for the year.  Two categories showed solid double digit growth in 2008: government departments, services and community (+12%) and travel (+10%).  Meanwhile ad spending for investment, finance and banking declined by 14 percent.

Retail outlets dominated ad spending, with The Warehouse, a major discount department store chain, Harvey Norman and New World Supermarkets comprising the top three advertisers over the course of the year.