Todd Hale, Senior Vice President, Consumer & Shopper Insights &
Dan Brady, Director, Insights Consulting, The Nielsen Company

SUMMARY: A consistent pattern of reduced shopping trips continues to be a major element of consumer’s economic coping strategies. In the latest battle for share of wallet, those retailers who satisfy consumers through differentiation will gain more of less.

The recession continues its ravaging effect on retailers. According to Nielsen, the downward trend of consumers shopping less hit a new low in February 2010, reporting a 4% year-over-year decline in monthly all-outlet shopping trips. And while per trip shopping basket rings began to pick up during and after the holidays, February remained static with a 1% increase compared to last year. Retailers’ focus on store brands and retail price cuts helped keep spending levels in check driving more value for shoppers.

A closer look at monthly shopping trips shows that trends have virtually flat-lined in total and across all major retail channels. Grocery stores have been shopped two plus times more often than competitive retail channels. Other Nielsen trends show that consumers are not shopping more stores looking for deals as consumers consistently shopped fewer retailers each period in 2009 than they did in 2008. It is a tough market and breathing life into a different retail environment will take new strategies that keep shoppers satisfied and spending while they are in the store.

Food Matters
As consumers are eating in more and out less, retailers are converting lost restaurant trips into grocery trips. And while grocery trips were up in the last eight of twelve periods ending February 2010, trips in the last four months are down. Value channels such as dollar stores, warehouse clubs and supercenters have fared the best showing growth in most periods in the last year and one-half. In fact, only supercenters and club stores had positive trip growth in each period in 2009. Both, however, declined slightly in 2010 as consumer confidence remained low and poor weather conditions plagued major population centers.

Continuing to take a hit are drug, convenience and regular mass merchandiser formats, although drug trips are showing signs of improvement as consumers stock up on meds to combat the effects of the cold and flu season.

Shopping trips to discretionary retailers such as toy, electronic, department, liquor and home improvement stores continue to feel the economic pinch. Electronic, toy and department stores have been hit especially hard, with year-over-year shopping trip declines in the latest four-week period ending February 2010 of 33%, 18% and 7% respectively.

Do More With Less
With less store traffic, retailers need to capitalize on consumers’ time in the store like never before. Three priorities should top the list for every retailer:

1. Satisfy loyal shoppers with savings linked to shopping frequency and spending levels.
2. Entice new shoppers with promotional offers such as a free reusable shopping bag or product.
3. Offer value and low prices, but more important, stake a claim to at least one or two points of differentiation to maintain a competitive advantage.

Jean-Jacques Vandenheede, European Business Insight Director

SUMMARY: Drawing on Nielsen’s unique data assets and geographical footprint the European Growth Reporter compares overall market dynamics (value and unit growth) in the Fast Moving Consumer Goods sector across Europe.

Based on the widest possible basket of product categories that are continuously tracked by Nielsen in each of these countries and channels, the fourth quarter 2009 shows nominal growth, which has remained stable since the prior quarter, and around 3% for four consecutive quarters.

The fourth quarter of 2009 has shown nominal growth at 2.9%, a stable growth rate hovering around 3% for the year, once again outperforming the United States which ended the year with a 0.6% nominal growth rate. European inflation remained low at 1.3% in the fourth quarter. Deflation held at the -5% level in Slovakia, Finland and Portugal.

Europe experienced higher volume increases in 2009 than the prior year, increasing by 0.6% to 1.6% in the fourth quarter. Volume growth is accelerating in Austria, Finland, France, Ireland, Norway, Spain and Turkey.

The Big 5 European economies (France, Germany, Italy, Spain, United Kingdom) ended the year at various stages of recovery. France and Spain recorded solid volume improvements while Germany and Italy stayed close to the zero line. Value growth in the United Kingdom reached the 5% mark with 3% points of this coming from volume increases.

By year end, 2009 performance delivered better volume growth than 2008. The best volume improvements came from the United Kingdom, Sweden, France, Austria and Germany. Offsetting those gains were volume losses recorded in Switzerland, Slovakia, the Czech Republic and Poland.

Total European View

Nominal Volume Growth
Across Europe, nominal volume growth inched up to 2.9% in the final quarter of 2009, gaining 0.3% point over the third quarter. This small gain in volume places European volume growth ahead of the United States which saw volume drop by -1.2% in the fourth quarter.

The volume growth rate is accelerating in the following countries: Austria, Finland, France, Germany, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Turkey and the United Kingdom.

The Big 5 European economies are showing a mixed picture. While France, Germany, Spain and the United Kingdom recorded volume gains over 2008, Italy lost ground.

Ireland, Slovakia, Hungary and the Czech Republic recorded the greatest volume declines in 2009.

Value Growth
Unit value growth fell precipitously from 5.7% in 2008 to 1.5% in 2009, underperforming the prior year in every single quarter of 2009, reflecting slowing inflation and price compression implemented at retailers as a result of economic pressures.

Country Analysis—Western Europe
The latest quarterly Europe Growth Reporter measuring volume and value sales in the fast moving consumer goods industry across markets in Europe is showing encouraging signs of improvement with more than half the countries measured recording positive volume trends. 2009 volumes increased to +1.7% in 2009 from 1.1% growth in 2008. This is still some way from 2007’s 3% growth rates; a slow but steady improvement.

As the chart above demonstrates, the leading Western European growth countries in fourth quarter 2009 were Turkey, Norway, the United Kingdom, Poland, Sweden, France, Austria, the Netherlands, Belgium, Spain and Switzerland.

About the Nielsen European Growth Reporter
This report compares overall market dynamics (value and unit growth) in the Fast Moving Consumer Goods sector across Europe. It is based on the sales tracking Nielsen performs in every European market, and covers sales in grocery, hypermarket, supermarket, discount and convenience channels.

The report is based on the widest possible basket of product categories that are continuously tracked by Nielsen in each of these countries and channels, and this edition reports on week 41 of 2009 through to week 52 of 2009.

Todd Hale, Senior Vice President, Consumer & Shopper Insights, Nielsen

SUMMARY: Understanding shopping and media habits at different ages can help marketers optimize critical assortment, pricing, promotion and advertising decisions by crafting targeted strategies and niche offers that reflect deal propensity, trip frequency, channel predilection, average spend and media usage.

Generation: group of contemporaries; all of the people who were born at approximately the same time, considered as a group, and especially when considered as having shared interests and attitudes.

• Greatest Generation: born prior to 1946 (64 + years of age in 2009)
• Boomers: 1946 – 1964 (45 to 63)
• Gen X: 1965 – 1976 (33 to 44)
• Millennials: 1977 – 1994 (15 to 32)

Observers of popular culture have long known that in large part, generations look alike, think alike, dress alike, vote alike, live alike, and share a similar attitude toward life and leisure activities. That theory certainly holds true for shopping. A recent Nielsen analysis of the four key generations revealed generationally consistent shopping habits that reflect diverse lifestyle preferences and economic habits.

The Greatest Generation members, shaped by the Great Depression and World War II frugality, are the most frequent shoppers and more deal prone than other age segments. High-earning Boomers have the largest annual dollar spend per household of any group, followed by GenX. Millennials don’t like to waste time in-store, shopping less often than other age cohorts but buying more per trip as a result.

Young Spenders
Millennial and Gen X shoppers favor mass supercenters and mass merchandisers over more traditional formats like grocery or drug stores which remain a draw for the Greatest Generation and Boomers. When younger shoppers do check-in to a format, they make a big impression at checkout. Millennials topped the basket value list at grocery stores and mass supercenters, with Gen X taking top spending honors at mass merchandisers and drug stores. Millennials today represent the largest population segment—over 76 million strong—just slightly larger in number than the Boomer segment. The two groups together represent half of the U.S. population.

At club, dollar and convenience/gas channels, Boomers and the Greatest Generation populate the aisles more frequently, while younger shoppers offset fewer trips with bigger baskets.

On Target
Certain store banners hold a unique appeal for the younger generations, and Target is at the head of that retailing class. Target stores have managed to maintain a hip, trendy image with a strong value message with whimsical advertising; strong, almost pop art in-store merchandising; and a roster of high profile designers for everything from housewares (Michael Graves) to bedding (Todd Oldham) to women’s fashion (Mossimo) to cosmetics (Sonia Kashuk). And, with the interest in at-home meals, Target recently announced a new partnership with TV cook show host Giada De Laurentiis for a store-brand line of specialty food items and cookware.

Gen X and Millennials both patronize Target more often than other age cohorts, but also outspend them at Target, as well as at competitive mass merchandiser banners like Kmart and Walmart.

Spending Patterns
Research suggests that owning a pet can stave off loneliness and lower blood pressure. Apparently, the Greatest Generation got the message, which may account for the average $198 in annual spending among pet food buyers in these households. An analysis of a selected sample of categories where there were big differences in annual spend across the generations showed gaps between the gaps. The next largest spending categories for seniors were wine at $124 per year and vitamins at $107 per year.

For these selected categories, Boomers spent even more on pet food ($211 per year), followed by carbonated beverages ($140/year) and wine ($125/year). Pet food also topped the list for Gen X at $148 per year, with carbonated beverages a close second among big dollar categories at $134 per year and baby food in third position at $127 annually. Millennials and their young families placed baby food in the top spot with annual outlays of $170 per household, followed by carbonated beverages ($116/year) and pet food ($112/year).

Pleasure or Pain
A Nielsen survey identified that most households (53%) have favorable attitudes toward grocery shopping while 38% consider it a chore. Retailers take note: interesting generational differences exist, which can help uncover ways to extend their time in the aisles.

It is an interesting dichotomy that the Greatest Generation is less likely to enjoy shopping than any other age cohort—with the most respondents rating shopping as a chore—and yet also the most likely to walk up and down each aisle on a shopping trip, thus extending their time in-store. Merchandising opportunities to pepper products that appeal to older consumers should be pursued.

Conversely, the Millennial generation, who makes the fewest trips to virtually any format, really likes shopping. On a typical mission, they know how to find what they need and are less likely to shop the entire store. Engaging this “in and out” shopper with products such as music or other in-store entertainment could extend their time in stores and get them to shop more aisles.

Planning and Price
Investigating an array of different consumer shopping practices and strategies, Nielsen determined that shoppers in these economic times are proving to be rational consumers with more than half relying on shopping lists and consistently comparing the unit price for a product. Other ways consumers attempt to eke value out of a shopping trip include using the store circular to identify sale items and redeeming coupons—a practice that has spiked in popularity thanks to the advent of electronic and mobile coupons.

While Gen X and Millennials claimed the highest coupon redemption rates and were among the most likely to use shopping lists for most trips, they also admitted to making the most unplanned purchases on their shopping excursions. Younger shoppers tended to bring children with them more often than others, were less likely to ask for advice from meat or produce department personnel and, in the case of Millennials, very likely to bring another adult along on most outings.

Dining and Dollars
When asked how the economic downturn had impacted meal time, more than 40% of respondents mentioned consuming fewer carry-out or home-delivered meals, or increasing the use of private label foods. One-third or more of those surveyed now incorporate more basic ingredients in meals and buy the produce that is in season, fresher and less expensive.

More than one-quarter prepare large quantities of food that can be eaten throughout the week, reduce the number of desserts served and opt to brew their own coffee at home. Nearly one-quarter mentioned serving healthier meals. The Greatest Generation and Boomers were the groups most likely to purchase seasonal produce and serve healthier meals, while Gen X and Millennials cut down on carry-outs and home delivery while stocking up on private label.

Media and meals
Consistently across the board and across the generations, people turned to cookbooks, the Internet and television for recipe ideas and less expensive in-home entertainment as budget-conserving options. Millennials were the most wired into the Internet, while Gen X favored cooking programs and the Greatest Generation paged through cookbooks.

On average, the typical American consumes more than 35 hours of media per week across the three screens—TV, Internet and mobile. As smartphones redefine customer media interaction, they present enormous potential for generating buzz around products, delivering timely product info and coupon codes, and building community through brand advocacy.

Shopportunities
So what is the best way to reach each generation and capitalize on their unique shopping interests and needs? Here are some suggestions:

Greatest Generation: freebies and senior discounts to appeal to their value orientation. Special products addressing aging issues; special packs for smaller households. Better signage, more forgiving package design, on-shelf or on-cart magnifying glasses. These savvy shoppers spend most of their online time using email and message boards, providing two ready avenues for delivering targeted offers and initiating value-add discussions about health issues and special wellness programs.

Boomers: keep these big spenders happy with monthly or quarterly cash-back savings programs that reflect spending levels. Pursue the up-sell into prescription medications, insurance, gifts for grandkids and kids, entertainment, travel, even discount wines by the case. Comprising more than one-third of the Internet population, Boomers are big online shoppers, comfortable using email and messaging to stay in touch. Twitter is a huge untapped outlet for reaching Boomers, who increased utilization 469% during 2009. Reach one and you reach their entire follower base with product info and special offers.

Gen X: time is a precious commodity for these busy young families, so reduce deadline pressure by offering meal planning and deals, school supplies and little indulgences like lattes to make shopping less onerous. Child care activity centers or computer kiosks keep kids engaged while parents shop. In-store cooking or craft classes offer family fun and a reason to increase the trip count. More than 80% of X-ers are online checking out Facebook, MySpace and Twitter, shopping and price checking online and texting or emailing friends. Deliver quick hit info and offers using new media for fast results.

Millennials: consider upgrading piped-in music to current hits to attract contemporary shoppers. Coffee stations with battery chargers and in-store WiFi let them kick back and review Internet or mobile coupons and shopping lists. Convert their need for immediate gratification into impulse buy sales with enticing end caps and front of store bins. These visually-oriented shoppers will Tweet and text about special deals real time from the store aisles about what looks good today, where to meet-up, and anything cool that catches their eye on site. If you’re lucky, you’ll hit a quirky Millennial sweet spot, and they’ll YouTube or Hulu a video of a helpful employee or unusual in-store promotion.

Growing trend
While the trend of women working outside the home has been more evident in developed countries, it is also present in developing nations—as is the case with Latin American countries. According to the International Labor Organization (ILO), 53% of Latin American women are linked to the labor market—a proportion which reaches 70% of the women between the ages of 20 and 40 years old. Further, the United Nations Population Fund (UNFPA) estimates that roughly 44 million women joined the labor markets of Latin America and the Caribbean in the last decade.

A Nielsen analysis in Latin America of more than 20,000 households across countries in Brazil, Chile, Colombia and Mexico further support the findings that there is a clear growing trend of women working outside the home. In Chile, for example, the percentage of working women grew from 31% in 2007 to 34% in 2008. In Mexico, the number of working women increased 10% over eight years reaching 35% in 2008. Of the four countries, Columbia has the greatest percentage of working women at 40% and Brazil follows closely at 36.6%.

Education creates opportunities
As women’s education levels increase, so do job opportunities. By the end of the 1990s, the United Nations reported that Latin American women between the ages of 30 and 45 with a formal education at the elementary level had a workforce contribution of 55%. That rate rose to 60% when women had an unfinished high school education, 65% with a high school education and more than 80% with a professional degree.

Nielsen data reinforced these findings—as the socioeconomic level increases, more women are educated and therefore have more opportunities for employment. The chart below shows occupation trends of housewives in Mexico from April 2008 to March 2009.

Lifestyle drives purchasing decisions
The rising purchase power of Latin American women is similar across most of the countries in the region. To better understand how this growing economic trend is impacting shopping behavior, Nielsen conducted an analysis in the Mexican market to compare the growth of shopping volume among households where women work vs. the total population.

The findings show that time-starved households—those balancing both work and home responsibilities—are looking for convenient products that save time and are easy to prepare. Categories that over index among households where women work include soups, ready-to-eat cereals, mayonnaise, flavored water, ready-to-drink beverages and packaged bread. And since women who work outside the home generally have more social interactions, hair treatments/conditioners and deodorants also have a high spending index.

Driven by the lack of time to go shopping at the supermarket, door-to-door sales is growing significantly in households where the woman works—spending is up 2.8% in 2009. Health care and beauty categories are the primary drivers of this growth—women who work have increased spending 15% in 2009 vs. 2008. Household products have also contributed to this growth, increasing 8.9% among working women vs. a spending decline of 20.9% among women who don’t work.

Reaching women
Women who are balancing both home and career are becoming increasingly important in the Latin American markets—those between the ages of 20–40 with higher education levels make up the highest percentage. Key purchase drivers for this segment include:

• Ready-to-eat food categories
• Convenient shopping outlets
• Health care and beauty products

Jane Crossan,Vice President, Practice Leader, Financial Services, The Nielsen Company

For the past six months we’ve seen and heard about the recovery of the U.S. market: the DOW has ticked up and the Fed chair has said the recession is “likely over.” But ultimately, the consumer will determine when our economy is back on track when you consider that consumer spending accounts for roughly 70 percent of U.S. economic activity. Until the consumer starts spending again, the recovery is likely to be slow and it may feel like we’re in a weak economy for some time. To get a closer look at the consumer’s financial outlook and their going-forward intent,  Nielsen Claritas surveyed more than 2,500 consumers, including 500 households that saw their personal financial institution impacted by a takeover or acquisition. What we found was that while the intensity of the economic panic had subsided since 2008, concerns persist and new habits in spending and saving are solidifying.

The new frugality
Similar to what we’re seeing with the outlook to the upcoming holiday season, the majority of consumers are saying this is just not the time to buy. When posed with a very simple fill-in-the-blank prompt: “At this moment, the time to buy the things you want and need is…” the panel responded heavily with “not so good.” Combine that with those who said the timing was downright “bad,” and you’re looking at 71% of respondents telling us they are no position to buy right now.

These responses underscore the consumer confidence index which began to drop in May and continued to drop through much of the summer. Even back-to-school shopping was lackluster despite a slight rise in that sector in August. The prevailing mood could likely be summed up by one respondent who noted bluntly: “I will not be making any large-item purchases for a long while.”

Spending and saving less
Between pulling back on spending and working to consolidate debt, the average consumer is getting squeezed.

In the past six months…

• One third say they have used credit less while…
• Only 13% say they have used credit more
• Consumers indicate they have controlled spending by using cash, debit and check as methods of payment
• 27% say they have saved less vs…
• 22% who say they have been able to save more
• 16% say they contributed less to retirement over the last 6 months

Even when conditions improve in the future, consumers are viewing the use of credit cautiously, with 30% saying they’ll use credit less. Savings will also continue to be a struggle as only 19% say they will be able to save more even when the economic storm clears.

The middle still feeling the pressure
In October 2008, concern about the economy was felt equally across the board, regardless of household net worth. Now, however, the higher net worth households seem to be faring better with their extreme concern almost cut in half. The two highest net worth brackets showed a noticeable drop in extreme concern compared to the lower three brackets, perhaps because homeowners with higher equity are less affected by recent drops in home values.

What’s interesting is the comparable concern in the middle and lower two brackets.  In fact, the middle bracket (those with a $100-249K net worth) expressed the highest amount of concern in 2008  and 2009, evidence that this is not a “poor man’s recession.” If anything, those in the middle are feeling the most pressure. These mid-net worth households  are likely comprised of  recent first home buyers who traded up at the peak of the market, or took equity out of their homes to fund other lifestyle choices.

Adding to that middle-class worry are growing concerns about personal finance matters at the heart of the American dream.

More than one third of consumers continue to be concerned about their mortgage or home value – not surprising given that recent data shows that one in eight mortgages is delinquent or in foreclosure – and the median sales price of existing home sales is down 16.8% over this time last year according to an Economic Snapshot at the time the survey was fielded. But the greatest concerns are around investments – specifically retirement portfolios as total family wealth has decreased since its peak in June 2007.

So while there may be less panic about the economy in general, these personal factors underscore what we’re hearing: the recovery for the consumer will be a longer, and more personal road back.

“There are hot spots of a recovery,” commented James Russo, Vice President, Global Consumer Insights at The Nielsen Company. “However, until the labor market stabilizes and returns to growth in the U.S, spending will continue to be restrained.”

Nielsen Economic Current Key Indicators
Country	Trend	Jun-09	Jul-09
Brazil		2	2
Canada		3	3
China		2	2
France		3	3
Germany		3	3
Hong Kong		2	2
India		1	1
Italy		3	4
Spain		3	3
Taiwan		4	3
United Kingdom		2	2
United States		3	3
Source: The Nielsen Company 1=Very Strong Growth >/= +5%; 2 = Growth between +1 and +4%; 3 =Neutral Between -1 and +1%; 4 =Negative between -1 and -4%; 5 = Very Negative

As expected, the strongest growth continues to come from the emerging economies of Brazil, China, Hong Kong and India – although all remained unchanged from the previous month. While Taiwan is the only country that showed a measurable gain this month, it essentially remained flat as it was the only country that declined last month. Of note in Brazil, interest rates and unemployment rates are falling with the expansion of industrial activity, and there are signs of recovery in food product categories and non-basic product categories. In Hong Kong, previous growth in household categories due to the H1N1 “swine flu” virus has been slowing, but baby products continue to be the most lucrative category demonstrating the fastest growth.

In North America, Canada continues to outpace the U.S. as evidenced by gains in dollar sales and promotional activity, while in the U.S., frequency of shopper trips and transaction size continued to slow despite aggressive price reductions as consumers remained cautious about the outlook.

Western Europe also remains mired in a prolonged period of sluggishness. However, promotional activity appears to be having a positive effect on sales with the exception of Italy, the only country showing a significant decline this month, where coincidentally, promotional activity also dropped. France saw continued growth in value channels, while unit and dollar sales in Germany remained moderate, and in the UK, there was improvement in volume sales and premium store brands.

Download the latest Nielsen Economic Current.

July 3rd traditionally has the highest sales volume for all three types of meat. Consumers were 50 percent more likely to buy hot dogs during the four-week period ending on July 12, 2008 than any other time over the year. The trend is even more pronounced for bratwurst and knockwurst last year, with consumers 106 percent more likely to buy the thicker sausages during the same period.
Until recently, purchases of bratwurst and knockwurst have been growing, with annual sales rising 8.9 percent between June of 2007 and June of 2009. However, sales of bratwurst and knockwurst by volume have fallen by 6.7 percent over the past two months, ending June 13, 2009, compared to the same period last year.

Sales of hot dogs have seen a marked increase during the past two months, increasing 3.7 percent over the eight-week period ending 6/13/09 compared to the same period the previous year. Considering that hot dogs are the less expensive option, the reversal of these trends may reflect consumers’ tighter BBQ budgets.

As for the beer that consumers will be buying to wash down their dogs, Nielsen predicts that almost two billion servings will be purchased in preparation for the Fourth of July in 2009. Supermarkets are likely to see the biggest increase in consumer purchases across all beer categories, with premium light beer driving almost 35 percent of sales volume.

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.