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.

At the same time, technology is having a measurable impact on retail sales.  In a recent U.S. study, Nielsen measured more than 200 digital ad campaigns and found the following:

• Average of 32% sales increase
• $1.1 million hike in short-term incremental sales
• 157% return on investment
• 18% boost in penetration
• 14% surge in buying rate

In addition to online ads, retailers are using scanning technology to enable consumers to check-out faster, create and retrieve shopping lists and even find and print recipes.  Read more about how technology is transforming both the retail environment and consumer shopping experience in the new edition of Consumer Insight.

Even though some analysts predict that the U.S. economy may have hit bottom and are cautiously optimistic, the changes we have seen in consumer behavior are likely to persist for the foreseeable future.  Here are some ways grocery retailers and CPG manufacturers can leverage these trends:

• Stay in the game: Evaluate new formats and locations and focus on innovation and differentiation. Maintain marketing and ad spending: history has shown us that companies that continue marketing in downturns generally perform better when conditions improve.

• Communicate: Listen and talk to your consumers. Engage them – they want to be heard and looking for help.

• Articulate your value: Understand your value proposition and articulate that in ways that are meaningful to consumers.  Create value and deliver on an aspiration.

• Reach consumers where they live: The renewed trend of “nesting” creates opportunities to market and position products that can comfort, enliven and enhance the home entertainment and dining experience.

• Expand store brands: Consumers have shown an increasing willingness to embrace private label products, and now is the time to explore ways to enhance PL offerings to build brand loyalty.

“Today, perhaps more than ever before, retailers and CPG companies that understand consumers, product categories and channel activity at an increasingly granular level will be in a better position to deliver new solutions and drive success,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at Nielsen.

Read the full article about insights and opportunities to grocers and CPG companies in Progressive Grocer.

Limited-portion snacks accounted for only $74 million of the $11.3 billion snacks business.  According to Nielsen, food, drug and mass merchandiser stores (excluding Walmart) over the past five years mostly show that this category’s share accounts for 2 percent or less of sales. 

Despite being a relatively miniscule part of overall snack sales, some types of limited-portion packs showed growth in 2008.  Potato chips and tortilla chips grew by 62.1 percent and 10.2 percent, respectively.  That impressive growth, however, generated sales of only $17.2 million and $12.2 million.

Sales of limited portion cookies and crackers lost steam in 2008, down 6.8 percent and 25.6 percent, respectively, even though both categories showed modest overall growth.

This information was published in the January issue of Facts, Figures & the Future, a monthly e-publication focused on delivering the latest consumer data and trend information to members of the Food Marketing Institute and clients of Nielsen. Facts, Figures & the Future is published by The Lempert Report/Consumer Insight, Inc. and is sponsored by the Food Marketing Institute and Nielsen.

Is the outlook any brighter for the new year?  Food marketing expert Phil Lempert, of SupermarketGuru.com, offers his take on what consumers and retailers can expect in 2009.

Nielsen Wire: How did consumer habits change in 2008 — and how should retailers adjust?

Phil Lempert:
In 2008 shoppers used more coupons, bought more store brands, and started using shopping lists again. I have little doubt that these “learnings” will stay with many of these shoppers through their lifetimes — the same way our grandparents who lived through the depression held on to many of the values learned through that experience. At the same time, shoppers have become smarter – they are reading more labels and asking more questions. They are also demanding better service and the chance to be heard, which is a new challenge for retailers who are trying to hold down payroll costs.

In a recent consumer survey we conducted for Readers Digest Entertaining Group, 72% of shoppers said that they will continue to use the shopping strategies they’ve discovered over the past six months even when the economy recovers. The rules have changed, and more than ever the consumer is the commander of the shopping experience.

My recommendation to retailers and manufacturers is to strengthen your relationship with your current customers and to reach out to new ones. People are nervous and looking for stability and accountability — those who offer both will win.

Nielsen Wire: How else are retail grocery stores adjusting to the struggling economy?

Phil Lempert:
With higher costs and lower available capital, many retailers will be struggling to keep their operations at an acceptable level (acceptable to both their shoppers and themselves). At the same time, many stores are in need of new technology at the front end in order to comply with the new extended bar code, as well as preparing for RFID compatibility.

The move to build smaller stores (10,000 – 15,000 square feet) – led by Walmart and Tesco – may be one solution. Significantly reduced overhead and employee costs allow this format to be profitable with much smaller volume (and may well prove to be exactly the format aging baby boomers, in particular, are looking for). The concept of having one superstore in a community, with dozens of satellite stores dotting neighborhoods will be tested over the next year, and I suspect it will be the winning formula in many locales.

Nielsen Wire: Other than prices, what factors will affect consumer choices in grocery aisles in 2009?

Phil Lempert:
In the same Reader’s Digest survey I mentioned earlier, 76% of people said they were bored with the foods they were eating and wanted more new products and recipes. Look for the winners in all categories to be those national brands that innovate (think Healthy Choice’s steamer line of frozen foods) or bring in new flavors (Budweiser Chelada) to satisfy convenience and flavor, while staying within the constraints of our new value equation.

Clearly, there has been a shift towards “local.” People want to know where their products come from — especially imports. Now, consumers expect packaged goods to identify their source, much as bottled water has done for decades. Hunt’s canned tomatoes, which are grown and packed in California, and ice creams that contain blueberries from Maine are just two examples of the transparency that will become increasingly common in grocery stores. Marketing the source, quality, and taste of ingredients will become the advertising sweet spot in 2009.

Nielsen Wire: How have advertising and marketing strategies changed for grocers in this economy?

Phil Lempert:
The old ad model does not deliver the sales or influence that it once did, which is why brands and retailers have moved on to new media that are less costly, faster, more targeted to produce, and instantly measurable. The medium is certainly the message these days, and the old mode ad vehicle simply doesn’t appeal to future consumers. Advertisers must think more holistically about their advertising — and forget the idea that buying time on the Super Bowl and producing a lavish commercial that is designed to appeal to all is little more than fodder for an episode of Mad Men.

I just had the opportunity to be a judge in the National Grocers Association Creative Choice Awards, and while I can’t reveal any of the winners until they are announced at their awards ceremony in February, I can tell you that independent grocers, with limited budgets in most cases, are doing some of the most creative and effective advertising during this economic downturn.

Nielsen Wire: But can’t chain stores just point to their prices, which are often better than smaller independent stores?

Phil Lempert:
Ads that only promote price may give a short term bump in sales, but the truth is that advertising that builds a relationship based on what a product or brand stands for and the benefits it offers the customer is more effective in building life-long value. 

My recommendation to chain retailers, in particular, is to examine what smaller grocers are doing with their ad budgets and websites. They may be shocked to find that these less glitzy and more personal ads are stealing their shoppers.

About Phil Lempert
Known as “The Supermarket Guru,” Phil Lempert is one of America’s leading consumer trend-watchers and analysts.  Lempert is the food trends editor and correspondent for NBC News’ Today show, where he reports on consumer trends, food safety, and money-saving tips. He is also a monthly columnist for Progressive Grocer magazine and Gourmet Retailer magazine, and is the host of the weekly new products webcast “5 New Food Products in 5 Minutes: The Hits & Misses.”