The New Realities of Consumer Shopping Behavior

www.perishablesgroup.com

The New Realities of

Consumer Shopping

Behavior

July, 2009

Steve LutzExecutive Vice PresidentPerishables Group509.884.2616

http://www.nationalchickencouncil.com/

www.perishablesgroup.com 2Perishables Group, 2009 Proprietary and Confidential

UNDERSTAND CHANGING CONSUMERS

Time periods:

Q2 and Q3 2008: Oil Shock

Q4 2008: Economic meltdown

Data to May, 2009: The New Normal

U.S. retail data: 13,000 supermarkets& Local

POS and loyalty card data: Two Chains, 200,000 Households

1,600 in-store consumer intercepts (March, 2009)

Other secondary consumer/trade research

Approach


SUMMARY: Five Key Trends

1. Consumers trading down to less expensive items within a category

2. Consumers trading out of categories or out of fresh departments entirely

3. Consumers commonly seek value by:

Buying less per trip

Buying more frequently

Buying in larger quantities to “stock up” on specials

4. Consumers are shifting retail formats

5. Consumers are visiting restaurants less and supermarkets more

Source: Perishables Group Pricing Consumer Research Project 2009


4

SECONDARY

RESEARCH

Changing Consumer Purchase Patterns and the Economy


Consumers and the Economy

Consumer fears impact purchase patterns

Price is the No. 1 shopping concern in 2009

Shifts in shopping patterns/priorities

More than 50% of consumers have cut back on quality or

quantity of food purchases

“Price” seems to dominate

Critical to understand evolving

consumer purchases decisions

Source: 12009 National Grocers Association Consumer Panel Survey; 2National Bureau of Economic Research


20

24

24

32

23

28

37

16

20

22

26

20

24

31

Choose a Less Expensive Restaurant

Much More Often

Bring Prepared Meal or Home Delivery

Much Less Often

Eat Fast Food Much Less Often

Eat Dinner at Restaurant Much Less Often

Bring Lunch to Work/Pack Lunch Much

More Often

Eat Breakfast at Home Much More Often

Eat Dinner at Home Much More often

% U.S. Households Claiming

Oct '08 Apr '08

Percent of Households Claiming

Changing Purchase Criteria

Source: Homescan®, a service of The Nielsen Company – Panel Views Survey


New Consumer Reality

“The recession is having a far greater impact on consumer

spending habits than previous downturns and some

behavior patterns will be permanently changed. Seventy-

five percent of consumers have altered their purchasing

behavior over the past year, in some cases trading down

and in others making wholesale life changes.”

Interpublic Group

Ad Week

June, 2009


Consumer Purchase Shifts

Consumers fulfilling basic over discretionary needs

Trading down occurring within categories

Consumers motivated by value-based decisions

Key meat products comparatively expensive and vulnerable to

substitution

Channel Shifting


Defining “Value” the New Mantra

Demographics

Occasion

Purchase Criteria Location/Channel

Package Size

Price


10

SCAN DATA

13,OOO SUPERMARKETS



2009 Performance through May 1

Supermarket Meat

Faster growing categories

Chicken, Turkey

Dollars per

Store/Week % Change

vs YAGO

Volume per

Store/Week % Change

vs YAGO

Average Retail Average Retail %

Change vs YAGO

Fresh Meat 2.9% 2.2% $2.74 0.7%

Beef 2.0% 0.6% $3.66 1.5%

Chicken 3.9% 3.7% $2.03 0.2%

Pork 3.2% 2.7% $2.55 0.5%

Turkey 8.5% 4.2% $1.58 4.2%

Veal -11.6% -18.1% $6.18 7.8%

Source: Perishables Group FreshFacts® Powered by Nielsen


Chicken: May 1, 2009

Solid Category

Growth

Value Items

Higher

Product

Dollars per

Store/Week %

Change vs

YAGO

Chicken 3.9%

Chicken Breasts 2.8%

Whole Chickens 4.9%

Chicken Legs/Drumsticks 6.3%

Chicken Wings 2.0%

Chicken Thighs 6.4%

Ground Chicken 9.1%

Chicken Combo Packs 25.3%

Chicken Offals 4.7%

Other Chicken -0.01%Source: Perishables Group FreshFacts® Powered by Nielsen


Chicken: May 1, 2009

Promotions

Promos Up

Value FocusProduct

Dollars per

Store/Week %

Change vs

YAGO

Any

Promo

Dollars %

Change vs

YAGO

Chicken 3.9% 4.3%

Chicken Breasts 2.8% 3.6%

Whole Chickens 4.9% 5.0%

Chicken Legs/Drumsticks 6.3% 12.1%

Chicken Wings 2.0% -3.1%

Chicken Thighs 6.4% 4.3%

Ground Chicken 9.1% 6.5%

Chicken Combo Packs 25.3% 48.0%

Chicken Offals 4.7% -27.9%

Other Chicken -0.01% 4.5%



Consumers Respond to “Value”

Product

Dollars per

Store/Week %

Change vs

YAGO

Any

Promo

Dollars %

Change vs

YAGO

Volume %

Lift on

Promotion

Chicken 3.9% 4.3% 192.6%

Chicken Breasts 2.8% 3.6% 237.9%

Whole Chickens 4.9% 5.0% 254.0%

Chicken Legs/Drumsticks 6.3% 12.1% 131.1%

Chicken Wings 2.0% -3.1% 100.7%

Chicken Thighs 6.4% 4.3% 115.8%

Ground Chicken 9.1% 6.5% 92.5%

Chicken Combo Packs 25.3% 48.0% 107.6%

Chicken Offals 4.7% -27.9% 68.5%

Other Chicken -0.01% 4.5% 36.7%



Total U.S. Ad Count – Q4 2008

Source: The Fresh Perspective by Perishables Group: Using Consumer Understanding to Guide Strategies at Retail

Retailers ran

more ads for the

top six categories

of fruit (2.7%) and

meat (3.9%)


16

LOYALTY CARD

100,OOO HOUSEHOLDS

EASTERN CHAIN



Loyalty Card Data: Q4 Beef/Chicken

Consumers trading out of high-priced beef items

Trip Frequency Volume per trip

Consumers trading down to high-priced chicken and

mid-priced beef

Trip frequency Volume per trip

Consumers trading down to low-priced chicken and beef

Trip frequency Volume per trip


www.perishablesgroup.com 18

Volume per Trip Up

Volume per Trip Down

Trip Frequency Up

Trip Frequency Down

Deli Cheese

Specialty Cheese

Desserts

Breakfast Bakery

Deli Meat

Breads & Rolls

Entrees

Prepared Vegetables

Packaged Salad

Deli Prepared Foods

Q2/Q3 Trends: East Coast Retailer

Need Based Shopper

Buying Only what’s needed

Waiting for Deals

Buying More Often

(Trading into category)

Consumer Leaving

Category



more often:

trading in

Q4 Trends: East Coast Retailer

Deli Cheese

Specialty Cheese

Desserts

Breakfast Bakery

Deli Meat

Breads & Rolls

Entrees

Prepared VegetablesPackaged Salad

Deli Prepared Foods

Need Based Shopper

Waiting for Deals

Buying More Often

(Trading into category)

Consumer Leaving

Category

Trip Frequency Up

Volume per Trip Up

Trip Frequency Down

Volume per Trip Down


Perishables Group, 2009

Proprietary and Confidential


Loyalty Card: Eastern Retailer



21

CONSUMER

IN-STORE

INTERCEPTS



Purchase Activity


33%14%


Eating More/Eating Less



Perception: Meat Prices are Up



Higher Priced Items = Beef



Product Substitution at 90%!



Lower Priced Items



Prices Up = Shop for Deals



Role of Discounts

69%

5%



Store Brands Gain Favor

8%

44%



Ingredients Count


7%

28%


Natural/Organics

53%



Savings Strategies


Freezing Gains Traction


14%

33%


Lower Income Groups Defect



At Lower Income….It’s Canned



PUTTING IT TOGETHER



Decision Pyramid

Premium Items

Mainstream

Bargain

Consumers trading

down to less

expensive items

within the category

Consumers trading across to

capture value within the tier

Consumers

trading up

within the

category if

they

perceive

value

Consumers

trading out

of the

category



Consumer Value Strategy

There is significant new category/consumer complexity

Understanding/tracking category performance and sales

dynamics crucial to leading retailers

Consumer demographics drive outcomes

Massive trading behavior—but value means many

different things

ValueDemographics

Occasion

Purchase Criteria Location/Channel

Package Size

Price


Challenges for Chicken

Consumers very conscious of pricing

Turkey poised to siphon customers

Consumers predisposed to purchase substitutes

Consumers showing signs of price resistance as cost

sensitivity is high


Consumer Value Strategy

Consumers responding to retail/supplier stimulus

If we race to the bottom, consumers will race with us

Understanding consumer segments at the retailer/store level

more important than ever

Know your category

Drivers

Triggers

Substitutes


2009 Marketing Opportunities

Account-based value strategies are critical

Know details of performance

Align category best practices with consumer segments

Develop store-specific plans vs. total chain plans

Roadmap to drive total category dollars

Recommendations to apply ALL retail tools

Merchandising, assortment, pricing, promotion


THANK YOU!

Changing Consumer Purchase

Patterns and the Economy

Steve Lutz

Executive Vice President

509.884.2616

The New Realities of Consumer Shopping Behavior

Documents

Transcript of The New Realities of Consumer Shopping Behavior