Published on: May 6, 2008by Michael Sansolo
Content Guy's Note: Once again, MorningNewsBeat contributing columnist Michael Sansolo – who was a senior executive with the Food Marketing Institute (FMI) for some 13 years – offers analysis of some of the FMI research and conclusions presented at the association's annual show in Las Vegas. A version of this piece originally appeared as part of FMI's "Consumer Trends" report.
Consumer attitudes toward the economy, shopping, products and meals are changing in many ways that provide clues about worries and opportunities for the food industry going forward. "Consumer Trends," the annual FMI study of shopping habits that forms part of the basis of the FMI state of the industry speech, picked up on many of the key elements this year.
Here are some highlights from that report..
• Price Power Grows — Most years, the increasingly diverse nature of the American population makes broad generalizations relatively meaningless. Instead, building successful links with a loyal shopper base requires keen attention to the specific needs of various niches. However, with the economic outlook darkening, the power of price is asserting itself again — raising significant areas of concern. Throughout "Trends," shoppers showed renewed emphasis on price as a key factor in selecting a primary or secondary store. Yet, price is one of the main areas where shoppers see industry performance falling short of the importance they place on various store attributes. And it is highly likely that the growing share of shopping trips taken by supercenters is boosted by the emphasis this format places on price. As price sensitivity grows, even to shoppers with higher levels of income, operators are going to face a powerful squeeze between passing on rising food prices and the need to meet shopper concerns over those same prices. To paraphrase a long famous movie line, “Fasten your seat belts, it’s going to be a bumpy year.”
• The Other Half — As economic issues move to the center of the nation's awareness, value shopping is grabbing headlines. The grocery shopping decision-making process has grown far more complex and smart retailers will need to keep a close eye on shopper patterns. For instance, will cherry pickers make a huge return in a time when gasoline prices are historically high, or will shoppers understand the trade off between two or three shopping stops versus the additional cost involved? How will shoppers respond to private label products, many of which have considerably improved over the years, and some of which have also taken on a premium look and feel? What's more, the median household income in the U.S. remains around $45,000 per year. The strategies and merchandising that works for those in the upper half may be radically different than what works for those in the lower half, who were already struggling to make ends meet before the downturn took hold. Every economic downturn is unique and the strategies employed by both shoppers in stores in previous periods merit consideration along with examination to see if those same strategies are relevant today.
• Talk to Them! — Shopper opinions on food safety always make for challenging interpretations. As the bouncing number of consumer confidence shows, shopper opinions can be wildly swayed by the events in the news and the proximity of such events to the timing of surveys. In more than any other part of "Trends," food safety requires interpretation and creativity. After all, for the vast majority of shoppers the store is their only connection to the food supply. While information comes from myriad sources including the media and government and consumers may believe problems are caused at processing plants, at farms or even across oceans, their only place to take action is in the aisles of the supermarket. It raises the question of what kinds of information could be best communicated through the store in labels, signs, employees or even emails. New programs to better educate shoppers on food safety, sourcing, science and even problem alerts might all help stores better cement relations with shoppers and create improved food handling from farm to the family table.
• The Most Important Meal — Supermarket operators can find so much good news in consumer responses to mealtime dilemmas this year. Supermarkets are seen as providing healthy and economical alternatives to restaurant meals, certainly two of the most important issues facing shoppers in 2008. However, shoppers don’t always behave as well as they suggest and that in itself is cause for alarm. Within the restaurant industry, much of the discussion centers on whether diners will trade down during an economic slowdown, moving more meals to fast food places and away from sit down. A move back to home cooking—even in today’s simplified form—may not be the first alternative. The biggest cause for alarm in these statistics should surround the discussion of breakfast. Only about one-third of shoppers are regularly having the first meal of the day at home, a statistic that would have been unthinkable a generation ago. After all, breakfast probably offers the most economical option, the simplest meal preparation and incredible diversity in healthy choices. Yet, breakfast is rarely merchandised as a meal. Whereas the typical McDonald’s changes signs and menus for breakfast, the supermarket breakfast offering remains largely unchanged. Cereal is still in one aisle, milk in another (thankfully near juice) and bananas are rarely featured any place but produce. Although shoppers have changed drastically, little attempt is made to promote breakfast as a meal with the same flair given dinnertime meal solutions. Nutritionists have long referred to breakfast as the most important meal of the day. Merchandisers may need to catch up.
• Fresh Approaches — The important role that meat, poultry, fruits and vegetables play in the success of traditional supermarkets is laid clear every year in "Trends." While supermarket share of many categories continues to slide, meat and produce remain the critical areas where conventional operators maintain a lock on shopper loyalty. In sharp contrast, supercenter shoppers continue to move a significant share of their meat and produce spending to other formats and stores. However, those stores’ share of these critical products continues to improve and the near future may favor even more growth. Throughout "Trends," shoppers show increasing concern about price and the economy, factors that favor supercenters. Conventional operators will be challenged to avoid the erosion in product dominance seen in areas like paper products or breakfast cereals. Already, retailers report anecdotal evidence of trading down in their aisles and similar trends are beginning to surface in the foodservice industry, where quick serve restaurants are taking market share from sit down establishments. Of course, there is no single approach to winning shopper loyalty. Emerging issues like environmental concerns or bio-fuels continue to gain attention among an increasing share of shoppers. Even in difficult economic times, a significant share of customers seems ready to make environmental concerns, natural eating and health and wellness concerns key to their shopping decisions.
(FMI's complete "Consumer Trends" report can be purchased at www.fmi.org/store.)
Other FMI Show news from the Content Guy…
Provocative presentation yesterday morning by futurist John Patrick, author of "Net Attitude," in which he suggested that the Internet has grown to its infancy," and that when it comes to the Internet revolution, "you haven't seen anything yet." Patrick said that the Internet is becoming ever-more pervasive, affecting millions of businesses, billions of people, and trillions of devices – "everything will be connected to everything," he said, creating an environment in which businesses must embrace "the power of the click" if they are to be relevant to consumers.
Patrick derided those who suggested that we might just be in another Internet bubble, saying that he collapse of so many Internet companies a decade ago was not the fault of the Internet, but rather of investors who were "ebullient about changing the world and making water run uphill." Today's Internet companies and investors are far more practical about their business models, he said, and another collapse is less likely.
But here was the big message from Patrick: that companies designing an Internet strategy had to do so around consumers' needs, not their own. They need to decide, "is it a tool for the business or a tool for the people? There is a fundamental difference," Patrick said, and he said that to be truly successful, "you have to think from the outside in – you have to listen to the people."
Which sounds like a pretty good mantra to apply to all elements of the retail business.
The annual Prevention magazine "Shopping For Health" survey was released at FMI, with revelations that include:
• "Nearly everyone (80%) tries 'a lot' or 'some' to eat healthfully. Among those who try a lot, 10 percent say they are 'always successful'."
• "Successful eaters say their grocery decisions are driven strongly by goals to manage weight (52%). They are also more likely than average to shop in order to avoid future medical conditions or manage a current condition."
• "They develop a plan and stick to it, starting with using a list when they shop — done by 65% of healthy eaters, compared with 42% of all consumers."
• "Their plans include eating more fruits and vegetables (87% vs. 63% of all shoppers), limiting foods with trans fats (79% vs. 63%) and reducing portion sizes (79% vs. 47%)."
• "Eighty three percent eat dinner at home five to seven times per week, giving them better control over healthy ingredients, compared with 66% of total shoppers."
The "Shopping for Health" report also suggested that "local" is growing in appeal to shoppers, with half of those surveyed saying that if the cost is the same, "they would choose locally grown produce vs. organic." Only 28 percent said they would choose organic under the same circumstances. In addition, a number of consumers said they wee moving away from organics, with 70 percent saying they are too expensive, 39 percent saying there is a lack of perceivable difference between organic and non-organic foods, and 33 percent saying that have safety concerns.
FMI unveiled its annual "state of the industry" research, saying that "supermarket industry sales increased 4.6 percent in 2007, and same-store sales rose 4.2 percent, the highest mark for this performance measure in more than a decade. These gains, however, were largely offset by the 4.2 percent food-at-home inflation rate last year.
"Unlike previous years, mid-sized food retailers (31-100 stores) posted the highest growth figures with overall sales increasing 7.4 percent and same-store sales 6.5 percent. The increases among independent retailers (1-10 stores) and the largest chains (500 or more stores) were closer to the industry medians. Among independents, overall sales grew 4.6 percent and same-store sales 4.4 percent. For the largest chains, these growth figures were 5.2 percent and 4.2 percent, respectively."
FMI CEO Tim Hammonds said, "The industry performed quite well in an extraordinarily challenging year … Companies managed spikes in energy, commodity, healthcare and credit card interchange costs, along with relentless competition in the industry.”
FMI announced the Grand Prize winners of the 2008 Store Manager Awards:
• Ralph Towery, manager of the MarketPlace Foods store in Minot, ND, in the category of companies with 1-49 stores.
• Cheryl Rondenelli, manager of a Hannaford Bros. Co. supermarket in Clinton, NY, in the category of companies with 50-199 stores.
• And Mark Halvorson, manager of a Cub Foods store in St. Paul, MN, for companies with 200 or more stores.
- KC's View: