Consumer or Consumed? The Economy Hits Home

Recently, at Nielsen’s Consumer 360 Conference, The Nielsen Company featured a unique exhibit, Consumed: The Economy Hits Home, which looks at how today’s uncertain economy is shaping consumer attitudes and behaviors and how marketers can navigate this new landscape to uncover growth opportunities. Mark Leiter, President, Professional Services, provides a guided video tour.

Read the corresponding presentation: Consumer or Consumed.

More video and presentations available at Consumer360.com.

Consumers Cautiously Ready to Spend Again

First signs of how consumers will behave post recession.

Restraint will be the new mantra among consumers, according to the Nielsen Global Consumer Confidence Survey. But, that doesn’t mean they won’t start spending again in the near future.

Respondents to the poll conducted in April, across 50 countries making up 86 percent of the GDP, said they would continue to focus on fiscal responsibility. Yet, “they will allow themselves some of those little indulgences,” said James Russo, vice president, Global Consumer Insights. “Perhaps pent up demand will play itself out and they’ll take that vacation they put off, go back to casual dining and increase out of home entertainment activities such as movie going.”

In April, 56 percent of consumers said they were spending less on new clothes. However, only 22 percent said they would continue to do so with an economic recovery predicted by year’s end.

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Consumed by Challenges and the Changing Consumer Mindset

Michelle Moran, Editor In Chief, Progressive Grocer & Gourmet Retailer

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.”

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High and Middle Income Shoppers Spending More in Dollar Stores

The economic downturn has been a boon to dollar stores, which attracted increased consumer spending in 2008, including spending among high and middle income shoppers, according to The Nielsen Company. Nielsen’s analysis of consumer shopping habits shows consumers at all income levels shopping more at dollar stores, with high income shoppers spending 18 percent more at dollar stores in the second half of 2008 compared to the prior year. Dollar stores are outpacing major consumer packaged goods (CPG) channels among both low and high income shoppers. The analysis was presented today at Nielsen’s Consumer 360.

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

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Growth Of Organic Sales Slows with Recession

Organic products - which are often priced at a premium over non-organic products - have taken a sales hit over the last 12 months as consumers have cut back discretionary spending, according to new analysis by Nielsen’s Director of Industry Insights, Tom Pirovano.  In March 2008, monthly sales of organic products grew 24 percent; a year later, growth almost came to a standstill of 1 percent, marking a dramatic shift from previous monthly growth rates of more than 30 percent seen in 2005 and 2006.

[click to enlarge graph]

“The recession and the resulting uncertainty it has created among Americans has prompted most consumers to look at every dollar they spend,” said Pirovano. “At this point, it appears that cost beats the potential benefits of organic products when shoppers head to the grocery store.  It will be interesting to watch if sales of organic products rebound along with the economy, or whether that trend will be a victim of the vast changes affecting consumer behavior.”

Pricing Trends In An Uncertain Economy

Every day, shoppers walk into a store to find that the price of a favorite item has gone up.  These price increases drove dollar growth for retail sales within food, drug and mass merchandisers to 3.6 percent in the 52-week period ending 1/24/2009, although sales slowed in the last quarter.  Much of that growth, however, was driven by inflationary pricing as both retailers and manufacturers raised prices due to rapidly escalating commodity costs.  Every department - except general merchandise - showed dollar sales growth over the year.

Across 114 categories representing more than 99 percent of all department sales Nielsen monitors, six categories had price increases of greater than 15 percent over a year ago.  38 categories had price increases of 0 percent to 4.9 percent, while 11 had price declines. The top five categories with the largest price increases over the course of the year:

• Dry vegetables & grains 25%
• Flour 23%
• Jams, jellies & spreads (including peanut butter) 19%
• Car accessories 19%
• Pet food 16%

Higher commodity prices played a role in all of the food categories, while higher crude oil prices drove increases for motor oil in the car accessory categories.  Meanwhile, the following categories decreased in price:

• Fresh eggs -12%
• Milk -8%
• Candles & Incense -5%
• Light bulbs and telephone accessories -3%
• Non-carbonated soft drinks -3%

In the four week period ended January 24, 2009, unit prices across the store were up 5.5 percent - exactly the same as the 2008 Consumer Price Index calculated by the U.S. government.

“U.S. consumers would certainly benefit from lower prices.  But retailers should be careful with how far they push their manufacturer partners to lower prices. If they simply push for lower prices without planning for the right lower prices, they may find it extremely difficult to grow same-store sales this year,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at Nielsen.

Read the entire article about pricing trends in the lastest edition of Facts, Figures & the Future here.

Holiday Sales 2008: The Definitive Report

The early predictions were gloomy: the recession gripping the U.S. would make for a dismal holiday shopping season for retailers.  And while many retailers certainly felt the effects of the economic downturn, holiday dollar sales in 2008 actually increased 5.8 percent or $99.5 billion across grocery and drug stores, mass merchandisers and convenience stores, according to Nielsen.

Categories that drove the highest sales spikes were musical instruments and accessories, with more than half of the purchases for the year made in the last eight weeks of 2008.  Women’s and children’s fragrances, baking supplies and computer electronics products were also favorites.

Perhaps anticipating spending more time at home in the coming year, 10 percent of all homes bought new home entertainment equipment, with TVs accounting for 35 percent of those purchases. Almost two-thirds of those TVs were high-def units.  Video game consoles added up to 18 percent of entertainment equipment purchases, while DVD players contributed an additional 11 percent of sales.  VCRs continued their slow march to extinction, comprising less than 2 percent of sales.

DVD sales fell 14 percent in the last eight weeks of the year compared to the same period in 2007. Meanwhile, box office receipts climbed 11 percent to $1.655 billion during the holiday period with a number of holiday favorites hitting the big screen.

Read the complete review of holiday sales in the current edition of Consumer Insight.

Nielsen Economic Current Debuts

Nielsen today unveiled the Economic Current, a monthly study that will track key consumer and retailing trends on a global, regional and country-wide basis. Using the vast amount of consumer data collected by Nielsen, the Economic Current will serve as a centralized source of information on key consumer topics such as:

• Market Index volume, in terms of unit and country currency change
• Retail channel shifting
• Shopping frequency and spending trends
• Overall consumer confidence

“Nielsen collects and analyzes data on tens of thousands of products around the world. As we were thinking of new ways to leverage this valuable resource, we thought it would be useful to summarize this information and create a monthly snapshot of consumer and retail trends across the globe. We expect that the Nielsen Economic Current will provide our clients and others with another valuable tool for evaluating these trends at both a macro- and microeconomic level,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at Nielsen.

In addition to global and regional components, the Economic Current will follow trends in eleven countries representing over 70 percent of Global GDP.  Countries were chosen based on their importance to the overall global economy as well as countries where Nielsen captures a broad set of consumer, retail and media content. The countries which the Economic Current will track on an individual basis are:

• United States
• Canada
• France
• Germany
• United Kingdom
• Italy
• Spain
• Brazil
• Russia
• India
• China

Over the course of the next week, Nielsen Wire will feature brief summaries on key sections of the latest edition of the Economic Current. In the months ahead, new editions of the Economic Current will be supplemented with podcasts by senior executives and analysts who will provide further insight on global consumer trends.

For the complete report, click here.

Nielsen’s 2009 Consumer Survival Plan

It’s no secret that consumers nationwide have been forced to alter their behavior and spending patterns due to the weak economy in 2008. But, specifically, just how are they coping?

Based on its extensive research in the Consumer Packaged Goods and Entertainment categories, The Nielsen Company has some answers.

The New Mantra: If You Can’t Eat It… You Don’t Need It

Consumers are relying more and more on food staples and “value” items such as rice, noodles, and pasta, which dominated Nielsen’s list of the fastest-growing categories in 2008.

Dollar sales vs. a year ago:

• Bulk rice up 38 percent
• Ramen noodles up 30 percent
• Dry pasta up 25 percent
• Margarine up 21 percent
• Spam up 14 percent
• Canned vegetables up 9 percent
• Frozen vegetables up 7 percent
• Macaroni & cheese up 7 percent

Consumers Are Cooking From Scratch…

Noteworthy is an 8.2 percent increase in unit sales of Canning & Freezing Supplies.  Consumers are now growing and storing their own foods, as well as cooking from scratch rather than buying more expensive prepared “convenience” foods.

And Drinking More Alcohol

Consumers are buying more Wine (7.9 percent increase in unit sales) and Liquors2.6 percent increase in unit sales).

…But, Are Taking Their Vitamins

During these hard economic times, consumers are buying more vitamins (4.3 percent increase in unit sales).  In fact, for most of 2008, the vitamin category was the only Health & Beauty category to grow unit sales by more than 2 percent.  Nielsen predicts that vitamin sales will outpace other categories in 2009. As the U.S. population gets older and time-stressed families supplement less than desirable eating habits, vitamins will continue to grow unit volume, though competitive pricing may keep dollar growth lower.

However, the growth of organic products will slow dramatically. Unless organic marketers can do a more effective job of demonstrating better taste or concrete health benefits, expect the growth of UPC-coded organics to decline less than +10 percent.

“Going Green” Is Now Optional

“Going green” will be motivated more by cost-cutting than planet-saving intentions. Families on a tighter budget will be less likely to pay extra for environmentally-sustainable “green” products, but they will improve the environment as a by-product of cost-cutting strategies, such as saving money on gas by combining errands (lowering car emissions), and by purchasing less non-essential goods (producing less waste).

Consumers Are Trading Down… Or “Out”

Consumers are shifting dollar and unit spending in favor of less expensive private label/store brands as opposed to purchasing established name brands.  Store brands hit an all-time high in unit sales and dollars at the end of 2008.  Also, 48 percent of consumers consistently cited that they prefer larger sizes of items with lower pricing per serving over downsized products at historic price levels.

Nielsen predicts that national established brands will try aggressively to win back store brand business from consumers by using innovative packaging, unique flavors, and additional health and wellness claims.

50 percent of consumers are dining out less often, while more than 30 percent are “trading down” to less expensive restaurants.

…And Are Paying With Cash

Nielsen predicts that cash will be king, especially at convenience stores.  As credit card companies continue to raise fees on retailers, there is more motivation to offer discounts for shoppers paying cash.  Convenience stores will take the lead on cash discounts, as many already offer lower gas prices for cash purchases.  As other retail channels offer cash discounts, credit card companies may get enough pressure to reduce fees for retailers.

…But Still Love Going To The Movies, Especially 3D Movies

2008 box office sales are up 1.6 percent year over year, and 3-D cinema admissions will increase due to the growing availability of 3-D movies and theaters. While many families are likely to keep a tight rein on their entertainment budgets in 2009, Nielsen predicts that 3-D movie theaters might be the exception because consumers appear to love 3-D films.  Gross sales increased more than 60 percent in 2008 for 3-D films compared to traditional films due to higher prices and higher attendance.  There are already more than one thousand 3-D theaters in the U.S., and as many as eleven major 3-D movie releases expected to hit screens in 2009.

…And Downloading Music

Though overall CD sales are down 14 percent, consumers are digitally downloading music tracks at a feverish pace - up 27 percent, while sales of digital albums are up 32 percent.

Ironically, in the new digital age, sales of vinyl LPs were at an all-time high (1.88 million). There has been a resurgence of vinyl due to the new turntables on the market that enable consumers to play an LP and also transfer the music onto their mp3 players/iPods or flash drives. All of the turntables today have this digital transfer capability.

…And Watching TV

Television viewing is at an all-time high among Americans, with the average person watching 4 hours, 45 minutes per day during the 2007-2008 season.

In Britain, “Out Of Town” Super Stores Reap Rewards Of Frugal Holiday Shopping

Sales in the British grocery sector picked up over the holidays, but were largely negated by weak sales at the beginning of December, Nielsen reported last week.

Growth (by value) of British food sales for the four-week period ending December 27 was up by 2.6% year-over-year overall and by 4.5% year-over-year for grocery multiples.

“The consumer was much more cautious this year, and it was a back to basics Christmas,” Mike Watkins, senior manager, retailer services, Nielsen, noted.  “Sales of packaged grocery (+11%), frozen (+10%), and confectionery (+8%) were buoyant, while sales of liquor (+4%), heath and beauty (+1%), and deli counter (+1%) were more muted.”

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