Consumer trends in the age of retailization

Consumer trends in the age of retailization

Gergana MarinovaProgressive Conference, June 3, 2010

GfK Consumer Tracking GfK Bulgaria – Consumer trends in the age of retailization June 2010


How does the crisis influence the consumer behavior?

Where do consumers shop?

What is the consumers’ opinion?

So what?

Theagenda


How does the crisis influence the consumer behavior?

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Two main crisis stages from a consumer’s point of view

Listening, Preparation, Readiness- Crisis presence in the media- Anxiety, nervous anticipation, stress

Crisis is here- Decreased out of home purchases- Reduced consumption of essential (“elementary”) food- Increased spending on “non-elementary food products” - Reduced consumption of premium brands and products for indulgency

6


Consumer trends in difficult times – the picture

Bulgarian economy is in crisis – a key factor for the consumer behavior

change

7


Household Consumption Indices by Baskets2009 vs. 2008

Source: GfK Bulgaria – Consumer TrackingCalculation based upon FMCG basket of monitored product categories


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2008 2009

Frequency of purchase (every x-th day) 0.57 0.55

Average number of purchasing occasions per month 17.3 16.8

Average purchase (BGN per trip) 4.89 5.15

Average price (BGN) 2.28 2.37

Average monthly FMCG spending per household (BGN) 84.7 87.2

Consumers tend to limit their purchase basket in terms of volume.

Along with the decreasing inflation the Bulgarian households tend to purchase goods at higher prices.

Their frequency of purchase declines, at the expense of the volume bought on a purchase occasion.

The consumption of “elementary food” is decreasing at the expense of “non-elementary” products - Increase of the in-home consumption


Source: GfK Bulgaria Consumer Tracking, Retail Report 2008/2009 BulgariaCalculation based upon FMCG basket of monitored product categories

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1.9

5.5

0.2

-0.4

0.0

2.3

5.2

24.2

26.1

27.4

18.3

23.6

14.4

15.1

2009 vs 2008

2008 vs 2007

Total FMCG

Packaged grocery

Beer

Soft drinks

Chilled food

Personal care

Home care


Source: GfK Bulgaria – Consumer TrackingCalculation based upon FMCG basket of monitored product categories

Value based, %

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2009 VS 2008

+/-%*

Total Technical Consumer Goods -27.0%

Consumer Electronics (CE) -3.12 %

Photo -33.4 %

Major Domestic Appliances (MDA) -29.4 %

Small Domestic Appliances (SDA) -44.7 %

Information Technology (IT) -27.2 %

Telecommunication (TC) -48.6 %

Office Equipment (OE) -31.6 %

Technical consumer goods have been seriously affected

Source: GfK Retail and Technology

*Product groups included in the sectors:CE: PTV, AHS, Camcorders, DVD Players/Recorders, Portable Media Player; Photo: Dig. Still Camera; MDA: Washing machines, Cooling, Cooking, Tumble Driers, Freezers; SDA: Vacuum Cleaners, Air Conditioners; IT: Monitors, Notebooks, PC; TC: Mobile&SmartPhones; OE: MFD, Printers


Where do consumersshop?

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Modern trade is developing the most successfully

Source: GfK Consumer Tracking; Value based %, 2009 vs. 2008

FMCG Sector

13


Modern trade is developing the most successfully

Main outlet types value shares - in-home consumption of FMCG

Source: GfK Consumer Tracking; Value based %

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30%70%

72%

28%

Czech Republic

63%

37%

Hungary

36%64%

Serbia

26%74%Bulgaria

33%

67%

Croatia

14%86%

Russia

82%

19%

Slovakia

48%53%

Poland

Source: GfK Consumer Tracking; Calculation based upon consumer basket including monitored product categories; Measure: value share (%); Period: January – December 2009

37%63%

Bosnia & Herzegovina

Top 10 KA

Others

Romania

Leading accounts – top 10 share across the region

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Retailers in Bulgaria: Who are the main players?

Discounters- share of total retail food trade in %

1,4 4,4 6,5

27,9

41,7

18,3

46,0

13,2

17,5

13,5

4,8

3,0

2,9

Top 10 penetration %Modern trade in Bulgaria is still too young

Source: GfK Consumer Tracking; Value based %,

8,3

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Private labels

Private labels are part of the landscape. Well managed, they contribute to the retailer’s reputation, they build loyalty and awareness. Private labels control 20% of the US market, 35% in Germany, more than 40% in the UK*

First private label – smoked bacon, Sainsbury, UK.

Real rise in private labels.Retailers noticed a shrinking profit margin for branded goods. Real revolution with PL. Retailers

started to develop national chains and to work on successful PL programs.

“The global economic downturn is changing the retail landscape in Europe. Consumers are paying more attention to discounters and supermarkets and hypermarkets are fighting back on price. Value-for-money is now at the top of consumer shopping lists and that is always good news for private label. Retailers recognize, however, that even in recession shoppers expect quality and assortment”

Brian Sharoff, PLMA President

1882

1920

1970

Nowadays..

*Source: Jan-Benedict E.M. Steenkamp & Marnik G. Dekimpe, “Marketing strategies for fast-moving consumer goods: UK Perspective “, February 10th, 2009

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19%82%

Czech Republic

26%74%

Hungary

2%98%

Serbia

4%96%

Bulgaria

14%86%

Croatia

1%

99%

Russia

26%74%

Slovakia

20%80%

Poland

Source: GfK Consumer Tracking; Calculation based upon consumer basket including monitored product categories; Measure: value share (%); Period: January - December 2009

1%99%

Bosnia & Herzegovina

Private Labels

Branded 4%

96%

Romania

Private labels – piece of the pie varies across the region

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Private labels – How big is their piece of the pie?

Total FMCG Bulgaria PL Share Development

0,5%1,0% 1,1%

1,7%

2,7%

3,6%

1,3%1,5%

2,0% 2,1% 2,1%2,4%

2,8%3,1% 3,1% 3,3%

3,6%

4,5%

5,2%

2004 2005 2006 2007 2008 2009 1Q'07 2Q'07 3Q'07 Q4'07 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 4Q'09 1Q'10

Source: GfK Consumer Tracking; Value based %,

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Top 5 Categories PL’s Volume Share

Name/Product 2008

Cooking fats 10.6

Ice Drinks 7.9

Processed Cheese 7.0

Juices 7.0

Pasta 6.5

Name/Product 2009

Cooking fats 16.4

Milk&Yogurt Desserts 11.8

Ice Drinks 11.6

Processed Cheese 9.5

Juices 9.4

PL’s>

“Much of the loss of the market shares of manufacturer’s brands are initiated in economic downturns and consumers who discover store (retailer) brands in recession never return to manufacturer’s brands when the economy improves again”. (Marketing strategies for fast-moving consumer goods; Jan-Benedict E.M. Steenkamp & Marnik G. Dekimpe)

Source: GfK Consumer Tracking; Volume based %,


What is the consumers’ opinion?

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Pessimists or optimists?

The Consumer Confidence Barometer keeps track of the consumer behavior on the basis of six main indicators: “Evaluation of the household financial status”, “Evaluation of the overall economic situation in the country”, “Big purchases ability of the household”, “Unemployment expectations”, “Prices expectations”, “Savings ability”

Source: GfK Consumer Confidence Barometer

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Bulgaria Czech Republic

Poland Romania

much better 0 1 1 1

somewhat better 4 7 14 6

the same 36 58 51 27

somewhat worse 30 22 24 33

much worse 28 11 9 32

no opinion 2 1 3 0

we can save considerably 0 8 0 0

we can save a bit 11 51 20 13

we can barely make ends meet 68 34 58 62

we have to touch regularly our savings 4 5 7 7

we need to borrow in order to cope 10 2 9 17

no opinion 7 1 6 1

Q: What is your present financial situation?

Source: Consumer Confidence Barometer April 2010 , Expressed in Percentage

Households’ financial situation is getting worse!

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53 % cut back on leisure/ free time and holidays

47 % cut back on clothing and footwear

41 % cut back on alcoholic beverages

35 % cut back on cigarettes

33 % cut back on cosmetics

33 % cut back on sweets/confectionery

What will Bulgarian consumers cut back in 2010?

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UNDEMANDINGMobile

pragmatic8%

UNDEMANDINGMobile

pragmatic

MOBILITY, PRICE SENSITIVITY AND DEMANDINGNESS are the most differentiating factors.

Source: GfK Bulgaria, shopper typology

PRICE SENSITIVE

PRICE NON-SENSITIVE

MOBILEIMMOBILE

DEMANDINGEconomist

UNDEMANDINGThrifty

UNDEMANDINGUndemanding conservative

UNDEMANDINGGenerous

20%

35% 14%

10%

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Importance Criteria Mobile Shoppers Total

Proximity of home or workplace 47% 65%

Assortment range 72% 58%

Affordable Prices 53% 43%

Quick Shopping 19% 22%

Pleasant shopping atmosphere 18% 13%

Willing and nice personnel 10% 12%

Long opening hours 13% 12%

Promotions (incl. price deductions) 18% 10%

Variety-Price are drivers for Mobile Shoppers!

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Motivation factors

Assortment range o 2.000 up to 40.000 FMCG products are listed in Super- and Hypermarkets

o In Bulgaria the discount formats offer 1.500 different FMCG products on

the average

Price o Competitive prices at the supermarkets, hypermarkets, cash&carry

o Permanently low prices (regarded as safe and reliable) at the discounters

Distance o Still in Bulgaria prevail the immobile households

o More than the half of the buyers (thrifty and undemanding conservatives)

purchase at the closest store.


So what?

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The discounters in Bulgaria

the classicalMarketing

principle is:

“more for more“

the hard discountingprinciple is:

“less for much less“

further developementof discounter

principle:

“the same for less“

newdevelopment:

“more for less“

The quality strategy of discounters…> adress consumers who attach importance to quality

“Same for less”“More for less” Penny principle: “Yes, you save money, but not at the expense of the quality”

Kaufland principle: “You receive more of everything at lower prices” Plus principle: “Quality at low prices”Lidl principle: “Quality is cheaper”*

*In the UK

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Retail market in Bulgaria is entering a new phase...and it is the consumer who determines the success

o Category managemento Efficient consumer responseo Private label profitability

Key instruments for retailers’ future growth

http://images.google.si/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/thumb/4/49/Penny_Market_logo.svg/320px-Penny_Market_logo.svg.png&imgrefurl=http://en.wikipedia.org/wiki/File:Penny_Market_logo.svg&usg=__fxyyInh7zwnTI-XPOb1grdJiTAc=&h=276&w=320&sz=14&hl=sl&start=40&tbnid=ZO157nivqi_OgM:&tbnh=102&tbnw=118&prev=/images?q=penny+market&gbv=2&ndsp=20&hl=sl&sa=N&start=20

http://images.google.si/imgres?imgurl=http://ot.trollserv.com/guilds/lidl.png&imgrefurl=http://ot.trollserv.com/?subtopic=guilds&usg=__reR_oRZhyCPwcQc2Eadyg-QsKGc=&h=600&w=600&sz=29&hl=sl&start=2&tbnid=Onf8wta_K6o6oM:&tbnh=135&tbnw=135&prev=/images?q=lidl&gbv=2&hl=sl

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What can you do?

1 You can forget most of what you have known about consumers sofar. Recession is a time of change. And your consumer has certainlychanged! Listen to him and learn him in the new light.

2 Have no illusions that price is not (the most) important. Rather ask yourself what better than your competitors you can offer for the price. Find your way how to differentiate!

3 Segment your buyers! It is not a short-term investment. Newbehavioral patterns will not simply disappear tommorow.

Open your eyes wide ... listen to consumers ... and offer more than you are expected

Sources: Rhodes, D. I., Stetler, D. 2009. Seizing advantage in a downturn. Harvard Business Review. February.Taylor, E. 2009. Going against the grain. Research World. January.

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What can you do?

4 There is certainly not enough time for preparing a brand newstrategy. If you wait, someone else will take the opportunity toreply to the new needs of consumers. But before you invest intosomething new make sure it is not just you who wishes it!

5 Priority should be to retain existing customers! If they need a reason to stay with you, reward their loyalty. What is a relevantreward? You have to ask them.

6 Now it’s definitely not time to reduce your marketing budget!Increased promotion in times of recession has a bigger impact onperformance than in the time of growth.

Open your eyes wide ... listen to consumers ... and offer more than you are expected

Sources: Rhodes, D. I., Stetler, D. 2009. Seizing advantage in a downturn. Harvard Business Review. February.Taylor, E. 2009. Going against the grain. Research World. January. CIES -The Food Business Forum 2009. Top of Mind 2009. January. www.ciesnet.com


What you sacrifice now, you pay for later!

Source: “Advertising on the Edge” , The Economist

Thank you for your attention!

GfK. Growth from Knowledge


Consumer trends in the age of retailization

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