business news in context, analysis with attitude

Reporting In from VNU’s Consumer 360 Conference
Monday morning’s weather in Phoenix might have been a bit cooler than the 1100 brand marketers and retailers were expecting…but inside the ballroom, things were heating up as eight consumers told the attendees just what was on their minds. This no-holds barred session brought cheers from the audience as the panel almost unanimously agreed that they preferred brands to private label. They also pointed out where retailers need to improve: better customer service, more services to help handicapped shoppers and less self-check-outs.

This consumer panel, which consisted of three men and five women and included Latins, African Americans and Caucasians, concurred that eating healthy (even for the one gentleman whose favorite meal was beer and chicken wings) was now a number one priority. Most felt that they shouldn’t have to pay ‘extra’ to eat healthier foods. The defining moment came when one panel member admitted to the audience that she had changed her eating habits a year and a half ago and stopped eating out. The result? She lost 135 pounds!

James Russo of ACNielsen will share his Retail Industry Review and 2003 Projections in this morning’s general session that suggests a gradual strengthening of the economy. Few doubt that there could also be a continuation of event driven market and psychological reactions, which would cause a progressive slowdown in consumer spending.

In a preview, Russo explained that the indicators measuring manufacturing activity would be the key barometers for the rest of 2003. His projections are based in part on the “Market Movers” of the past year: Wal-Marts momentum, Kmart’s uphill battle, grocery channel threats, international acquisition activity, growth in drug and dollar channels and slowing of warehouse/club growth.

What’s on his radar for 2003?

• Wal-Mart’s expansion could double sales within 5 years to $438 billion
• Wal-Mart Dollar Store boutique
• Wal-Mart Neighborhood Market will be THE competitive force on the horizon
• Target to open 94 stores in 2003 (32 SuperTargets)
• Kmart testing “neighborhood” prototype
• Walgreen’s aggressive openings are ahead of objectives: 7,000 by 2010 and success in their “grab and go” food sections
• Fueling stations a focus of all grocery retailers
• UBS Warburg survey finds supermarket prices 39 percent higher then Wal-Mart’s and the presence of a supercenter in a geographic area lowered the areas grocery prices by 13%
• 7-Eleven continuing innovation focuses 2003 on financial services kiosks, loyalty card program and aligning pricing with food.

An ACNielsen study released this morning says that since 1999, consumer visits per year to supermarkets are down 12 percent, while visits to supercenters are up 40 percent -- and that consumers are spending $12 more per visit at supercenters than they are at grocery stores.

While there are a number of companies in the supercenter business, Wal-Mart clearly is the leader in the field, and is doing significant competitive damage to traditional retailers such as Safeway, Kroger and Albertsons, forcing them to cut costs and reevaluate competitive strategies. Indeed, one can trace the current travails being suffered by Fleming to Wal-Mart’s overwhelming presence.

Todd Hale, senior vice president at ACNielsen, tells USAToday this morning that supermarkets need to work harder on price, as well as focus on strengths such as perishables and ready-to-eat foods. "Each grocer has to figure out what they want to be and who they want to compete against."

Tomorrow’s MNB reports on: the changing face of the Hispanic Consumer, In-store Execution and Effective Targeting.
KC's View:
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