For most American shoppers, the weekly grocery list is filled with fresh foods: meats, deli, produce, baked goods and the like. For those who have been closely following consumer trends, this comes as little surprise, as Americans have reduced out-of-home dining and cook food at home more regularly. One part stretching household budgets and another part finding a genuine joy in cooking and breaking bread with family and friends, at home dining seems to be back in vogue. Obviously, then, fresh foods are important for grocers; in fact, they represent one-third of grocery channel sales.

Fresh foods have long been the purview of supermarkets. In most stores, shoppers are greeted by colorful displays of fruits and vegetables, refrigerated cases of fresh meat and the smell of freshly-baked breads and cakes. They appeal to the senses like few other categories. And they have maintained sales while other parts of the store have declined.

But supermarkets lock on this category is facing increased competition. Perhaps seeing this, mass merchandisers and club stores have bet on fresh foods, and thus far, it looks to have been a wise one: fresh foods have been the only departments posting sales increases in these channels, up 1.1 percent in mass merchandisers/supercenters and up 1.9 percent in club stores resulting in respective 0.1 and 0.2 share growth. Mass and Club continue to attract more fresh food buying households, increasing Grocery channel competition for the consumer’s fresh food dollar. Grocers need to create synergies to drive center store and perimeter sales.

How can grocers take advantage of perimeter store sales and leverage that success in the center store?

1. Assist the shopper’s decision-making process. Fresh categories require a high-level of decision making: how important is variety, brand assortment and promotions? Where do the products come from, such as locally grown produce, sustainability farming and animal welfare? Educate shoppers with in-store displays and online education with respect to origin, nutrition, growing trends and recipes. In-store product samples are always effective introductions to new products.
2. Drive impulse buys in bakery and deli. While Bakery and Deli are less likely to trigger a trip, finds ways to drive impulsive or reminder purchases. Few things are more mouthwatering than the smell of fresh bread or cookies coming out of the oven or expansive displays of lunchmeats.
3. Optimize center store strategies. When meat is in the basket, it is likely to be joined with meal starters and side dishes. Bakery purchases are often accompanied by deli meats and cheeses as well as condiments. Produce is often joined by fish and meal starters. Understand these synergies to build shopper basket size.
4. Expand prepared food offerings. The only deli department segment growing (+3.5% for 52 weeks ended Q1 2011), prepared foods such as cooked chickens, salads and sandwiches represent more than half of dollars spent in the category. These offerings cater to shoppers’ increasing desire for convenience, quick preparation and ready-to-eat meal options. Quality meal deals are key to driving repeat purchases, and offer opportunities to cross-promote (e.g., chicken plus soft drink deals).

The ways grocers can enhance their fresh offerings are almost endless, and done the right way, they are a key differentiating factor in the increasingly competitive marketplace that can keep customers coming to stores and increasing basket size.

More consumers in the U.S. are online talking about fresh and unprocessed foods when it comes to healthy eating, and a vocal segment of health enthusiasts are setting trends on the next wave of hot ingredients and spices.

To better understand these emerging trends in nutrition, Nielsen has been analyzing online consumer conversations about food and health and wellness since 2003. Our analysis highlights discussion trends among mainstream consumers and also quantifies buzz among health enthusiasts, a passionate and informed consumer segment that Nielsen monitors across 400+ social networks, key blogs and forums. Listening to what health enthusiasts care about helps us to see what’s next.

As we look at what consumers buy and how they talk about products, we’re able to quantify the online buzz around products and ingredients, as well as product label claims like low fat or high fiber.

One key trend we’ve observed is that health enthusiasts are expanding their palate with fresh citrus fruits and flavors.

• Kumquat buzz among health conscious consumers and search activity* in Q4 2010 were up significantly in part due to inclusion in recipes.
• Satsuma – a seedless fruit of Japanese origin – is on the rise with health enthusiasts touting high levels of vitamin C and fiber. Beyond health, Satsuma oranges promise a “beauty from within” benefit and are used in skin care peels.

*Google Insights

Comparing Health Enthusiasts with the Mainstream

Key observations from online conversations:

• Fresh and unprocessed foods generate the highest volume of all online claim conversation across the mainstream audience.
• Presence of fiber is on the rise with mainstream consumers – up 14% in Q4.
• Preservative-free offerings should be watched closely given increasing mainstream interest (+8%)
• Carb presence and sugar-free offerings are leading topics in terms of total volume for both segments.
• Gluten-free interest is on the rise among Health Enthusiasts
• Mainstream consumers are conscious of sodium offerings likely as a result of recent news on sodium content and manufacturers introduced reduced-sodium offerings.
• Low- and no-sodium offerings are on the rise among health enthusiasts.

SUMMARY: When retailers compete on price and rollbacks are market-wide, retail traffic trends rarely change. More importantly, Nielsen research shows that price rollbacks can actually reduce category dollars, making an effective pricing strategy a necessity.

Rob Schram, Vice President Analytic Consulting, The Nielsen Company

When commodity costs for foods rose dramatically in 2008, most manufacturers were forced to raise prices to protect margins—some more than once. Once commodity prices dropped, retailers put pressure on manufacturers to lower prices. But as the Great Recession took hold and consumers cut back on spending, manufacturers wanted higher prices to stick to compensate for the flat unit growth experienced in most categories.

And so the price wars began. And true to life, in war there are no winners. When retailers compete on price and rollbacks are market-wide, there are no inherent traffic gains. In fact, Nielsen research shows that price rollbacks can actually reduce category dollars.

Profitable Pricing
Retailers intending to fight on price better know which categories to target or they will be fighting a losing battle. Price elasticity is a measure of consumers’ likelihood to purchase in relation to a change in price. If you raise prices on categories with a price elasticity of less than one, or take a price rollback, you can actually decrease category sales. It’s a delicate balancing act. A price rollback may slightly increase category volume, but not as much as price goes down—so dollar sales actually go down. And vice versa on price increases—sales go up, but not as much as volume goes down.

Pinpointing best-bet categories requires knowing how elastic they are to price changes. High-elasticity categories are more sensitive to price changes because they are considered less of a necessity. When the opportunity cost of buying these products become too high, consumers opt out. These categories are typically commoditized products with low differentiation. Examples include:

• Paper towels
• Canned vegetables
• Canned pet food
• Canned fruit
• Incontinence care

Conversely, low-elasticity categories are more insensitive to price changes because they are typically the “must have” items that consumers will continue to buy no matter the price. These categories are typically perishable, convenient and are less commoditized. Examples include:

• Sliced cheese
• Dry pet food
• Macaroni & cheese
• Frozen side dishes
• Deli meat
• Bath tissue
• Microwaveable meals

Six Keys to Successful Price Planning

1. Plan pricing from two starting points – supply side / demand side. Define profit goals by forecasting the cost of goods, labor and transportation costs and plant capacity. And understand consumers’ price sensitivity to both your price and your competitor’s.
2. Establish a cyclical price management process. From planning and implementing to tracking, maintaining on-going control of the process will ensure that profit requirements are met and promotion response is achieved.
3. Take a portfolio approach. Understanding the price elasticity of each item in the portfolio in relation to the profit impact of a price increase provides a path to meeting corporate profit goals in a unified approach.
4. Focus on hard metrics at the center. Hard metrics with common definitions like shelf prices, list prices shipments and financials across brand groups must be the focus of any price planning approach.
5. Establish KPI’s and milestones. Determine scorecards for all key brands and track results and the execution. Be prepared to adjust the plan to react to marketplace changes and competitive initiatives.
6. Endorse and enforce. A portfolio approach means that some brands will take price changes and other will not. All parties in the process must follow the process and understand the broader goals.

Price wars are a long-term proposition, where over-reacting often leads to failure. Long-term winners innovate and differentiate and know that while price is important, value is more important. Careful planning, research and ongoing management are the steps it takes to win the war on price.

Nearly nine in 10 Indians (86%) place ultimate responsibility for food safety on the food they consume at home on themselves.  More than six in 10 think that the food manufacturer has the main responsibility for providing them with safe food while only 8 percent think the retailer has the main responsibility.  The government is viewed as the most trusted entity when a food safety issue arises.

“Food contamination is a problem that Indians face every now and then.  Food supply in India is often fragmented involving a multitude of middlemen, which exposes it to various types of fraudulent practices.  In such conditions Indians are very careful of where they make purchases from and mostly go by the name of the manufacturer.  The retailer is not seen as the prima donna in India, the manufacturer is,” said Biswarup Banerjee, Associate Director, Marketing Communications, South Asia, The Nielsen Company.

Almost three-quarters (73%) believed that certain countries provide safer food than others, but most Indians agree that food grown in country is safer than imported food.  More than four in ten (42%) said that they try to actively buy locally made products to support the local farmer or producer, with 19 percent believing that local products are better for them and their family’s health.

So what are the top selling categories in the drug channel? Six of the top eleven categories are outside the health and beauty care category.  Tobacco leads the way with almost $3 billion in sales, an increase of 18 percent from last year.  Cold/allergy remedies, nutritional supplements, headache remedies and chocolate candy round out the top five.   In terms of growth leaders, pet care products posted a 67 percent increase from last year, followed by depilatories and peanut butter.  Of the eleven categories showing the strongest growth, eight are foods.

But the leading chains such as Walgreens, CVS and Rite Aid are stepping up their efforts to innovate and bring more customers through their doors.  As with grocery stores, private label products are increasing their share of sales, with store branded cold/allergy remedies, nutritional supplements and headache remedies leading the way. Meanwhile, private label pet care, laundry detergent and antacids have shown the most growth.  Some of the chains are establishing in-store medical clinics, where customers can receive services such as blood pressure screenings, treatment for common maladies and flu shots.   Others are making the shopping experience more efficient by re-designing stores and reducing SKUs. 

“Drug retailers are feeling the heat from mass merchandisers and other retail channels.  Look for drug stores to innovate and evolve with more in-store clinics, competitive store brands, and expansion beyond traditional health & beauty categories,” said Tom Pirovano, Director of Industry Insights at Nielsen.

Other drug store facts:

• Drug store shoppers spend nearly twice as much on cigarettes than on cold/allergy remedies.
• Drug stores dominate all channels in the sale of contraceptives, generating 64 percent of sales in the category.
• The two highest growth categories in terms of share for the drug channel are tobacco and feminine hygiene.
• The category that has the highest drug channel private label share: canned nuts (64%).
• The Cleveland market has the strongest drug store channel representing 8.6 percent of total sales compared to 3.8 percent for the U.S. as a whole. Miami, Boston, New York and Sacramento round out the top five.
• Denver, Salt Lake City, Portland, OR have lower-than-average sales in the drug store channel
• Drug stores skew to African Americans, households without kids, lower incomes and older households than other channels
• Where one lives plays a huge role in the channels one shops: those living in cosmopolitan centers and struggling urban cores spend more of their money in drug stores than those in suburbia or rural communities.

By: Jonathan Banks, Business Insights Director, The Nielsen Company

SUMMARY: While weight loss strategies vary by region, the world’s consumers will start the New Year looking for the right combination of alternatives to lose excess weight. Approaches range from changing their diet, to working out, consuming diet pills, bars or shakes, and taking prescription weight loss drugs.

Year after year, it leads the list of the most popular New Year’s Resolutions: lose weight. Close behind on the “most popular resolutions” list are promises to get fit (#5) and to eat right (#6). Perhaps it’s just the human condition to be dissatisfied with one’s physical appearance, but regardless of the reason, according to a Nielsen 52-country global survey, 60% of the world’s population is struggling with their weight — 50% with overweight and 10% with underweight issues.

Tactics for paring pounds vary: cutting down on fats (69%), cutting down on chocolates and sugar (64%), eating more natural, fresh foods (53%), eating the same foods but having smaller portions (46%), eating less processed food (29%). Fewer than 10% turn to other diet plans—the low carb/high fat Atkins Diet, Weight Watchers or other slimming programs.

Regional profiles
North Americans recognize their tendency to overindulge and self-identify as the most “very overweight” region (6%), double the incidence reported by Emerging Markets (3%) and about 30% higher than Asia Pacific or Europe residents. On the opposite end of the scale, the “most underweight” regions include Asia Pacific, where more than half of respondents scored themselves as “underweight” (12%) or “about the right weight” (41%), Latin America and Emerging Markets.

Interestingly, despite the fact that Asia Pacific has the highest percentage of self-reported underweight citizens, that region also had one of the highest percentages of folks trying to lose weight (53%). Latin Americans reported the highest percent trying to lose weight at 57%.

The losing journey
Do consumers walk the walk or just talk the talk when it comes to weight loss? Far and away, the tough-to-execute, but proven slimming combination of diet and exercise was the weight loss recipe of choice in every region. Asia Pacific residents struck a balance between the two tactics, with 77% changing their diet and 73% exercising more. North Americans were more prone to attack diet issues first at 84%.

On a surprising note, Emerging Market consumers were more than twice as likely (14%) as North Americans (6%) or Europeans (7%) to use diet pills/bars/shakes to help shed pounds.

Diet dilemmas
Changes in food consumption led the way in the fight against fat, with fat being the operative word. Cutting down on fats was the most popular method used to control weight in every region except Europe, where reducing chocolate intake dominated.

Another reducing technique was to eat more natural and fresh foods—the consistent third choice across all regions except in North America, which placed this method as fourth. North Americans would rather eat the same amount, but have smaller portions, which ranked fourth as the most popular tactic for all of the other regions.

Pumping up
When it comes to the exercise option, results proved counterintuitive. North Americans claim to be the most overweight of any region, yet they self-report the highest levels of exercise, with 70% stating they work out at least once a week or more. Conversely, Asia Pacific residents do the best job of managing weight, but exercise less than any other region, with 58% saying they work out at least once a week.

Emerging Market natives were the most likely to claim that they never exercise, yet maintain good body weight. The reasons for this might be better overall diets and a lifestyle which promotes walking and features fewer sedentary jobs. Walking is far and away the exercise of choice in all five regions, followed by working out at the gym in four of five regions, Asia Pacific residents prefer running or jogging.

Healthy eating
How can people eat more healthily? In four out of five regions, dieters said they would be more likely to cut down on some food groups to achieve balance. The sole exception was Asia Pacific, where survey respondents said they would eat the same food groups, just in greater moderation.

Roughly 20% of participants in four regions felt they already consumed a pretty healthy diet, with North Americans alone in acknowledging they could do better—only 14% believed their current diet plan was healthy.

Concerned and confused
Roughly half of consumers were confused by the barrage of diet and healthy eating info available in the marketplace, much of it conflicting.  Doctors and medical professionals were cited as the most credible source of healthy eating information by 68% of respondents, followed by the Internet (36%), TV programs and documentaries (34%), books (29%), nutritional information on packages (25%), family (17%), magazines (14%), newspapers (13%), friends (11%) and supermarket brochures and flyers (5%).

Something fishy
Nutritionists know that fish is an excellent source of low-calorie protein without the lipid issues of red meat. Consumers agreed or strongly agreed with the statement that “fish is good for me” (88%), and that “fish is healthier than meat or chicken” (66%). That makes it the perfect food for those who are watching their weight. On average, families around the world dine on fish about 1.6 times per week. Consumption in the Philippines is off the charts, roughly twice the global average rate.

Fish is a particularly popular home menu item in Asian countries, representing 10 of the 12 highest fish-consuming areas: the Philippines, Malaysia, Singapore, Thailand, Hong Kong, Indonesia, Japan, Taiwan, Vietnam and China. The coastal countries of Portugal and Spain round out the fish-friendly list.

Upstream battle
Folks reluctant to feast on fish complain that they “don’t like the taste”, “don’t like the smell”, “don’t like the bones” and find that it’s “too expensive”. Frozen, prepared fish may eliminate many of these objections, including a concern with how to properly cook a fish entrée.

Industry experts expect fish sales to increase swimmingly given the universal concern with weight issues, the link between meat animals and global warming, heart health considerations, and the growing vegan and locavore movements.

Edible essentials, like bread, milk, cheese, and fresh produce, were among the top retail categories for October, according to Nielsen. 

Discretionary items like carbonated beverages, candy, and snacks were also among the top sellers in October — but most of these categories showed year-over-year unit and dollar sales declines.

Top Categories: October 2008 (Dollar Sales: Food/Drug/Mass Merchandiser Sales)

Top Categories: October 2008 (Unit Sales: Food/Drug/Mass Merchandiser Sales)

Products geared toward at-home use — canning supplies, baking ingredients, and wine — were among the fastest growing food, drug, and mass merchandiser retail categories in October, according to Nielsen. 

That trend may signal a shift in consumer behavior, as Americans increasingly opt to save money by staying in and eating at home. 

Fastest Growing Categories: October 2008 (Dollar Sales Growth: Food/Drug/Mass Merchandiser Sales)

Fastest Growing Categories: October 2008 (Unit Sales Growth: Food/Drug/Mass Merchandiser Sales)

Learn more about global consumers’ responses to the current economic crisis on Nielsen Wire.

That influence may even extend to her personal trainer, Bob Greene, whose “Best Life” program endorses consumer products that promote healthy living.

According to a recent Nielsen report, products featuring Greene’s “Best Life” seal of approval on their packaging easily outsold traditional food and beverage products. 

In 2008, brands endorsed by “Best Life” generated a 9.2% dollar sales increase, year-over-year, while all food and beverage products increased by just 4.6% during the same time period. 

During the most recent five-year period, “Best Life” brands also outperformed other brands.  Dollar sales of “Best Life” brands grew by 30% during the time period, while sales of all food and beverage products increased by just 13%.

View the full report.

In 2007, ad spending for stuffing mixes increased 10,800% from the late summer months (Q3 2007: $45,180) to the fall (Q4 2007: $4.9 million).

During the same time frame, ad spending on products within the Pie Crust category grew from literally nothing (Q3 2007: $0) to $3.3 million.

Meanwhile, ad spending within the Gravy Mix category grew from nothing (Q3 2007: $0) to $920,358 in the fourth quarter, and ad spending within the Cranberry Sauce category grew from nothing (Q3 2007: $0) to $939,112.

What about the turkey?

Surprisingly, poultry ad spending declined by 24% from Q3 2007 ($15 million) to Q4 2007 (almost $11.4 million).

I found myself at our client meetings last week in San Francisco, Seattle and LA, repeatedly making the point that CPGs had been increasing their online ad spend. This was based upon conversations that I’d been having with folks in the CPG space and the intense interest that we’ve been seeing lately from CPGs in online advertising. As I had a few spare minutes today, I checked AdRelevance to make sure that I was right about this. I was relieved to see that online ad impressions among Food and Drug and Personal Care categories had indeed increased by 32 percent over the past 12 months (Oct 06 – Sep 07 compared with Oct 07 – Sep 08). Interestingly, there is a big difference in the growth between the two big subcategories within CPG. In the most recent 12 months, impressions did not grow relative to the same period in the previous 12 months in the food and beverage category. In personal care, on the other hand, impressions grew by 87 percent.

What happened? Well, when we dig into the data, we see that it’s mostly a story about a few big advertisers significantly curtailing their online ad budgets with many others showing modest increases. During the two periods that we measured, Coca Cola’s ad impressions dropped from 276 million impressions to 50 million. Miller Brewing’s impressions dropped from 184 million to 52 million. On the personal care side, though, we saw the big advertisers generally keeping their impressions up.

Is this about personal care, or about food and beverage? I don’t think so. I think that it’s mostly about the immaturity of the media in tough economic times. As one big advertiser pulls back, we’ll see many others plodding along with modest increases in the online ad budgets, reflecting even greater increases in the allocation of ad dollars to the Internet. Given the tough economic climate that many advertisers are going to be operating in, I think that this is the story that we’re going to be seeing for another year or two. Some big advertisers will scale back significantly, a rare advertiser will dramatically shift dollars to the Web, and many others will continue to execute a modest shift of dollars from traditional vehicles to Internet.