The Global Consumer Confidence Survey, established in 2005, tracks consumer confidence, major concerns and spending intentions among more than 28,000 online consumers in 56 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism. Consumer confidence fell globally from 89 to 88, down for the seventh consecutive quarter. “We’ve been on a roller-coaster ride, with a lot of ups and downs and screaming along the way and the ride is not over yet,” said Carman Allison, director of consumer insights, Nielsen. “We’re about to hit another turn.”

Employment is Up – But So is Pessimism
A key component of national confidence is how Canadians perceive the job market. Fifty four percent rated job prospects as good or excellent, better than the global average (43%), but down from 58 percent in Q2 of 2011. Canadians also continue to grow more negative about how they view their personal finances. Globally, 51 percent of respondents felt good or excellent about the state of their finances over the next 12 months. That’s up one percent from the Q2 survey. Yet Canada trends in the opposite direction, with 54 percent of Canadian respondents rating their finances as good or excellent, down from 61 percent just three months earlier. “Canadians may be feeling more optimistic than the global average, amidst some positive economic trends in this country over the past year. Yet a combination of recent factors, such as rising prices of goods, stock market turbulence and bad economic news from the U.S. and Europe, are affecting consumer confidence,” noted Allison.

Discretionary Spending Flat
When asked what they are doing with spare cash, 37 percent of Canadians said they direct spare cash to paying off debts and another 30 percent pour it into savings. “Households are showing increasing fiscal responsibility. Spending is also hampered by this new reality; almost one-quarter of consumers (23%) report that no spending money remains after they’ve paid for the essentials,” Allison said.

• For more insights, download Consumer Confidence: A Canadian Perspective – Q3 2011

The recession was a wake up call to a new conscientious consumer, where spare cash is low and prices are high. Three key trends are defining the new Canadian consumer marketplace:

1. Tepid Consumer Confidence
2. Rising Prices
3. The Quest for Value

Back in the Game or Still on the Sidelines?
The latest results from the first quarter Nielsen Global Online Survey show that global consumer confidence is starting to improve, albeit slowly, with a two-point index rise from fourth quarter to a score of 92. Canadian consumers followed this trend, increasing three points and bouncing back to a score of 102 – the level reported in the first half of last year. Fueling the increase in confidence are two factors: Canadians are feeling more optimistic about job prospects/personal finances and the strength of the Canadian dollar, which has sheltered consumers from the impact of rising global food prices.

However, the threat of increasing inflation and interest rates has prompted just over half (51%) of Canadian consumers to believe they are still in a recession. According to the Nielsen survey, one in four (26%) Canadian consumers have no discretionary income and rising food and gas prices is a major concern – both of which have increased substantially since last year.

Gas prices have increased 30 percent in the past year to reach a new high of $1.41 per litre ($5.33 per U.S. gallon). The increase in gas is costing the average household an additional $71 per month. In fact, when gas prices exceed $1.75 per litre, the monthly gas bill could exceed the grocery bill. Additionally, the rising cost of commodities is fuelling price increases within the top 100 categories. The most affected categories include coffee (+19%), bacon (+17%) and sugar (+11%).

As household budgets continue to get the squeeze, consumers are looking for ways to save. Top saving activities include:

• 70% only buy when on sale
• 52% use coupons
• 37% buy larger value packs
• • 34% shop at value retailers
• • 33% stock up when on promotion
• • 27% shop close to home
• • 18% buy smaller sizes (lower unit cost)

The Quest for Value
Discount retailers are gaining share in all regions of Canada, capturing over one-third (37%) of grocery and drug category sales – an increase of four percent over the previous year. And while loyalty to the discount channel is increasing among all income groups, higher income households spend the most. The greatest annual dollar outlay at discount stores comes from households that earn between $70-100K, spending $2,520 per year. Biggest share of wallet spenders comes from households earning $20-30K per year, where 34 percent of their annual budget goes to discount retailers.

Same Game, New Rules
While Canadians remain largely optimistic, rising food and gas prices continue to put pressure on consumers. In order to adapt to the value consumers, retailers and manufacturers need to:

• Manage a blend of long- and short-term perspectives – while consumers are ready to increase spending on non-essentials, value will be a key motivator for consumers and food will be a key motivator across channels.
• Maintain sustainable pricing strategies for growth – As consumers continue to be affected by inflationary pressures, promotions need to continue, but with higher promoted prices.
• Be creative with options when taking price increases – Consider new size formats to meet the consumers need for value and spend control.

After an inconsistent 2010, consumers, retailers and consumer-packaged goods manufacturers are undoubtedly hoping for renewed growth and a return to normalcy in 2011. But what does “normal” really mean these days? At the start of the year, there remain some conflicting signs about what might happen in the next 12 months. Globally, consumer confidence stalled after three quarters of growth. In Canada, consumer confidence remains fairly high and well above that of Americans. What’s more, Canadians are more optimistic than American consumers: 57 percent say that their personal finances will be good or excellent compared to just 44 percent of Americans. Despite the assurances from economists that the recession is over, 58 percent of Canadians believe the country is still in a recession, with 19 percent believing that the nation will emerge from the recession in the next 12 months (contrast this with Americans, the vast majority of whom (86%) believe that the U.S. is still in recession and 19 percent believing the recession will end in 2011).

While Canadians may be more confident than Americans, they are using their spare cash the same way: to pay off debt. Health remains their top concern, followed by debt and the economy. To cut household expenses, they spent less on clothes, scaled back out-of-home entertainment and dining, and spent less on consumer packaged goods. In the year ahead, 30 percent of survey respondents said they would continue to spend less on those goods, presenting an ongoing challenge to retailers and consumer packaged goods (CPG) manufacturers to attracter greater market share.

Where CPG is Headed in 2011
The big winner in the current market environment is the consumer. CPG prices have started to deflate for the 3rd consecutive quarter.

While regular prices have continued to rise, feature pricing or promotions have caused prices to drop, a nod to consumers looking to get value for money. In the third quarter of 2010, $90 million stayed in consumers’ wallets due to feature pricing, and over the past three years, the percent of retail sales with a price cut increased and was up to one-third of sales or 48 percent of units.

While pricing is critical, consumers look at a number of factors when choosing where to shop. They want stores that are well-stocked with high-quality and fresh goods, are convenient and offer a pleasant overall experience. Competitive prices are considered a given. The need for promotions will continue, but price discounting needs to be aggressively managed to sustain dollar volume growth. As seen in the U.S., lower prices do not necessarily equal increased sales. Rising commodity prices will result in increased prices for many goods, but manufacturers and retailers who overlook consumers’ unprecedented power and choice will be making a significant error.

Engaging the Canadian Consumer
What’s good for the consumer is not necessarily good for the retailer or CPG manufacturer. One critical element for creating a win-win situation is finding new ways to connect with the consumer and leverage technology, particularly mobile phones and social media.

Smartphone ownership in Canada stood at 18 percent in April 2010. But with 29 percent of survey respondents indicating that they plan on buying a smartphone (in the next twelve months), almost half of the population will have the devices in the near term. Already consumers are using smartphones as part of their shopping routine: mobile coupons are increasingly popular and offer the deals consumers are looking for without the hassle of clipping a paper coupon. Smartphone loyalty cards eliminate the need to carry a plastic membership card and help consumers track their spending. Other apps enable shoppers to plan their grocery lists, view nutritional information or schedule delivery. But don’t expect smartphones to replace credit or cards just yet: just 15 percent of Canadians said they would be willing to use their phones to make payments while 61 percent said they would not (although amongst younger consumers, about a quarter said that they would be willing to do so).

Social media is another way consumers have increased their power. Advertising and marketing were traditionally one-way, from advertiser to consumer. Social media has turned the relationship between retailers, brands and consumers on its head: consumers now interact – with brands and, more importantly – with each other. If they have something to say about a product or service, there’s a ready-made audience listening: 27 percent of Canadians surveyed said they are more likely to share a negative product experience online. Friends and family dominate the “trust zone” when it comes to recommendations about a purchase decision, but 40 percent of consumers place trust in online product reviews.

Some businesses have been slow to adapt to this new medium. But before dismissing social media as a fad, consider the facts: it took radio almost 40 years to reach 50 million users, while TV took 13 years. The Internet had 50 million users in just four years, and Facebook alone had 200 million users in less than a year! With more than 500 million members, Facebook would be the world’s third largest country.

Canadians have embraced social media with gusto: 60 percent said they visit social media sites, and more than a quarter (26%) spends six or more hours a week at such sites. Social media now cuts across all age groups, and females are more likely to be engaged with such sites – key to the CPG industry as moms are the key decision-maker when it comes to buying goods for the household.

Retailers and CPG manufacturers should view social media as a store front through which to draw consumers. Offer consumers opportunities to save money or free apps that help them shop. Features such as these tend to prompt them to provide personal information. Consumers want to be involved, and companies need to find a way to engage with them in a meaningful, whether it is responding to consumer complaints or offering promotions.

To take advantage of these trends, companies need to change their media mix. No longer is it sufficient to just produce a TV commercial or newspaper ad. In less than five years, social media has taken a place at the marketing table – and has, by many measures, become one of the most efficient ways of reaching consumers. Consider the experience of a well-known food manufacturer: five years ago, marketing was focused on TV and print. Today, advertising is supplemented with a web site, offering recipes and other information, a YouTube channel, recipe emails and Facebook pages which allow consumers to leave comments about the company’s products and where the company will respond when appropriate. They have also connected consumers with a charitable cause, attracting tens of thousands of friends. They have a mobile site, easily accessible on smartphones, as well as an app. Today, social media is 50% of this company’s marketing emphasis.

The Takeaway
The economic outlook remains uncertain, and Canadians remain somewhat skittish about spending their money. But retailers and CPG manufacturers that manage pricing, keep innovating and acknowledge the power of social media are well-positioned to succeed. Here’s how they can connect with the consumer:

Maintain sustainable pricing strategies for growth

• Need for promotions will continue in the short term, but aggressive prices means lower dollar sales growth
• We are at the tipping point of where lower promoted prices are not generating incremental dollar growth

Social Media is not a fad

• Mobile technology is the game changer
• Converse with – not at – consumers and simplify their lives
• Connect with consumers’ culture

Evolve marketing plans

• Balance between traditional and new media
• Commit and be in it for the long term
• Be creative and test concepts

While there’s no magic bullet, the key for CPG companies and retailers is acknowledging the unprecedented power of consumers and maintain the flexibility to evolve with market conditions. Opening a dialogue with shoppers and engaging them is an important first step in attracting and retaining them, and social media is a critical component of that strategy.

The fragile nature of the worldwide economic recovery is evident by the drop of three Consumer Confidence Index points in quarter three to a level of 90—the first downward trend in a year. Canada is fairing better with a level of 101, which held fairly steady from Q2, down just slightly from 102 and seven index points higher than the confidence level at this same time last year. In contrast, U.S. confidence levels were down sharply from 87 in Q2 to 81 in Q3.

Less Optimistic About Jobs
One reason for the flat or falling confidence levels—a growing concern about jobs. In the month that the Nielsen confidence survey was conducted, the unemployment rate in Canada actually edged down slightly, by 0.1 percentage points, to 8%. Statistics Canada reports that overall employment in Canada rose by 349,000 (up 2.1%) between September 2009 and September 2010.

Still, four in ten Canadians who were surveyed by Nielsen say that job prospects in the country over the next 12 months are “not good” or “bad”. That’s up from 35% who said the same in Q2 of this year (though still below the global average, and well below the stated job concerns in the U.S.).

Less Discretionary Spending
The job concerns in Canada are coupled with less discretionary spending. In fact, for many consumers around the world, spending on non-essential goods has become more restrained this year.

Fourteen percent of global consumers—but a much higher 22% in Canada and 28% in the U.S. —say that they’re left with no spare cash after paying essential living expenses.

Four in 10 Canadians said they are using spare cash to pay off debts (versus a global average of 29%), and that’s up from 34% in Q2. Also up is the percentage of Canadians who are pouring spare cash into savings—36% in Q3 vs. 27% in Q2. All of this repairing of household balance sheets leaves less money available for the spending that can spur the economy. Compared to global spending patterns, a lower percentage of Canadian consumers are spending on every discretionary category in the Nielsen survey.

In Canada, despite the increase in consumer confidence over last year, Canadians remain cautious when it comes to opening their wallets. Consumers are still focused on value, continuing to shop at discount retailers and buying on promotion at record levels.

Will Spending Bounce Back?
In light of the purse tightening, what are the prospects for increased spending by Canadians? Some signs are encouraging. Nielsen asked consumers if this is a good or bad time to buy the things that they need and want. Forty-four percent of Canadians said this is a “good” or “excellent” time, up from 41% in Q2 of 2010 and 37% in Q1. That’s well above both the global and U.S. percentages.

In regards to personal finances over the next 12 months, just over six in 10 Canadians (61%) said “good” or “excellent”. That’s up a bit from 59% in Q2, and is much higher that the 51% of people globally and 46% in the U.S. who feel positive about the state of their finances.

Recession Worries Continue
A little over half of Canadians (54%) think the country is still in recession, down slightly from those who felt so in Q2 (56%) and significantly from Q1 levels (65%). But the concerns are deep; of those who think Canada is in recession, a full one-third (34%) feel that the country will not be out of it in 12 months. Fifty-eight percent of respondents globally—and 88% in the U.S.—say that their country is currently in a recession.

Health Tops Economic Concerns
Nielsen asked consumers around the world to name their biggest concerns over the next six months. Though health topped the list for Canadians, the other top five concerns all related to the economy.

Download the Full Report:
Consumer Confidence – Canadian Perspective – English
Consumer Confidence – Canadian Perspective – French

Insights on the Private Label Consumer

• Heavy private label buyers are typically from larger households (three or more) with families (kids under age 18); under 45 years old, with higher incomes ($70K plus).
• Super heavy and heavy private label buyers account for nearly 60 percent of total private label dollar sales.
• Top private label buyers spend more than the average shopper across all product categories and spend more per shopping trip, with private label products accounting for more than one-third of their total shopping trip bill.
• The face of the private label buyer is evolving to one person households, age 55 – 64 years, no kids, with incomes of $100K plus.

“Not only is it critical for retailers to know who is buying private label today, but also who will be the primary private label buyers in the future,” said Carman Allison, director of Industry Insights, Nielsen. “As the face of the private label consumer evolves along with general demographic trends to smaller, older, higher income households, retailers need to make sure they are planning for the future by innovating to meet the needs of tomorrow’s private label consumer. This could mean an increased focus on smaller sizes or portion-controlled products, health and wellness offerings such as low fat or low sodium, and premium offerings to attract higher income consumers.”

Insights on the State of Private Label in Canada

• Fast-moving consumer goods (FMCG) private label sales in Canada remain flat at $11.4 billion, and unit sales are down one percent. National brand dollar sales are up three percent to $50.9 billion while unit sales are up two percent.
• Canadians spend $844 on private label products annually, up two percent from last year.
• On average, private label products are 30 percent less expensive than national brands, but the gap, fueled by higher levels of inflation for private label, has slightly narrowed.
• Canadians spend $12.20 per trip on private label products, up three percent from last year and the average Canadian household makes 69 trips per year to purchase private label products.

“The battle of the brands continues,” said Allison. “Despite the economic downturn, Canadians did not switch from national brands to private label products. National brands are meeting consumers’ needs for value by driving more sales through feature pricing while private label increased prices at a higher rate, narrowing the shelf price advantage. That said, Canadian retailer concentration is increasing, with the top five retailers representing the majority of the grocery trade. This translates to increased private label development.”

Several Western Europe economies, namely Germany, United Kingdom and France, reported moderate growth in Q1 with consumer spending between 1% and 4%. However, the escalating European debt crisis that has damped confidence in Q2 may impact future growth. In North America, the contrast between increasingly optimistic Canada and cautiously restrained U.S. is being reflected in dollar sales. Across both the U.S. and Canada consumers are cutting back on shopping trips, seeking value and establishing a balance of branded and store brand purchasing.

Advertising spending also improved in Q1 as 25 of the 31 countries reported in Nielsen’s Global Ad Spend Report experienced gains of greater than or equal to 5%. Two globally significant events – Winter Olympics and FIFA World Cup – were driving forces behind this trend. Economically struggling countries Japan, Ireland and Spain were the only countries with flat to declining ad spending in Q1.

What to Watch
In the second half of 2010, against the backdrop of a shaky global economy, consumers in emerging markets will remain more willing to spend on discretionary categories such as apparel, vacation and out-of-home entertainment. In the developed economies where a largely jobless recovery is taking place, the consumer remains very reticent as they are closely monitoring their spending. Value remains the mantra and the new normal is characterized by restraint.

Download the Q2 2010 Nielsen Economic Current.

With an index score of 98, Canada beats the global average by 11 points and bests its southern neighbor by 16 points.  In fact, Canada is one of only two countries in the top ten outside of Asia (the other being Brazil).

“Over the past six months, Canadian consumers have stopped talking about recession and changed the conversation to recovery,” said Carman Allison, Marketing and Communications Director, Nielsen Canada.  “We’re more optimistic about our job prospects and personal finances, and are ready to open our wallets and put the recession behind us.”

So how has this renewed confidence manifest itself?  Canadians are more likely to pay off debt (39% vs. 31% globally) and much less likely to save or invest in the markets (27% vs. 49% globally).  Interestingly, the high level of confidence contrasts with the fact that 70 percent of Canadians still believe that their economy was in recession, despite the fact that the Bank of Canada declared it technically over last summer.  But 40 percent believe that Canada will be out of recession in 2010.

Concerns remain.  The top three issues were increasing utility bills, personal debt and the economy.  Canadians – and Americans – are much more worried about debt than the rest of the world (13% compared to just 7% globally).

“Even while showing faith that we are in recovery mode, Canadians are planning to retain some frugal habits. Economists expect this to be a slow recovery, so consumers will continue to seek value and look for ways to stretch their shopping dollars in the near term and perhaps even longer into the future,” concluded Allison.

Download the report on Canadian Consumer Confidence.

Overall, Canadians were more confident than their neighbors to the south, with more positive outlooks regarding job prospects, the state of their personal finances and their willingness to spend.  With respect to jobs, 46 percent of Canadians say that local prospects will be “good” or “excellent” over the next 12 months, compared to just 28 percent in the U.S.  More than half (55%) feel that the state of their personal finances will be “good” or “excellent,” up three points since July and compared to 51 percent of Americans who said the same.  More than two-fifths of Canadians feel it is a good time to buy the things they want and need, compared to 33 percent of Americans. All of that said, a strong majority (82%) of Canadians feel that the country is still in a recession, despite the fact that the Bank of Canada announced that the recession was over.  Nine in ten Americans said that they felt their country was still in a recession.

In a sign that the consumer’s obsession with all things economic and recession is starting to recede, Canadians are once again showing concern with other issues such as work-life balance and health.  But despite these positive signs, Canadians remain cautious about spending.  Paying off debt is the top use for spare cash (with 39% saying that is their priority) followed by socking away money into savings (26%).  When they are spending, holidays and vacations is the top category (26%) with out-of-home entertainment (23%) and home improvements (20%) rounding out the top three.  Canadian men indicated that they are more likely to spend on outside entertainment and new technology, while responsible Canadian women are focused on paying off debt.

Read the full report.

As a whole, Canadians are more likely to wait out minor illnesses and conditions before doing anything about them.  Almost two-thirds said that they wait to see if a problem gets better before taking OTC medications.  Ten percent of those surveyed said they never take non-prescription medications for minor ailments, preferring to tough things out, and some indicating that they believed that using these products could be harmful to their health. 

When illness does strike, 17 percent of Canadians take advantage of their medical coverage and visit their doctor for advice (compared with just 9 percent for Americans).  They also put a lot of stock in their pharmacist: 40 percent said that the advice from pharmacists was important to them when choosing an OTC medication, compared to just 13 percent in the U.S.

“Canadians can be classified as minimalists when it comes to self-medication, especially in tough economic times.  When we do reach for an OTC treatment, we normally rely on the advice of a pharmacist to find a medication that is effective, fast, safe and offers value for money,” said Carman Allison, Director, Marketing Communications at Nielsen Canada.

Read the full report.

In the U.S., consumers remain skittish.  Shifts to private label brands continued at a strong pace, as they have for the last eight months, while consumers are shopping less frequently and spending less per trip.  Canadians, on the other hand, are spending more per trip, and are taking advantage of retail promotions.  Unlike in the U.S., private label brands are struggling to gain share as national brands step up promotional activity.

In Europe, the French remain relatively unchanged in their shopping.  Value channels continued to see growth and more retailers were selling on promotion, leading to a modest increase in the amount spent per trip.  Germans showed very little change in the number of shopping trips they took, nor did they increase or decrease how much they spent.  Unit sales increased, however.  In the UK, sales volume improved slightly from the previous month, while budget store brands’ growth slowed as consumers began returning to premium brands.  British shoppers were also spending slightly more per trip.  Italians continued to move to store brands and value channels, although they were reducing their shopping frequency.  Spaniards, who have been among the most optimistic, have not seen that reflected in spending.

Brazilians showed an 8 point surge in optimism, and this translated into more frequent shopping trips and higher sales, in both volume and value terms.  Hong Kong and China both showed growth in sales, but Taiwan showed declines, and optimism there was among the lowest in Asia.  Indian consumers’ confidence was high, and volume and value sales both increased by more than 5 percent.

“While things are starting to look up, it’s clear that Americans and Western Europeans aren’t quite convinced that recovery has taken hold and remain cautious when it comes to shopping.  The labor market is clearly affecting this behavior.  It comes as little surprise that Brazil, India and China – countries that have generally been less affected by the global recession – are among the first to see renewed consumer confidence and sales growth,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company.

The Buzz

While the idea of recovery hasn’t opened up global consumers’ wallets quite yet, it has started to infiltrate their discussions on the Web.  In June, 71 percent of survey respondents thought that their countries were in recession, an improvement from the 77 percent who thought the same in April.  Additionally, 26 percent believed that their country will be out of a recession in the next twelve months, up three points from April.  Global recession buzz has declined 27 percent since March.  In July, however recessionary buzz perked up, primarily in Western Europe.

“We are likely to see an overall downward trend in recession discussions, but it will be choppy until consumers really feel as if they are experiencing the recovery,” said Russo.

Download the latest Nielsen Economic Current.