Read the corresponding presentation: Consumer or Consumed.

More video and presentations available at Consumer360.com.

For those of you who attended our 2009 Consumer 360 client conference, you heard the opening remarks from John Lewis, President & CEO, Nielsen Consumer North America, on the impact of the economy on our industry.  His message was about how our company is “investing considerable resources in the area of thought leadership to mine Nielsen content to understand what will happen tomorrow; where (our economy) will settle; and what will the new paradigm look like?”

When John looks at the economy he sees “consumers under profound pressure in every way and there are so many changes going on” and asked the audience “what is changing versus what isn’t changing so we don’t overlook or miss some obvious opportunities”?

I wanted to share some of John’s messaging and embellish it with some of my own observations.  As John mentioned, Nielsen research shows that only 5% of U.S. households are in “panic mode” and doing just about everything they can to modify where they shop, what they buy, and how they consume products to make it through these tough times.  The remaining 95% of consumers have modified some of their behaviors too, but these folks have been “very much in the game” for marketers to pursue.

In terms of what isn’t changing, John called out three areas:

• Health & Wellness: U.S. consumers are still looking to lead healthier lives, but economic pressures have led some consumers to alter their prior habits and practices. So sales of many “better-for-you” foods are soft or down and sales of prescription drugs took a hit this past year, but opportunities for growth still exist today and in the future. However, it will take new learning and a lot more marketing muscle than required before this recession, to win or compete in this space. John stated how “it may be less about premium price and more about big innovation, not incremental plays, that puts you into a health & wellness category.” John cited how drug retailers have brought health care solutions to their stores as “big and bold” examples of innovation. Check out Walgreens’ web site and see how their communications on the topic of health and wellness reach well beyond traditional health messaging used in years past.
• Convenience: convenient and easily accessible store locations; convenient and easy-to-find in-store or on-shelf product location; food and non-food solutions that save time from our busy lives “aren’t going to get less important”. John discussed the example of retailers in the Dollar channel who have been expanding their stores in localized areas to bring their value proposition to more consumers. Convenient heat-and-eat food products are more prevalent that ever in our stores and have you seen the 3-in-1 laundry detergent, fabric softener and anti-static sheets recently launched by Purex?
• Demographic Trends: aging population and multi-cultural consumers were target consumer groups for many retailers and manufacturers prior to this recession. With declining population growth in the U.S., future growth will be harder to achieve than in years past. Are you investing more resources and focus against these consumer segments? Shifts in the spending power or wealth in our population has and will likely continue to create a large group of consumers whose ability to spend freely will be challenged for many years to come. This group of consumers will also provide opportunities for those companies who understand them best and respond accordingly.

In terms of what did change, John discussed the near-term trades-offs which have been numerous and different over the past year or more in the areas of:

• Reordering shopping lists or actually going back to using shopping lists and a huge shift back to basics – food and value really matters
• Changes in where and how consumers shop with trip growth in value retail channels and coupon redemptions seeing a renaissance as consumers seek more deals and take advantage of the explosion of online coupon offers
• Consumers opting out of certain categories entirely
• Redefining of discretionary versus essential spending
• Trading across categories
• Trading down on brands

John concluded this discussion with the need to understand the “micro versus the macro-changes” occurring in our industry.  He described a “micro-war versus a macro-war” and the need to understand and respond to both.  The micro-war is what John referred to as “the typical or traditional competitive set” as defined by a retailer trading area or category where a manufacturer or retailer competes.  Today’s successful manufacturers and retailers leverage pricing, assortment, promotion, advertising and analytic insights to collaborate and drive marketplace success.  But John talked about how companies can “win the micro-war, but lose the battle” because of the larger macro-wars that transcend category or retailer choices or decisions made by consumers.  Examples of these huge macro-trend busters include:

• Away-from-home consumption took a big hit in this recession breaking a 25-year trend where in-home consumption was on the decline. Consumers are now seeing the home as a safe nesting place where success will come to those who understand this shift and seize the opportunity.
• Pampering shift from spas and beauty salons to at-home solutions – most consumers want to look and feel good, but they are looking for better value.
• Savings rates go to black – will this be a short-term or long-term shift and how will this impact your business?
• Store brands are now a viable choice for more consumers as retailers have shifted greater focus and offer brand-quality assortment at a better price or even at a premium price.

John challenged the audience to think about what they are doing to build a sustainable business model by going on the offensive or defensive “to exploit what has changed or what hasn’t changed”.  I found John’s presentation to be very insightful and he served up numerous examples of how our clients can win the micro and macro wars and come out of this recession in a strong position – I trust that you did or will too!

Watch presentations from Consumer 360 here and for more information on consumer shopping patterns, contact me: todd.hale@nielsen.com

A primary theme of the high-energy general session on Day Two of the Nielsen Consumer360 conference was encouraging attendees to use the current recession as a learning opportunity, in order to build better relationships with consumers and/or reinvent business models.

From Nielsen’s James Russo, there was talk of the fact that great companies such as GE, Disney, Microsoft, and HP were started during economic downturns. And, he felt that consumers may soon be spending more, albeit with some restraint. Signs of the recession were everywhere, from a global reduction in out of home entertainment expenditures, to canning and freezing supplies being a top growth category, to a slowing of growth in health and wellness and organics. Home has become the new “center.”

Kraft’s Nick Sorvillo said his company has multiple online consumer panels that tell them that consumers are looking for control and security in their lives. They have discovered new priorities and advantages from living simpler lives – Sorvillo called this “brightsiding.” As 72% of shoppers surveyed said they will continue using new shopping strategies when the economy improves, Kraft has gone about reconnecting with consumers and becoming a dependable, valuable source of help — providing recipes by e-mail, recipe widgets, and an iPhone assistant app that, having launched ten months ago, is in the top 50 iPhone apps.

Malcolm Gladwell, author of “The Tipping Point,” “Blink,” and his new book, “Outliers,” said that the recession offers us a chance to rethink assumptions and bad habits accumulated over many years. To him, successful people are aware of their limitations and work harder to overcome them. He noted that some things that we see as advantages, such as small school class sizes, are not necessarily so. For example, many Asian countries that have great educational systems have large class sizes. In essence, one of this theories is that making it too easy for people spoils them and actually inhibits success. In that light, he sees the current poor economy as perhaps providing a highway to creativity – nothing like a crisis to focus the mind.

Ken Romanzi discussed the revitalization of Ocean Spray, as over the past few years the company has jump started sales by educating consumers that their products taste good, and are good for them. Ocean Spray embarked on a heavy P.R. and marketing campaign to reintroduce the cranberry to U.S. consumers, showcasing their products’ heritage, and linking their products to various holidays and celebrations.

Nielsen’s Chairman and CEO, Dave Calhoun, said he has been amazed at the resilience of consumers, as their spending on food and fuel held up until the liquidity crunch of last September. He sees another 12 months’ or so of turmoil and said an important signal will be what consumers are going to do about saving, as so far most of the growth in savings has been involuntary, due to the reduced availability of credit.

All in all, it was an enlightening and entertaining morning – with every bad economic statistic seemingly offset by the notion that the current downturn was eventually going to go away, and until then we have an opportunity to rethink how and what we’re doing. It was also great to see many speakers at the conference using video and audio clips of consumers – giving us much more than just charts and statistics.

Many of the videos of the sessions at Consumer 360 are available on demand at Consumer360.com.

Our consumer packaged goods (CPG) world is one where technology is rapidly evolving and transforming how consumers receive, seek and use information to impact buying and shopping decisions. This makes our jobs exciting and challenging at the same time as it is harder than ever to manage the ever-changing technology landscape and almost impossible to control.

Consumers are time-starved and diverse. Case in point: The number of TV channels in the U.S. has more than tripled since 1990, giving consumers a wide variety of channel choices. The majority of all ages and income groups are connected to the Internet. Retailers have relied on newspapers – a medium declining in its present form — to deliver a major portion of their advertising. These are just some of the examples in our world today that make it harder for advertisers to reach target consumers or push us to look for alternative forms of communication vehicles.

Your future success as a retailer or manufacturer requires new approaches. With rapid adoption of new technology (iPhone anyone?) consumers have clearly demonstrated a great willingness to engage in multiple media vehicles. Your survival may require sweeping changes in how and what you communicate to your brand buyers and retail shoppers.

I hope you can join me in this morning’s General Session at Consumer 360 as we explore this brave new world . . .one in which technology is making it easier for consumers to talk to retailers and manufacturers. . . any time and in real time. We’ll explore what manufacturers and retailers like Kroger, BJ’s, Safeway, Food Lion, Stop & Shop, Walgreens and Ukrop’s are doing now with new communication approaches and technology to engage their customers. I’ll also share my predictions on how CPG media and communications will change.

If you aren’t able to join us in Orlando today, please visit Consumer 360 again on Friday to view the on-demand session video.

At the Consumer 360 Conference yesterday Malcolm Gladwell gave some fascinating remarks on compensatory learning. I thought it was a perfect frame for what Nielsen is doing in the area of Shopper Management. The basic message is that some people, or businesses or processes, achieve greatness through continuous and iterative improvement. That is precisely the path we are in Shopper Management at Nielsen.

Today’s shopper has access to more choice and convenience than ever before with a typical grocery retail outlet having over 40,000 skus to choose from. In addition, channels have doubled over the past 50 years. In my neighborhood in San Clemente, California there are seven different channels available for certain categories. Shoppers are bombarded with ads throughout their day. This environment creates a major challenge for our manufacturing and retailing clients, as it results in a shopper who is highly impulsive and largely disloyal.

Thus the importance of understanding shoppers and shopper behavior has never been more critical. With the advent of access to granular forms of shopper data including frequent shopper data, tlog and even better access to panel data we have seen an evolution from legacy Category Management to Shopper Management.

Thank you to the outstanding panelists – - Melissa Zip, Food Lion, Rob Colarossi, Dr. Pepper Snapple Group, Amanda Kelly, Unilever, David Newman, PepsiCo and Diane Harper, Kraft — who joined me for our discussion earlier this week, “The Continued Rise of Customer Centricity.” Many of the videos of the sessions at Consumer 360 are available on demand at Consumer360.com.

“If we just listen to these consumers, they will tell you where you need to go,” said Nick Sorvillo, Kraft Senior VP Consumer Insight & Strategy.

Kraft’s driving mission is to reconnect – emotionally and functionally – with consumers. Sorvillo stressed the path to that connection includes building an image of trust, dependability and value solutions.

“Those of you who understand the value equation for the category you are in will succeed,” he explained. “And value is not all about price.”

Kraft’s Consumer Channel research spotlights the shopping psychology of today’s consumer. The economy has changed the attitudes of consumers – 61% of Kraft’s consumer surveyed said their attitudes have been permanently changed. These consumers are cooking more at home, entertaining at home – with a mantra of ‘back to basics’ and family. They are practicing what Sorvillo termed as “brightsiding” – looking to the brighter side of a situation.

Seventy-two percent of those same consumers will continue to use the same shopping strategies they’ve begun to practice under the present economic crunch. In order to continue to service these consumers, the industry will have to change its own focus and provide solutions.

The emotional relationship with consumers translates into proving that the industry is partnering with them through not only this recession but throughout their lifetime. Retail speakers and attendees echoed the task of breaking down barriers to the customer. Customer centricity is the hub of category management.

Food Lion demonstrated the power of the customer with presentations discussing its own shifts from a decades-long, low price-oriented inventory management to customer-oriented inventory management and store design. In a partnership with Kimberly-Clark, Food Lion SVP Merchandising & Distribution Derrick Penick said they revamped the baby care aisle with a focus on the primary consumer – Mom – with input from shopping mothers, the aisle was redesigned to better suit her shopping needs. The convenience of shopping the store is now a part of the value-proposition of Food Lion’s baby care category.

As alcoholic beverage suppliers, retailers and marketers . . .what does this mean for us? What can we learn?

Well, for starters, we need to know how consumers are changing their alcoholic beverage shopping strategies. They are actively comparing prices at the shelf, looking more closely at in-store sales, flyers and ads, and sometimes waiting for their favorite products to be on sale before they buy. With this in mind, it’s critical that suppliers ensure their products are priced right compared to the competition.

Watch Danny Brager Discuss The Economic Hangover

With a weak on-premise environment, today’s biggest opportunity is around the home. Consumers’ intended restraint with an improved economy appears more pronounced in the on-premise as well. The home is key now — and will remain so, at least in the short-term future.

Our research shows that younger consumers, age 21 – 34, will return to their pre-recession level of spending sooner than older consumers. Older consumers have been the hardest hit by this difficult economy and are reining in their spending as a result. Suppliers and retailers need to make sure their value message is strong, and ensure that their product assortment, as well as pricing, is right to meet the varying financial conditions of their target customers and consumers.

Read Nielsen’s complete media release

Al McClain, CEO & Founder, Retail Wire

With the economy effecting consumers, retailers, and marketers alike, this week’s Nielsen’s Consumer360 Conference presents an opportunity to think about new ways of addressing this marketing challenge.

On Tuesday, a session called “Data Mining the Recession”, presented by Nielsen’s Mark Laceky and Mitch Kriss identified three main ways shoppers are trying to save money:

* Defer purchases/reduce consumption

* Find items at lower priced outlets

* Buy less expensive versions of products

According to Nielsen attitudinal research, the number one strategy for saving money on groceries is to choose less expensive items, mentioned by 46% of respondents, vs. 23% who mentioned switching to private label.

Winning categories and products tend to be meal ingredients, as consumers cook more at home, and comfort/snack food.  Categories such as macaroni, sliced lunch meat, and mayonnaise are going well, while bottled water, frozen dinners, and magazines are doing poorly.  Winning category attributes include ‘canned’, ‘comfort’, ‘preparation’, ‘ingredient’, and ‘kids’.  Losing attributes include ‘beverages’, ‘healthy’, ‘utility’, ‘frozen’, and ‘discretionary.’

By overlaying Homescan data with zip code unemployment data, manufacturers and retailers can get a good idea as to the effect of the local unemployment rate on brand, category, and even item sales.  As consumers presumably eat out less and cook more, supercenters are gaining more trips than grocers but main meal item growth is strong on grocery trips.  Premium items are down, as are super premium, although not to the same extent, while value items are up.

Meanwhile, in a presentation on dollar stores by Nielsen’s Jeff Gregori, we learned that high income shoppers are frequenting dollar stores, although the low income group still accounts for 45% of the dollar store channel’s sales.

Dollar stores have become an intriguing channel for CPG companies because they are increasing sales and are brand-friendly.  Shoppers are switching to the channel from every other channel, except for ‘value grocery’, which includes banners like Save-A-Lot and Aldi.

With top categories such as paper, candy, pet food, snacks, detergents, carbonated beverages, household cleaners, cookies, and laundry detergents having low collar store conversion rates, there is plenty of upside potential for brands willing to work with dollar stores.  Food and beverages seem to have a particularly strong opportunity in this channel, as food has grown to represent 31% of this channel’s sales, and Dollar General has upped their food and beverage share to 34%.  Meanwhile, only 23% of the channel’s dollar sales are with items that sell for under a dollar, so shoppers aren’t literally looking for rock-bottom prices on everything.

Collaboration is the theme vividly painted at The Nielsen Company’s Consumer 360 morning kick off – as attendees found themselves consumed in data illustrating a continuously changing consumer mindset, fed by an ongoing shift in consumer psychology. And the message was clear from the start: collaboration at the retail-vendor level will be key the successfully navigating this challenging, changing landscape.

The grocery industry, indeed all of retail, is caught in the turmoil described in David Bowie’s 1971 classic “Changes.” Ch-ch-changes…turn and face the strain…Ch-ch-changes…just gonna have to be a different man. And while Bowie may have focused on the compulsive nature of artistic reinvention, the retail industry is focused now on its own reinvention – and that of today’s consumer.

Almost as if echoing Bowie’s own theatrical presentations, The Nielsen Company collaborated with Infinia Group to create a multi-media experience, entitled “Consumed: The Economy Hits Home.”

The dynamic learning platform brings guests into the minds of consumers with a series of video screens – streaming messages, visions, pictures, thoughts and observations, and of course, cutting-edge Nielsen data — combined to paint an exhibit of Mark Leiter (President, Professional Services) and John Lewis’ (President & CEO, North America of Nielsen Consumer] analysis Consumer or Consumed: Achieving Clarity in an Uncertain World.

Viewers of Consumed literally walk through Nielsen’s data and the consumer mind, sharing the latest perspective on how macro forces in today’s unpredictable economy are shaping consumers’ attitudes and behaviors. The fact is that today’s consumer is stressed, but the fact still remains that consumers are still actively shopping, buying and using a wide range of essential products. How the industry chooses to move ahead in the most productive manner is critical.

“Navigating through this new landscape requires bold leadership coupled with a sophisticated, analytical edge, one that allows you to see around the next corner and spot the many new options for growth as quickly as possible.”

Consumed spotlights nine chapters or elements to navigate- Contrast, Changes, Coping, Challenges, Channels, Choices, Competition, Clarity and Curiosity. In a blitz of media messages, the participant’s vision becomes clear – change is inevitable and welcome. The mission now is to get close to our consumers as an industry, understand and service their needs.

Key points include:

• The American dream is enduring, although that dream was just heavily edited.
• Most Americans can still afford the essentials: food, clothing and shelter.
• Living a healthier lifestyle isn’t a passing fad or fashion.
• Consumers are creatively redefining the media landscape.
• Long-term demographic forces will continue to created unprecedented growth opportunities.

Nielsen’s Jeff Gregori Discusses the Impact of Dollar Stores in the Uncertain Economy

Dollar stores are small to mid-size stores that sell an assortment of CPG products, ranging from household cleaning products to food, usually at low prices. Originally taking their name from the fact that most products were priced at or below one dollar, today’s dollar stores offer products at a variety of price ranges, with an average of only 23 percent of products at or below the one dollar price point. Even so, the continued focus on comparatively low prices and value is drawing shoppers from all income levels. According to Nielsen, an estimated 65 million U.S. consumers shopped at dollar stores in 2008.
“The troubled economy and rising costs in healthcare, education, and food have caused everyone — even those with high incomes — to rethink where they purchase basic household goods,” said Jeff Gregori, vice president, Retail Services, The Nielsen Company. “Five years ago, shoppers weren’t sure what they would find in a dollar store. Today, dollar stores are delivering more consistent selection and value, and consumers are shopping dollar stores more regularly to fulfill their basic CPG needs.”

The Typical Dollar Store Customer
Despite the increase in spending among high and middle income shoppers, low income shoppers are still the primary dollar store customer. According to Nielsen’s research, 45 percent of dollar store sales are from low annual household incomes (below $30K), 47 percent from middle incomes (between $30K and $99.9K), and only eight percent from high incomes (greater than $100K).
The most loyal dollar store customers tend to have low incomes and live in small towns and rural areas or in urban centers. Senior couples, senior singles (particularly widows) and younger families with children are more likely to shop in dollar stores only occasionally, relying on other retail channels to meet the rest of their household needs.

A Destination for Everyday Goods
In terms of products, dollar stores have become a regular shopping destination for everyday household staples. Among those who regularly shop at dollar stores, the most commonly purchased household items include paper goods, such as napkins and paper towels, detergent, trash bags, and cleaning and laundry supplies. The most common edible items are candy, snacks and cookies.

“With more shoppers having positive experiences at dollar stores, there is a significant opportunity for dollar stores and CPG manufacturers to build loyalty and expand into new product categories, such as food and beverages and select health and beauty care,” said Gregori. “There is also a potential growth opportunity in exploring dollar store private label offerings in both edible and non-edible products.  The challenge for dollar stores and CPG manufacturers is to get the product mix right to meet the needs of their traditional customers as well as new customers with higher incomes.”