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Value Defining Canada’s Future
Carman AllisonDirector of Consumer InsightsThe Nielsen Company
May 12, 2011
Q12011
The Recession Was A Wake-Up Call
Conscienti ConsumerSellerous
RisingPrices
The One Stop Shop
Slow CPG Growth
The Connected Consumer
The Value Driven Consumer
Tepid Consumer Confidence
Trends Defining a New Consumer Marketplace
Are consumers back in the game…
or sitting on the sidelines?
10294
8477
85
93 90 90 92
2H'06 2H'07 2H'08 Q12009
Q32009
Q22010
Q32010
Q42010
Q12011
Global consumer confidence is starting to show modest improvement in early 2011
Source: Nielsen Global Online Consumer Confidence Survey March 2011
Consumer Confidence Index
+2 pts
8482
8587
81 8183
113
104
84
9498
100102 101
99102
80
103
108106
10096
82
106
83
112110
105
111
96
114
1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11
US Canada
Source: Nielsen Consumer Confidence Survey
Sentiment illustrates divergence between Canada & United States – US still struggling
61%
40%29%
46%
31%
59%
Job Prospects will begood or excellent
Personal Finances willbe good or excellent
Agree good time to buy
Canada U.S.
Canadians More Optimistic than U.S. Consumers
Source: Nielsen Global Online Consumer Confidence and Opinion Survey March 2011 Change vs. Q4 11 (Dec)
+5 +3 +3 +2 -2 0
1.3
8.5
2.33.0
7.7
3.0
Inflation Unemployment Prime InterestRates
Dec-09 Mar-11
Source: Statistics Canada
More Canadians are working but faced with threat of higher inflation and interests rates
Is the recession over in Canada?
Yes No
Economist Consumer
55% 51%
85%
Global Canada US
% who think we are still in a recession
Consumer perception is our reality –majority still think we are in a recession
Source: Nielsen Global Online Consumer Confidence Survey March 2011
19% 24% 14%% who think we will be out of a recession in the next 12 months
Signs of a Recovery
…but still counting our pennies
Savings
Canadians are focused on the their balance sheets
Source: Nielsen Global Online Consumer Confidence Survey March 2011
What consumers do with spare cash?
37% Pay off debt
But…26% have no spare cash!
33%
• 13% Health
• 12% Food Prices
• 12% Gas Prices
• 10% Debt
• 8% Job Security
• 13% Fuel Prices
• 12% Utility Bills
• 11% Food Prices
• 11% Economy
• 10% Health
2nd Concern2nd ConcernTop ConcernsTop Concerns
Rising food and gas prices are becoming more of a concern for Canadians
Source: Nielsen Global Online Consumer Confidence Survey March 2011
The concern over rising food and gas prices has increased substantially over last year
6%12%
5%12%
13%
6%
11%
8%2nd Concern
1st Concern
Q12010
Q12011
Q12010
Q12011
Rising Food Prices Rising Gas Prices
14%
23%
11%
25%
Source: Nielsen Global Online Consumer Confidence Survey March 2011
• 47% Save of gas & utilities
• 38% Reduce take-out
• 34% Spend less on CPG
• 28% Spend less on clothes
• 27% Use car less
• 60% Reduce take-out
• 58% Reduce entertainment
• 57% Spend less on clothes
• 56% Save on gas & utilities
• 54% Spend less on CPG
Will Continue to DoWill Continue to DoDid This Past YearDid This Past Year
Some behaviours will last
Source: Nielsen Global Online Consumer Confidence Survey March 2011
What are Canadians doing to save on household expenses?
The New Consumer Toll
Rising Gas Prices
Gas prices have increased over 30% in the past year
Weekly Dollars per Litre – Regular Gas
$1.33 5/11/110
The gas tank may be full but the wallet is empty
If gas increases…
– $0.10 / litre…$30 more / month
– $0.50 / litre…$124 more / month
$228
$323$306 $319
Gas for Car Grocery Composite
2009 2011
Source: Gasbuddy.com May 2011, Homescan Grocery Composite to April 2011April 2010 $0.99/L May 2011 $1.33/L
The increase in gas is costing the average household an additional $78 per month
+34%
+$78/mth-1%
Avg Monthly Household Spend
$460$437
$414$391
$368$345
$322$299
$276
$1.20 $1.30 $1.40 $1.50 $1.60 $1.70 $1.80 $1.90 $2.00
When gas exceeds $1.75 per litre, the monthly gas bill will exceed the grocery bill
Gas Cost Per L
Average Monthly
Grocery Spend $403*
Avg Household Gas Spend / Month
May 2011
Source: Gasbuddy.com April 2011, Homescan Grocery Composite to December 2010May 2011 $1.33/L -- * Homescan estimate (Groc Comp + Fresh)
Household budgets will be squeezed
Continued focus on getting bang for the buck
Return to retail growth
but CPG growth slowing
Stats Canada -- Retail Trade by Industry Report
5.9
3.7
-2.9
5.1
3.5
6.4
2006 2007 2008 2009 2010 YTD
Retail sales growth has started to recover
% $ Growth
$ Sales (Billions) 389 413 428 415
54
5
2 121
0
21
2007 2008 2009 2010 Q1 2011
$ %Chg
Unit %Chg
Current CPG dollar growth lags the previous 3 years – units starting to rebound
Inflation +3 +3 +5 0 +1
Source: Nielsen MarketTrack, National All Channels – Period Ending March 12, 2011 Total Tracked Sales excluding Fresh Random Weight
31
‐1
5
‐101
6
-4
-2
0
2
4
6
8
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4.10 Q1 11
Canada
Source: Nielsen MarketTrack – Total Tracked Sales excluding Fresh Random Weight
Inflation
Canada’s CPG prices are starting to rise after 9 months of deflation
Canada’s CPI is 3.0% (Mar 2010)
Jan +0.5Feb -0.8Mar +1.9
3
6
10 ‐1
5
‐11
-4
-2
0
2
4
6
8
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4.10 Q1 11
Canada US Europe
Source: Nielsen MarketTrack – Total Tracked Sales excluding Fresh Random Weight
Inflation
Canada’s CPG inflation is following a similar trend as per the US – but rising at a faster rate
3
6
10 ‐1
5
‐11
-6
-4
-2
0
2
4
6
8
10
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11
Total Sales Reg Price TPR Price
Source: Nielsen MarketTrack – Total Tracked Sales excluding Fresh Random WeightRegular and TPR Sales: National G+D+M only
Inflation
Canada’s CPG inflationary trends are being impacted by volatile feature pricing
28
Total CPG
Meat & Seafood
HABA
Bakery
Non Grocery
Grocery
Produce
Deli
1
8
1
1
1
0
0
-6
Meat & Seafood, HABA and Bakery are fuelling CPG inflation
12 wk Indicated Inflation: Department Performance
Source: Nielsen MarketTrack, National All Channels12 Weeks Ending March 12, 2011 - Total Tracked Sales Excluding Random Weight
Fresh Fruit +1
Fresh Veg +8
Fresh Meat +3
29
Rising commodities is fuelling price increases within the top 100 categories
22%
30%
26%
10%
10%
>5% increase
2-4% increase
Static (+1 to -1%)
2-4% decrease
>5% decrease
% of Top 100 Categories* Price Increases
Top Increases
*Top 100 = 75% of CPG sales
Price TonnChg Chg
Coffee +19 +2Bacon +17 -8Sugar +11 -1Headache Relief +10 -2Luncheon Meat +9 +6Wieners +7 -7Yogurt +5 0
Source: Nielsen MarketTrack, National All Channels12 Weeks Ending March 12, 2011
If costs increase and you need to make price changes…what would consumers prefer you do?
• 35% - Offer larger sizes (lower cost per use)
• 17% - Introduce smaller sizes at lower prices
• 16% - Downsize but keep same price
• 11% - Offer same # of sales with higher prices
• 8% - Offer fewer sales
• 8% - Increase price of existing items
• 7% - Lower quality
Source: Nielsen PanelViews Economy Survey - Canada - March 2011
Value Consumer = Price Value Consumer = Benefits/Price
Value is not about price, it’s about the balance between price & benefits
Avg Price +87% higherDollar Sales +2,376%Unit Sales +2,559%
Dollar Sales +4%Unit Sales +4%
Remaining Yogurt Total Greek Yogurt
Source: Nielsen MarketTrack, National GB+DR+MM, 52 weeks ending April 9, 2011
Value Consumer = Price Value Consumer = Benefits/Price
Value is not about price, it’s about the balance between price & benefits
Avg Price +121% higherDollar Sales 160%Unit Sales 203%
Dollar Sales 3%Unit Sales 1%
Remaining Yogurt Total Greek Yogurt
Dollar Sales 6%Unit Sales 6%
Avg Price 83% higher Dollar Sales 9%Unit Sales 10%
Mainstream Chocolate Premium Chocolate
Dollar Sales -2%Pound Sales 1%
Avg Price 57% higher Dollar Sales 3%Pound Sales 5%
Pasta Excluding Health Healthy Pasta
Dollar Sales 4%Unit Sales -4%
Avg Price 18% higher Dollar Sales 8%Unit Sales 5%
Mainstream Coffee Premium Coffee Pod Coffee
Avg Price 40% higher Dollar Sales 115%Unit Sales 99%
Mid-Tier Toothpaste
Avg Retail Price +76% higherDollar Sales +21%Unit Sales +23%
Dollar Sales -4%Unit Sales -5%
Super Premium Toothpaste
Source: Nielsen MarketTrack, National GB+DR+MM, 52 weeks ending April 9, 2011
Value Consumer = Price Value Consumer = Benefits/Price
Value is not about price, it’s about the balance between price & benefits
Dollar Sales +16%Unit Sales +9%
Avg Price 37% higher Dollar Sales +30%Unit Sales +22%
Mainstream Coffee Super Premium Coffee Pod Coffee
Avg Price 24% higher Dollar Sales +130%Unit Sales +104%
Source: Nielsen MarketTrack, National GB+DR+MM, 52 weeks ending March 12, 2011
Rising prices are motivating
consumers to seek value
• Only buy when on sale 70% ‐5
• Use coupons 52% +2
• Buy larger value packs 37% +3
• Shop at value retailers 34% ‐1
• Stock up when on promotion 33% ‐4
• Shop close to home 27% +1
• Buy smaller sizes (lower unit cost) 18% +6
Consumers are consciously trying to save on CPG
Top saving activities::
Source: Nielsen Global Online Consumer Confidence Survey March 2011 – Canada – Chg vs YA
Deciding where to shop consumers will…
Source: Nielsen PanelViews – Shopper Opinions Survey March 2011
ReadFlyers
95%
TargetTheir List
54%
PriceCompare
49%
Switch Stores
66%
24%
Deciding what to buy in-store consumers will…
will switch brands based
on lower prices
buy more than
needed
decide what brand to buy
in store
Source: Nielsen PanelViews – Shopper Opinions Survey May 2011
Brand Loyalty Brand Selection Pantry Load
70% 72%
The role of the Store Flyer
• 77% read flyers on a weekly basis
• 62% of shoppers read each page (+8 pts)
• 54% read only the flyers from where they primarily shop (‐8 pts)
• 54% of shoppers prepare their shopping list based on what’s featured (‐6 pts)
• 34% read flyers online (+9 pts)
Source: Nielsen PanelViews – Shopper Opinions Survey May 2011 – Point Chg vs 2008
Q1 2011 has seen the first sign that regular priced sales are no longer declining on dollars
Sales Condition $ % Chg Unit % Chg $ % Chg Unit % Chg
Source: Nielsen MarketTrack, National GB+MM+DG – Feature (Temporary Price Reduction) 52 week periods ending March 12, 2011
Total +1
+7
-1
+9
-4
TPR Sales
52 weeks Q1 2011
+5
+1
-2
+5
Regular Sales
+2 +2
0
Q1 2011 has seen the first sign that regular priced sales are no longer declining on dollars
Sales Condition $ % Chg Unit % Chg $ % Chg Unit % Chg
Source: Nielsen MarketTrack, National GB+MM+DG – Feature (Temporary Price Reduction) 52 week periods ending March 12, 2011
Total +1
+7
-1
+9
-4
TPR Sales
52 weeks Q1 2011
+5
+1
-2
+5
Regular Sales
+2 +2
0
The percent of retail sales sold with a price cut accounts for one third of total CPG sales% Dollars Sold on TPR
Source: Nielsen MarketTrack, National GB+MM+DG12 week periods ending March 12, 2011
Quarterly Periods
The Shopper Recession
2007 2008 2009
45% of
units
2010 2011
33
25 27 26 27 26 27 28 28 28
31 31 31 3133
31 33
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Store Choice?
• 59% - Good value for the money
• 59% - Great sales and promotions
• 56% - Products in stock
• 55% - Lowest price
• 53% - Convenient location
• 53% - High quality fresh & produce
• 48% - Quality meat department
• 48% - Carries a variety of items
Value is a key driver of store choice but not the only lever to pull
Source: Nielsen PanelViews – Shopper Opinions Survey May 2011
44
The Quest For Value: Discount retailers are capturing over one third of Grocery and Drug category sales
71.3 62.6 63.7
28.7 37.4 36.3Discount
Conventional
Total Cash Receipt
+1% +4% +1%
Drug Composite**
-3% -3% -5%
Grocery Composite*
*Categories typically sold in a Grocery Store**Categories typically sold in a Drug Store
Source: Homescan Retailer Watch, National All Channels52 Weeks to April 2, 2011
VALU 241OCT 1
1
YOUR DISCOUNT TO DISCOVER!
46
63.3
37.0
Dis
coun
tC
onve
ntio
nal
Based on *Grocery Composite
Source: Homescan Grocery Watch, National All Channels52 weeks to April 2, 2011, Grocery Composite
+4%
-3%
$ Share Discount Share & Growth
Maritimes 12.9 +2
Quebec 34.5 +6
Ontario 46.0 +3
West 34.0 +3
Discount retailers are gaining share in all regions of Canada
*Categories typically sold in a Grocery Store
26.527.9 28.4
29.330.8
26.6
2007 2008 2009 2010 2011Est
2012Est
Discounter retailers are forecasted to grow due to retailer format expansions
All Channel $ Share
Source: Homescan Retailer Watch, National All Channels52 weeks to April 2, 2011, Total Expenditures
+5 +1 +5 +1
26.527.9 28.4
29.330.8
26.6
2007 2008 2009 2010 2011Est
2012Est
Discounter retailers are forecasted to grow due to retailer format expansions
All Channel $ Share
Source: Homescan Retailer Watch, National All Channels52 weeks to April 2, 2011, Total Expenditures
+5 +1 +5 +1
32.7
34.4
32.0
32.4
31.0
28.7
24.0
<$20K
$20-30K
$30-40K
$40-50K
$50-70K
$70-100K
>$100K
Share of Wallet - Discount
Source: Nielsen Homescan -- Account Shopper Profiler --National Discount -- 52 Weeks to December 25, 2010
HH Income
Discount $ Spend
$1,749
$1,934
$2,179
$2,375
$2,379
$2,520
$2,356
Loyalty to Discount is increasing among all income groups – higher income spend the most
-0.1
+1.2
+2.2
+0.6
+0.5
+0.2
+0.4
Total $ Spend
$5,354
$5,617
$6,801
$7,334
$7,669
$8,792
$9,809
32.7
34.4
32.0
32.4
31.0
28.7
24.0
<$20K
$20-30K
$30-40K
$40-50K
$50-70K
$70-100K
>$100K
Share of Wallet - Discount
Source: Nielsen Homescan -- Account Shopper Profiler --National Discount -- 52 Weeks to December 25, 2010
HH Income
Discount $ Spend
$1,749
$1,934
$2,179
$2,375
$2,379
$2,520
$2,356
Loyalty to Discount is increasing among all income groups – higher income spend the most
-0.1
+1.2
+2.2
+0.6
+0.5
+0.2
+0.4
Total $ Spend
$5,354
$5,617
$6,801
$7,334
$7,669
$8,792
$9,809
The moving Target Canada“acquisition of up to 220 Zellers
locations in Canada — with plans to open between 100 and 150
Canadian Targets in 2013 and 2014 — means the company anticipates sales will exceed $100 billion within
the next 6-7 years”
Source: LogoBase & wikimedia commons’; Supermarket News
2.4
-2.0
1.8
-1.8
Target US Walmart US
2009/10 2010/11
Target has momentum south of the border as Americans seek value and convenience
Same-Store-Sales Trends
Source: company press releases; latest monthly or quarterly news releases
Target has reported 10 consecutive months of growth
Target unveils small store format
Seattle 2012
“The new format, which will range in size from
60,000 to 100,000 square feet, is expected to be used in another 10
urban markets in the coming years, according
to comments from Target officials”
Source: LogoBase & wikimedia commons’; Supermarket News
Target unveils customized ad technology that makes shopping easier
Source: Target
Target printable coupons
Source: Target
What will the Target shopper potentially look like?
Source: Nielsen Homescan, Total U.S., Total Canada52-week period ending 12/25/2010 – UPC-coded purchases
Age
Household Income
Younger – Low Income
Older – High Income
Target draws disproportionately more dollars from affluent and younger shoppers than Zellers
Source: Nielsen Homescan, Total U.S., Total Canada52-week period ending 12/25/2010 – UPC-coded purchases
Age
Target US
52% >$70k (144 index)
53% <45 yrs old (136 index)
Household Income
Younger – Low Income
Older – High Income
40% >$70k (98 index)
35% <45 yrs old (95 index)
Zellers CA
Pointing to the future
2011
These habits will fuel
future dollar and unit growth
Consumers have come to terms with the new economy
Same game…
Bigger Baskets
Discount Retailers
Rising Prices
Return to Retail Growth
Awareness
Fewer Shopping Trips
Conventional Retailers
Declining Prices
Consumption Restraint
Habitual
The Conscientious Consumer
Value is the NormNeed for Value
The Market Has Adapted
Manage a blend of long and short term perspectives
Adapting to the Value Consumer
1
2
3
• consumers are ready to increase spend on non essentials• value will continue to be a key motivator for consumers• food will be a key traffic driver across channels
Maintain sustainable pricing strategies for growth• consumers continue to buy in inflationary price levels (2009)• need for promotions will continue in the next year, but continue
with higher promoted prices
Be creative with options when taking price increases• Consider new size formats to meet the consumers need for
value and spend control
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