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    Published on: May 6, 2008

    by 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:

    Published on: May 6, 2008

    Wal-Mart announced yesterday that it has expanded the discount prescription price program that has had an enormous impact on the price of prescribed medicines in the US, saying that it will now offer as many as 350 90-day supplies of generic prescription medications for $10, and will sell more than 1,000 OTC products for $4 or less.

    The program affects Wal-Mart stores, as well as Neighborhood Market and Sam's Club units.

    The Wall Street Journal notes that the move takes aim "at the burgeoning mail-order pharmacy business by undercutting their prices on some drugs and speeding delivery."

    Within hours, Target announced that it will match the new Wal-Mart program.

    KC's View:
    And other retailers will no doubt match the new plan as well.

    It is remarkable how Wal-Mart is helping to reshape the health care landscape through its prescription drug discount plans, actually achieving results while politicians dither and debate. And it is ironic that Wal-Mart, which has gotten so much bad press over the years in the health benefits arena, is the company leading the charge on this, forcing broader change by being aggressive and innovative on its own.

    This is worth noting in a broader context. Change happens when people and/or companies don't wait for the other guy to go first. Real change happens when you decide to go first, to take a shot, because you believe that something is the right thing to do on a variety of levels.

    Published on: May 6, 2008

    The Kroger Co. said yesterday that while it previously announced that shoppers could bring in their government-issued economic stimulus checks and cash them for Kroger gift cards that would include a 10 percent bonus, it now will no longer necessary to have such a check to get the additional money.

    Now, Kroger says, shoppers just have to bring in $300 to get a gift card for $330 – no stimulus check required. However, shoppers do need to have a Kroger loyalty card to take advantage of the program, which will be in $300 increments, up to $1200.

    "We tied it to the economic stimulus, but it was just a good time to launch because we knew consumers would have a little extra money and we can help them stretch their grocery dollars," said Kroger spokeswoman Johnna Reeder.

    KC's View:

    Published on: May 6, 2008

    Interesting piece in Advertising Age noting that "no good deed goes entirely unpunished; high-profile stances on social causes can have unintended consequences; and the water is getting pretty murky as 'ethical marketing' encourages consumers and activists to delve into corporate policies in ever-greater detail. P&G and Unilever in particular have become lightning rods of late in part because of the public stances they've taken on environmental and social issues."

    One example cited by Ad Age: "Unilever has scored at the top of global ethical and sustainability indexes in the past year. Its reward was to be labeled by Greenpeace, along with its global Dove agency, Ogilvy & Mather, and some U.K. PR firms, as killers of Indonesian orangutans because it buys palm oil from former rain forests." And Greenpeace has been effective, as Unilever CEO Patrick Cescau has called "for a moratorium on deforestation in Indonesia by palm-oil producers and pledged to get the ingredient only from sustainable sources by 2015," according to the story, which also suggests that an emboldened Greenpeace plans to turn its attention to palm oil users Procter & Gamble or Nestlé next.

    KC's View:
    To paraphrase Abraham Lincoln, you can't please all the people all the time…and that is the unfortunate reality of being a public company and marketer in the instant communications environment of 2008. But that doesn’t mean one should stop trying – the cynical among us would suggest that since organizations like Greenpeace and People for the Ethical Treatment of Animals (PETA) are never going to be satisfied by anything but total fealty to their radical agendas, why bother trying.

    But I can't go that route. I think it is important to always try to do the right thing, to always try to be ethical and fair in one's business decisions and dealings. Because if you do that, you can please most of the people most of the time, because they will respect the effort.

    Published on: May 6, 2008

    BrandWeek reports that Jamba Juice has signed a multi-tier marketing partnership with Dole Foods that has Dole bananas in supermarkets labeled with a sticker saying "I want to Jamba" and directing shoppers to a website offering smoothie recipes and the ability for consumers to post their own. According to the article, the alliance also "gives Dole presence in the restaurant channel. Dole will focus on pushing bananas, strawberries and pineapple products via recipe cards in stores throughout Jamba's network."

    The alliance is a response to companies like Starbucks and McDonald's deciding to get into the smoothie business, which will put them directly in competition with the much smaller Jamba Juice.

    • The Wall Street Journal this morning reports that PepsiCo "is reducing the amount of plastic it uses in bottles of some nonsoda drinks, in the latest move by beverage companies to appeal to consumers concerned about environmental waste and global warming. The new half-liter (16.9-oz.) bottle contains at least 20% less plastic than the one it is replacing, and it will be used for some versions of Lipton iced tea, juice drinks, a flavored water called Aquafina FlavorSplash and an enhanced water known as Aquafina Alive, Pepsi said."

    • The Wall Street Journal reports this morning that Target Corp. will sell about 47 percent of its $8.2 billion credit-card portfolio to JP Morgan Chase for $3.6 billion, in a deal expected to close by the end of the month. According to the Journal, Morgan "is buying a 47% stake in Target's credit-card receivables, but the deal is structured more like a loan than a sale. Target is expected in years five and six to repay the investment through the performance of the credit-card portfolio."

    • The New York Times this morning carries a story saying that late frosts during April in California may well result in a smaller-than-expected grape harvest this year, which could affect the availability and costs of the 2008 vintage.

    According to the story, "The frosts hit all over Northern California, including Mendocino and Lake counties in Northern California as well as the Napa Valley and Sonoma County regions. The cold also was felt in Central Coast vineyards."
    KC's View:

    Published on: May 6, 2008

    • The Great Atlantic & Pacific Tea Co. reported that its Q4 sales were $2.2 billion, up from $1.27 billion during the same period a year ago, a 74 percent increase that reflected its acquisition of Pathmark Stores; same-store sales were up three percent.

    However, the company also reported a Q4 loss of $61.5 million, compared with $7.2 million in the year-earlier period. Excluding non-operating special items, A&P's earnings before interest, taxes, depreciation and amortization more than tripled to $72.2 million.

    • Ingles Markets reported that its second quarter net sales increased by $14.9 percent to $782.8 million, on same-store sales that were up 15 percent. Q2 net income was down 3.8 percent to $13.0 million.

    KC's View:

    Published on: May 6, 2008

    …will return (probably after FMI…).
    KC's View: