the new normal insights into the post recessionary...

Copyright © 2010 The Nielsen Company. Confidential and proprietary.

The New Normal – Insights into the Post Recessionary Consumer and a View of the Retail Landscape in 2015

Todd HaleSVP, Consumer & Shopper InsightsThe Nielsen Company

September 17, 2010

2


Today’s Agenda

•Economic Update

•Buying & Retail Trends

•Retail Channel 2015 Forecast

•Retail Evolution Predictions

•Evolving Demographics

•What Should You Be Doing Now To Prepare For

the Future?

3


Economic Update

4


-753K

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14.9 MM jobless

Monthly Job Gains/Losses

August 2010: 9.6% Unemployment

16.7% Underemployed

42% unemployed for longer than 27 weeks

Labor Market Trend Was Improving, But Disappointing Last Three Months

Source: Seasonally Adjusted U.S. Total Non Farm Employment, U.S. Government

5


Expect Lengthy Recovery Period

Source: Calculated Risk

2001

Recession

6


Value (Quality/Options Relative to Price)

Being Rephrased…

I’ll trade down even if it means

sacrificing what I really want

I want what I want, but at the

best price

7


-4%

-2%

0%

2%

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10

2010 Retail Sales Ex Auto vs prior month

2H08

Fear

2009

Cautious Rebound

2010

New Normal?

Aug

„08

Aug

„09Aug

„10

Source: U.S. Census Bureau

Lackluster 2010 Retail Sales

8


Discretionary Making Comeback, But Off Poor 2009; Weaker 2010 for Nat’l Grocers & Walmart

2009

-15 -10 -5 0 5 10

Costco

BJ's

Sams

Kroger

Safeway

SuperValu

Family Dollar

Dollar Tree

Dollar General

Target

Kmart

Walmart

CVS

Walgreens

Rite Aid

Whole Foods

Nordstrom

Kohls

Macy's

JC Penney

Lowe's

Home Depot

2010

-10 -5 0 5 10

Costco

BJ's

Sams

Kroger

Safeway

SuperValu

Family Dollar

Dollar Tree

Dollar General

Target

Kmart

Walmart

CVS

Walgreens

Rite Aid

Whole Foods

Nordstrom

Kohls

Macy's

JC Penney

Lowe's

Home Depot

Value &

Convenience

Source: Company press releases; latest monthly or quarterly report

Discretionary

Spending

Stock-Up

& Save

9


96

103106 108 106

100

83 8280

8582

84

80

87

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

Consumer Confidence Index

Emerging

Developed

U.S. Consumer Confidence Remains Below Pre-Recession Levels

Source: Nielsen Global Online Consumer Confidence and Opinion Survey 2Q10

Rebound indicative of

elongated “L-shaped ”

recovery curve

10


Consumer Behavior Has Shifted

Saving

Coupons reborn

Private Brands as Equal or Better

Unlimited supply

Limited demand

Questioning

Spending

Coupons dying

Private Label as fall back

Limited supply

Unlimited demand

Habitual

11


-0.5

3.0

2.01.5 1.4

0.4 0.4 0.3

-0.8

-3.2-3.6

-6.8

Latest 52 Weeks

Edible Departments Driving Growth; Less Growth in Fresh Meat & Dairy (Where Prices Have Been Cut)

Total Dairy

Fresh

Meat

DeliFresh

Produce

Alco

BevDry

Grocery

Pkgd

MeatHBA

Non

Food

General

Merch

% Dollar Growth (FDM w/WM)

Source: Nielsen Scantrack, (U.S. FDM w/ Walmart) 52 weeks ending 08/07/2010 (vs. prior year); UPC-coded

Frozen

Foods

12


0.2

4.23.5

1.9 1.91.5 1.3

1.00.5

-1.9

-3.2

-6.2Latest 52 Weeks

Total DairyFresh

Meat

DeliFresh

Produce

Alco

Bev

Dry

Grocery

Pkgd

Meat

HBA

Non

FoodGeneral

Merch

Frozen

Non-Edibles Leading Unit Decline

Economy driving consumers to make

trade-offs or buy less

% Unit Growth (FDM w/WM)

Source: Nielsen Scantrack, (U.S. FDM w/ Walmart) 52 weeks ending 08/07/2010 (vs. prior year); UPC-coded

13


Source: Company websites

Price Wars in Chicago

http://www.dominicks.com/IFL/Grocery/Home

14


A&P Lowering Prices Too

Source: Company website

http://www.apfreshonline.com/pages_myAP_promotions.asp

15


Consumer Packaged Goods Prices Have Fallen & Units on Promotion Have Grown

% Change Unit Prices

-2

0

2

4

6

All Departments

% Change Feature and/or Display Unit Sales

-8

-4

0

4

8

12

11/29/08 12/27/08 01/24/09 02/21/09 03/21/0904/18/0905/16/09 06/13/09 07/11/09 08/08/09 09/05/0910/03/09 10/31/09 11/28/0912/26/0901/23/1002/20/1003/20/1004/17/1005/15/1006/12/1007/10/1008/07/10

Source: Nielsen Scantrack, (U.S. FDM w/ Walmart) 4 week increments (vs. prior year); UPC-coded

4 Weeks Ending

16


Weak Total Store Performance – Price Cuts & Heightened Promotions Not Working

% Change Dollar Sales

-2

0

2

4

6

% Change Unit Sales

-5

-2

1

4

11/29/08 12/27/08 01/24/09 02/21/09 03/21/0904/18/0905/16/09 06/13/09 07/11/09 08/08/09 09/05/0910/03/09 10/31/09 11/28/0912/26/0901/23/1002/20/1003/20/1004/17/1005/15/1006/12/1007/10/1008/07/10

All Departments

Or would situation be worse without

value efforts?

4 Weeks Ending vs Year Ago

Source: Nielsen Scantrack, (U.S. FDM w/ Walmart) 4 week increments (vs. prior year); UPC-coded

17


Same-Store-Sales Trends

-8

-6

-4

-2

0

2

4

6

1 2 3 4 5 6

Last Six Reported Quarters

Kroger

Walmart

Safeway

SuperValu

As Prices Fall, So Have Same-Store Sales Trends, But Kroger Outperforming Their Peers

Source: Company Press Releases

Retail Innovation

19


Store Formats

Supercenter Expansion

Small Formats

Green Formats

Ethnic Formats

Outdoor Malls

Pop-Up Retailers

Assortment & Services

Self-Check-Out

Health Clinics

Food & Food Service

Store Brands

Better-For-You Solutions

Online

Gift Cards

Communication

Digital Media

Social Media

Smart Phone Apps

In-Store Kiosks & TVs

Promotion

Coupon Renaissance

Shopper Cards Fulfill Promise

Gas Savings

Shopper Marketing

CPG Retail Innovations in Past Decade?

20


Value Channels Big Share Winners

1825

0

10

20

30

Winners

82

75

70

75

80

85

Losers0 20 40 60

Supermarkets

Drug

Mass

Convenience

Mass Supers

Club

Dollar

$ Share

2004

2009

Source: Nielsen Trade Dimensions & Nielsen TDLinx

21


While Online Sales Slowed During 2008 & 2009, its Share Continued to Grow

0

5000

10000

15000

20000

25000

30000

35000

40000

Q4 1

999

Q2 2

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4

Retail E-Commerce Sales

% of Total Retail Sales

Do

llars

(m

illio

ns)

On

lin

e %

of

tota

l U

S S

ale

s

Source: U.S. Census Bureau

22


18%

19%

20%

21%

22%

23%

24%

Store Brand Unit Share(Data through August 7, 2010)

2005 2006 2007 2008 2009

Economic Growth Recession

GDP 3.1% 2.7% 2.1% 0.4% - 2.4% 3.0%

2010

Pre-Recession Norm

Post-Crisis Norm

Source: Nielsen Scantrack, (U.S. FDM excl. Walmart) 4-week increments (vs. prior year); UPC-coded

Great Recession Created New Normal for Store Brands

23


% Change in Manufacturer Coupon Redemptions

Top 5 Redemption Growth Methods

Internet +263%

Direct Mail +69%

Magazine +51%

Instant Redeem +48%

Direct Mail Coop +45%

The Coupon ReinventedItself & Made a Comeback

Q1 Q2 Q3 Q4

2008 -7% -1% -3% +10%

2009 +17% +33% +29% +26%

2010 +13% +1%

Source: Inmar

24


Smaller Stores & Food Focus

Source: Company websites; Philly.com, Charles Fox / Staff Photographer

25


Food Fight: Grocers Seizingthe Opportunity

A new wave of lifestyle

store formats

Source: Company websites; supermarketnews.com

26


Want to Sell More Groceries & Cookware, Try Cooking Lessons


http://www.giantfoodstores.com/index.html

http://www.centralmarket.com/default.aspx

http://www.lundsandbyerlys.com/

27


Following the success of Aldi & Save-A-Lot, New No-Frills Formats from Giant Eagle & HEB

Source: Valu King; Joe Vs Smart Shop; Columbus Dispatch & Houston Chronicle

http://www.dispatch.com/wwwexportcontent/sites/dispatch/business/stories/2010/05/13/valu-king-art-gti8gndd-1valu-king-fs-c.jpg

28


Even High-End Retailers Expanding into Price-Impact Formats

Why can‟t other retailers

follow a similar path? What

about holding periodic BIG

SALE events?


29


New Ways to Extend Brand Reach Through Retail Formats


http://www.tidedrycleaners.com/

30


Times Square Brand Awareness & Equity Building

Source: New York Times; SoulofAmerica.com; Hershey’s

31


If Your Customers Aren't Coming to You, Go After Them or Make it Easier

Source: Keith Hine/Chicago Sun-Times; Meijer; Publix

http://americansfortruth.com/uploads/2008/03/mcdonalds-logo.JPG

32


Independents w/Ethnic Formats; a Few Big Chains Experiment


http://www.fiestamart.com/

33


Store Brand Innovationin New Territories


34


Winning & Experimenting w/Technology

Source: Company websites; Progressive Grocer &

Pittsburgh Post-Gazette

http://www.shopbloom.com/Savings/Specials/

35


Source: Dr. Vino

Technology & Sustainability – I’ll Drink to That!

Self-Serve Tanks

Bring Wine to

French

Supermarkets

36


Feature Ads Go Online


37


Walmart & 7-Eleven Make Big Betson In-Store TVs

Source: Company websites; QSRMagazine.com

38


7-Eleven On-Line Video Campaign to Build Awareness of Offerings

Source: New York Times; Company website

39


Smart Phone Apps to Simplify Our Lives & Make Smarter Shoppers


40


How Will P&G’s Online StoreImpact Retailing?


41


Predictions:Retail Channel 2015 Forecast

42


Mass Supercenters & E-commerce Will be Big Winners

Channel $ Shares

2001 2009 2015 forecast*

Mass Supercenters E-commerce Club

11

23

29

Source: 4i Consulting Group, Inc. a Nielsen Partner

43


Channel $ Shares

2001 2009 2015 forecast*

Supermarkets Drug Home Improvement Conv/Gas Mass Merch

Supermarkets Will Lose Share, but at Declining Rate – These Other Big Channels will Suffer Share Losses

7767 61


44


Channel $ Shares

2001 2009 2015 forecast*

High-End Grocery Limited Assortment Grocery

Growth in Low & High-End Grocery, but Small Share Positions

1

1.7

2.1

Aldi & Save-A-Lot

Trader Joe‟s & Whole Foods


45


Channel $ Shares

2001 2009 2015 forecast*

Consumer Electronics Liquor Dollar Office Pet Books Toy

Mixed Performance for Remaining Retail Channels – Pet & Dollar Gain

1210 10


46


E-Commerce & Supercenters WillDrive Strong CAGRs

-1

1

2

3

3

4

4

5

5

5

6

6

6

8

12

Books

Mass Merch

Liquor

HHI

Supermarkets

Conv/Gas

Drug

Office

Club

Dollar

Pet

Electronics

Supers

E-Commerce

Average

Channel

Growth: 5%

CAGR 2009 to 2015

Toy


47


Predictions:Consolidation

48


Top 3 Chains $ Share

76

55

78

60

84 8292

100

Dollar Stores Drug

2001 2004 2009 2015 est

Big Three Dollar & Drug StoresWill Dominate

Source: Trade Dimensions & TDLinx, services of The Nielsen Company

49


Supermarket + Mass Supers $ Share

24

3134

4341

5048

56

Top 3 Chains Top 5 Chains

2001 2004 2009 2015 est

Top 3 Food Chains Should Capture Half the Market in 2015


50


Supermarkets, Mass Supers, Mass Merch,

Drug Club, Dollar & Convenience $ Share

2330

43

2836

48

3141

55

35

46

61

Top 3 Chains Top 5 Chains Top 10 Chains

2001 2004 2009 2015 est

The Big Will Get Bigger


51


Strong Regional Chains Will Expand & Form Alliances for Scale

52


Predictions:Retail Evolution

53


The Future of Retailing – Not Exactly, but

Source: daylife.com

54


Smart Phones Will Be the Primary Enabler of Shopper Engagements +

•Position/location tracking

•Best price locators

•Camera shots of bar codes w/links to

promotions & product information

•Links to purchases for up-selling

opportunities

• “SMART” shopping list management &

home inventory auto fulfillment

•Budgeting tools & tax preparation/filing

55


Store Formats

•Get smaller, but larger formats dominate

•Pop-up retailing accelerates

•Blended & exclusive formats catering to

generations & ethnic consumers

•> expansion from high-end & low-end formats

•Entertainment & lifestyle formats

•Battle for supremacy between fixed & flexible–brick & mortar.com

–pure play.com

–.com brokers

–manufacturer.com

Source: supermarketnews.com

56



Assortment & Services

•Anywhere in-store check-out

•Rationalization of box to build shopper entanglement

•Pop-up departments

•Mechanized shelf re-sets & re-stocks

•Green assortment delivers green backs

•Expanded portion size control to battle obesity

57


Source: Photo by Mark Hoffman

Communication & Promotion

•Demise of traditional age & sex targets

•Anywhere & real time communications & promotions

• Immediate access to consumer reviews & product

demos

•Virtual online shopping tools

• In-store kiosks, digital media & holograms

•Loyalty programs get sophisticated–Deliver right communication/promotion

–2-way communication loop

–> continuity focus

58


Evolving Demographics:The Changing

Face ofConsumers

59


We See Major Impacts Basedon Demographics

Income Declines

& Income

Concentration

Uneven

Population

Growth

Immigration

& Growth in

Ethnic Families

Older

Consumers with

New Needs

Declines in

Per HH

Spending

Declining

% of HH with

Children

60


Take Stock Now of HowYour Portfolio Stacks Up

-20 -15 -10 -5 0 5 10

Projected Growth Rate

Category 1

Category 2

Category 3

Category 4

Category 5

Category 6

Category 7

Category 8

61


What Should You Be Doing Now to Prepare for the Future?

62


Be Prepared to Make Tough, Gut-Wrenching Decisions

•Develop or buy expertise in on-line, digital &

social media

•Plan for diminishing returns from traditional

media

•Nurture retailer/supplier relationships

•Format planning

•Demand forecasting by category & consumer

segment

•Expand via regional or global opportunities

•Make future management a company strength

•Understand the new faces of opportunity

Thank You

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