All Other Deloitte

Buying Habits Change as Prices Rise & Packs Shrink

\"\"Pay more, get less. This is the scenario that\’s increasingly playing out at grocery stores across the country — and a majority of food shoppers are taking note according to Deloitte\’s new \”2011 Consumer Food and Product Insight Survey.\”

Nearly 9 in 10 survey respondents (87.7 percent) believe prices in food stores are escalating and almost three-quarters (74 percent) say the size of some packaged goods is smaller. Consequently, savvy consumers are purchasing more private-label and store brand products. More than three-quarters of respondents (75.3 percent) purchased lower-priced products and nearly 2 in 5 respondents (39.6 percent) added more private label products to their grocery bags.

High gas prices are also having an impact on shopping behaviors. Nearly 3 in 4 respondents (72.7 percent) are making fewer trips to the grocery store to save money and more than two-fifths (40.8 percent) are purchasing fewer items overall.

\”Higher prices, smaller package sizes and pain at the pump are driving consumers to buy lower-priced grocery items,\” said Pat Conroy, vice-chairman, Deloitte LLP and the U.S. consumer products practice leader. \”That\’s why now more than ever it is important for consumer products companies to strengthen their customer relationships and distinguish value ahead of the competition.\”

Consumers Desire Healthier Food Options and \”Front-of-Package\” Nutrition Facts
Consumers are paying more attention to \”front-of-package\” nutrition information to assist them in making healthier decisions according to the survey.  More than 3 in 4 respondents (76.2 percent) say they more often want healthier food options when they shop and nearly two-thirds (64.8 percent) agree or somewhat agree that food retailers are starting to sell more locally produced fruits and vegetables.

Additionally, nearly one-half of respondents (49.3 percent) agree that packaging that displays a row of standardized icons called \”Nutrition Keys\” on the front of the package with standard ingredients listed on the back would be very helpful for purchasing decisions. Some companies are currently doing this on a voluntary basis. The survey also found that more than half (51.1 percent) of food shoppers read the ingredients on unfamiliar food items.

\”The front-of-package findings, coupled with survey results showing that consumers are trending towards healthier food purchases, presents a tremendous opportunity for consumer products companies that are willing to enhance their nutritional transparency,\” said Conroy. \”Consumer products companies that use healthy ingredients and are willing to share nutritional information on the front of the packaging can strengthen their customer base amongst a growing faction of consumers.\”

Smartphones are Playing a Role in Entire Shopping Process
The proliferation of smartphones and a much savvier base of shoppers have spurred consumers to use mobile devices to assist with several aspects of their shopping routines according to the survey. More than one-third (34 percent) of smartphone users research food prices or product information while in a store. More than two-fifths (43 percent) of smartphone users have managed a food shopping list on their device while not in a store.

Overall, more than one-half (53 percent) of shoppers surveyed are increasingly using technology to obtain information about food products and more than one-quarter (28 percent) of respondents interacted with a food retailer via their mobile application or website. Furthermore, more than one-fifth(23.5 percent) of survey respondents expect their smartphone-related grocery shopping activity to increase next year.

\”Smarter phones and smarter shoppers are transforming today\’s shopping experience,\” said Conroy. \”Moving forward, consumer product companies must make themselves more accessible to consumers who are using 21st century technologies to look for coupons, store specials and to even shop for groceries.\”

Food Shoppers Attracted to Supermarkets and Supercenters
Nearly 4 in 5 respondents (79.7 percent) purchased food from a traditional supermarket during the past year. Deloitte\’s survey also shows that large supercenters – those that sell food, clothing, etc. – are the second most sought after food buying destinations with more than 3 in 5 respondents (61 percent) purchasing groceries at these venues in the past year.

Outside of shopping at supermarkets and one-stop shop supercenters, nearly one-third of consumers (32.6 percent) met their grocery needs by visiting a dollar store over the past year. The survey also found that more than 2 in 5 respondents (22 percent) bought food at a drug store and slightly less than 1 in 20 shoppers (4.9 percent) visited an online retailer or food manufacturer to purchase food.


Battle of the Brands – The War Escalates


Consultants Pat Conroy and Anupam Narula of Deloitte present this article casting Private Brands and National Brands in a battle to the death. The article includes suggestions for combating Private Brands which are equally insightful in growing Private Brands.

The Battle for Brands in a World of Private Labels

Janet glances at the items in her shopping cart and then at her grocery list, realizing that this is going to be an expensive trip. She wonders how much she could save by replacing more of her family’s preferred national brands with the store brands. After all, nobody noticed when she switched the canned vegetables, pasta, and ice cream. Her daughters’ breakfasting objections to store brand cereals subsided by the third morning. Similarly, her husband raised his eyebrows when she brought home store brand ketchup, sliced cheese and soft drinks, only to raise them even further when she described the price difference.

Nonetheless, the family held the line in the soft drink aisle. “I know times are tough,” said her husband, “but surely there’s another way to save.” Now, Janet only purchases national brand soft drinks during sales or in bulk.

In the next aisle, Janet’s neighbor David shuffles by. “What do you think of those store brand paper towels?” she asks.

“It’s all from the same tree and costs less. My family can’t tell the difference.”

“Probably true,” says Janet as she adds store brand paper towels to her cart. “I am open to saving a few bucks – it adds up quickly. The feeling that I am paying for advertising when I buy a national brand is tough to stomach in this economy.”

“My kids actually prefer the store brand frozen pizza. It’s funny because my mother always avoided store brands; if she could see us using these paper towels now …” David shook his head and they both laughed.1

The Battle for Brand Loyalty

Consumers like Janet and David are emblematic of store brands (or private label goods) gaining market share at the expense of national brands. Between 2006 and 2009, market share rose across 74 percent of products in the personal care, household goods and food and beverage categories in the United States, according to Information Resources, Inc.2 In 2009, store brands represented nearly 18 percent of consumer packaged goods spending and over 23 percent of CPG products sold.3

Many consumers increasingly sense a diminishing discrepancy between the quality of national brands and their private label counterparts as retailers sharpen their focus on store brands and garner loyalty, and consumer product companies cede connections to retailers and increasingly knowledgeable customers. Private labels represent 20 percent of grocery store and 18 percent of supercenter sales.4 Furthermore, store brand products were 31 percent cheaper across product categories than their national brand counterparts.5 Store brands are not just a recession related phenomenon – U.S. store brand sales continue to grow over the long run despite improving economic conditions.6

The following recommendations may help consumer product companies to navigate this changing environment:7

  • Be a brand that the retailer cannot be.
  • Be irreplaceable.
  • Shed homogeneity.
  • Create a retailer-specific product portfolio.
  • Make me-too strategies an onerous path.
  • Stop reckless promotions.
  • Leave retailers bricked and mortared.

For retailers, the challenge is to anticipate and counter these consumer product company actions.

Read the entire article.

Adweek Deloitte

The Economy Has Caused Me to Realize Which Brands I Care About

\"\"In an article this week from Adweek titled: “Study: Maybe Demand Isn\’t So Pent Up”Mark Dolliver takes a look at a new report issued this month by Deloitte and the Harrison Group according to the article:

Attitudes toward private-label goods offer a telling example of consumers\’ sense that spending less needn\’t mean settling for less. Just one-third of the respondents endorsed the statement, \”I often feel that I am sacrificing when I purchase a store brand instead of a national brand.\” This is unsurprising when one notes that many people think the store brand and the national brand are the same stuff: 80 percent subscribed to the statement, \”I believe that most store brands are manufactured by the traditional national brands.\”

It\’s not that the economy has made people indifferent to brands. Rather, it has made them more discriminating about brands. Seventy-five percent of respondents to the survey (fielded in April) agreed that \”Going through these economic times has caused me to realize which brands I care about and which ones are less important to me.\”

Consumers are definitely giving retailers permission to grow Private Brands, the real question is will they actually grow brands or simply grow labels with no chance to survive in an improved economy.

Read the entire article.


Private Brand Insights & Profitability

\"\"Consultants extraordinare Deloitte have been hard at work creating a new group of insights that include the impact of Private Brands and how to compete in today’s market. Whether you are building Private Brands or competing against them this is an interesting body of work.

Deloitte CPG Pricing, Profitability and Trade Investment
Safeway is asking the brands to rollback their prices and is using their private label leverage.  “Costco stops carrying Coca-Cola products: Retailer and beverage maker at loggerheads over pricing” – 11/17/09 (MSNBC) As shoppers continue to grapple with the recession, retailers want to win their favor by giving them low prices. Holistic approach removes the tendency to optimize one metric at the disproportionate expense of others Profitability Management. Ability to factor in the effects of competitor activity, including private label

The 2010 American Pantry Study
The discussion topics included:  Consumers’ guilt about their shopping patterns prior to the recession Consumers’ increasing preference toward private label products as opposed to national brands How consumers have become more resourceful and precise, fundamentally changing the way they shop and stock their pantry

Consumers Redefine the “Game” of Shopping — It’s Not Just About Saving: Deloitte/Harrison Group Study
According to the survey, three out of four (75 percent) people are more open to trying private label and store brands than two years ago.