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NIELSEN PERISHABLES GROUP Utah Food Industry Association 8.14.2014 THE EVOLUTION OF FRESH.

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Presentation on theme: "NIELSEN PERISHABLES GROUP Utah Food Industry Association 8.14.2014 THE EVOLUTION OF FRESH."— Presentation transcript:

1 NIELSEN PERISHABLES GROUP Utah Food Industry Association THE EVOLUTION OF FRESH

2 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 2 WHO IS NIELSEN PERISHABLES GROUP? NEW TOTAL-STORE PERSPECTIVE ESTABLISHED LEADERS IN FRESH EXPANDED INFORMATION AND CAPABILITIES BAKERY DELI MEAT PRODUCESEAFOOD

3 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 3 CONCERNS SHARE OF RESPONSES ECONOMY20% DEBT12% JOB SECURITY13% HEALTH9% FOOD PRICES6% FUEL PRICES6% UTILITY PRICES3% WORK/LIFE BALANCE3% ECONOMIC CONCERNS REMAIN TOP OF MIND What are your biggest concerns over the next six months? Source: Nielsen Global Omnibus Consumer Confidence Survey Q3 2013

4 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 4 Forecast for 2014 Moderate Growth U.S. GROWTH SLOWED Actual and Projected U.S. GDP Growth ( ) 3.4% Forecast Source: IMF World Economic Outlook, Oct 2012; from Wells Fargo forecasts as of Dec ; TCG Analysis Actual

5 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 5 Median household Income in 2012 Inflation Adjusted Dollars Source: U.S. Census Bureau SHRINKING INCOMES IN THE MIDDLE CLASS DESPITE GDP INCREASES Decline in median household income in 9 of last 13 years – is this the new normal?

6 SO WHAT DOES THIS MEAN FOR FRESH?

7 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 7 FRESH HAS NOT BEEN IMMUNE TO PRICE INCREASES Source: Nielsen Perishables Group FreshFacts ® Total U.S. (FCA) weeks ending 12/28/2013 vs. Year Ago PROMOTIONPRICE SALE VOLUME % ON PROMO VS. YEAR AGO AVG. RETAIL PRICE VS. YEAR AGO -1.2% -1.7% +2.0%

8 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 8 DESPITE PRICE INCREASES FRESH DEPARTMENTS THRIVE Source: Nielsen Perishables Group FreshFacts ® Total U.S. (FCA, does not include convenience, drug or dollar) weeks ending 4/26/2014 vs. Year Ago and Total U.S. - All Outlets Combined, plus Convenience ending 5/11/2014 (UPC only) DOLLAR GROWTH VOLUME GROWTH Fresh growth continues to outpace rest of the store 1%0.2% TOTAL STORE TREND FRESH DEPARTMENTSCENTER STORE FOOD DEPARTMENTS

9 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 9 WINNERS AND LOSERS ACROSS THE STORE Source: Combined Nielsen Perishables Group FreshFacts® and Nielsen ScanTrack point-of-sale data sets – ranked by dollars per MM ACV for 52 weeks May 2014 THE IMPACTS Top 10 Fastest Dollar Velocity ($ per MM ACV) Growth Categories Across the Store Bottom 10 Biggest Dollar Velocity ($ per MM ACV) Losing Categories Across the Store

10 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 10 SO HOW DOES AN ENVIRONMENT LIKE THAT PRODUCE A SCENARIO LIKE THIS? Agenda (Evolutionary Traits) Fresh is more available than ever Fresh fits the trip Fresh communicating consumer benefits (making a play for the need-state) Fresh has something for almost everyone Future of fresh – a critical piece in the total store “ecosystem”

11 FRESH IS MORE AVAILABLE THAN EVER

12 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 12 ALTERNATIVE CHANNELS GROWING IN FRESH Source: 1. Nielsen Homescan Total Shopper View 52 weeks ending 12/28/13 versus year ago 2. Nielsen TDLinx DOLLAR STORES CHANNEL 41,378 Stores +21% 2013 vs 2007 PERISHABLES Purchase Frequency +7.1% vs YAGO CHANNEL 25,486 Stores +36% 2013 vs 2007 PERISHABLES Purchase Frequency +2.0% vs YAGO GROCERY CHANNEL 2 33,445 Stores +7% 2013 vs 2007 PERISHABLES 1 Purchase Frequency -2.6% vs YAGO DRUGSTORES CHANNEL 151,282 Stores +32% 2013 vs 2007 PERISHABLES Purchase Frequency +1.4% vs YAGO CONVENIENCE STORES Baskets with Fresh 1.5 to 2x Bigger Than The Average Basket

13 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 13 A GROWING NUMBER OF WAYS TO DELIVER FRESH TO CONSUMERS Source: Nielsen Perishables Group Dollar General Market City Target Walmart Neighborhood Market Walgreen’s

14 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 14 WHAT’S AROUND THE CORNER? We’re probably not getting LESS busy Source: Nielsen Perishables Group

15 FRESH FITS THE TRIP

16 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 16 MORE OUTLETS, MORE FRAGMENTED TRIPS Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending March 2014 Quick TripFill-in TripStock-up Trip <6 items in the basket6-15 items in the basket15+ items in the basket The Fast and the Frequent Across all outlets, more than 55% of all trips have 6 items or less The Power of Fresh Trips to these outlets with fresh are up 4% (higher for quick trips)

17 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 17 MILLENNIALS DRIVE QUICK TRIPS Source: Nielsen Perishables Group Total Shopper Study, from FreshFacts® Shopper Insights powered by DataLogix, 52 weeks ending 3/29/14, Millennials defined as born between Overall, Millennials make more trips per household than the average shopper Millennials are also the most important generation to quick trips, and spend the highest per quick trip Boomers and Generation X are the most important shoppers to stock-up trips It’s a New World Can’t assume Millennials will make bigger trips as they age – smart quick trip strategies are critical in food retail

18 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 18 AS QUICK TRIPS BECOME MORE POPULAR SOME FRESH CATEGORIES STAND TO GAIN Notably deli and bakery, two of the fastest growing fresh departments, Source: Nielsen Perishables Group Total Shopper Study, FreshFacts® Shopper Insights powered by DataLogix for 52 weeks ending 3/29/14 QUICK TRIPSSTOCK-UP TRIPS MORE THAN 15 ITEMS 6 ITEMS OR FEWER MOST IMPORTANT TRIPS TO: BAKERY DEPT. MOST IMPORTANT TRIPS TO: DELI DEPT.FROZEN DEPT. MEAT DEPT. PRODUCE DEPT. DAIRY DEPT. DRY GROCERY DEPT. Quick trips are different and offer different opportunities to win shopper dollars

19 FRESH COMMUNICATING CONSUMER BENEFITS

20 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 20 CONSUMER BENEFITS HAVE NOT CHANGED MULTICULTURAL/ GLOBAL QUALITY/VALUEHEALTHCONVENIENCE Source: Nielsen Perishables Group WHAT WE BUY

21 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 21 Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 12/28/2013 vs. Year Ago; Products in each group are not mutually exclusive 37%18%7%2% CONTRIBUTION TO FRESH DOLLAR SALES HOWEVER HOW CONSUMERS MEET THOSE PRIORITIES IS EVOLVING Fresh Growth by Consumer Priority

22 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 22 TOP 10 FASTEST-GROWING FRESH CATEGORIES EXEMPLIFY CONSUMER PRIORITIES Source: Nielsen Perishables Group FreshFacts® 52 weeks ending 12/28/13; includes categories with over 50% ACV selling over the 52 weeks ending 12/28/13 Produce Beverages $972M; +17% Cooking Greens $362M ; +24% PRODUCE Avocados $994M; +15% Specialty Fruits $502M; +15% Squash and Pumpkins $585M; +13% DELI Dips, Spreads and Toppings $994M; +15% Deli Breakfast Foods $71M; +11% MEAT Bacon $3B; +12% Citrus $2.5B; +12% Value-Added Vegetables $1.3 B; +13% WHAT WE BUY

23 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 23 BRANDS PLAYS AN INCREASINGLY IMPORTANT ROLE IN THE FRESH PERIMETER Source: Nielsen Perishables Group FreshFacts® BAKERYDELIMEATPRODUCESEAFOOD $14 billion 33% of department sales $2.6 billion 25% of department sales $10.1 billion 45% of department sales $26 billion 48% of department sales $2.3 billion 39% of sales BrandDollars% Growth Branded$56 B6.2% PRIVATE LABEL$27 B5% Unbranded$54 B4.1%

24 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 24 CONVENIENT OPTIONS BECOMING MORE POPULAR; CONSUMERS PAY MORE FOR A DIFFERENT KIND OF VALUE Source: Nielsen Perishables Group FreshFacts ®, 52 Weeks Ending 12/28/13; Total U.S. FCA Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13 Fresh Cut Fruit Jars and Cups Overwrap Meal Prep Side Dish Snacking Trays HOUSEHOLD PENETRATION +0.8% PURCHASE FREQUENCY +2.1% DOLLAR SALES +11.9% HOUSEHOLD PENETRATION +2.0% PURCHASE FREQUENCY +4.0% DOLLAR SALES +13.5% VALUE-ADDED FRUITVALUE-ADDED VEGETABLES Frozen buyers are decreasing purchase of similar product

25 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 25 EXOTIC FLAVORS AND NEW CONSUMER EXPERIENCES Source: Nielsen Perishables Group FreshFacts ®, 52 Weeks Ending 12/28/13; Total U.S. FCA, PMA 2013 trade show Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13 DOLLAR SALES +14.9% SPEND PER TRIP +3.1% MANGO SALES +17.0% POMEGRANATE SALES +34.7% PAPAYA SALES +21.3% SPECIALTY FRUITS Milennialls pay a premium for a unique eating experience Old products deliver a new experience

26 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 26 HEALTHY ISN’T HEALTHY ENOUGH Source: PMA 2013 trade show, brand websites Opportunity for messaging of health benefits in produce SUPERFOODSCALORIE COUNTING These commodities didn’t actually become healthier did they?

27 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 27 CONNECTING TO A SPECIFIC EATING OCCASION Source: PMA 2013 trade show, brand websites Opportunities exist for premium-priced offerings RISE OF SNACKINGSTRONG GROWTH IN BRANDED OPTIONS

28 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 28 IT’S WORKING IN BOTH DIRECTIONS; FRESH IS INSPIRING NEW CONCEPTS IN OTHER PARTS OF THE STORE TOO Garden-Lites Muffins: Veggie Blueberry Oat, Zucchini Banana Chocolate Chip, Zucchini Chocolate Veggie, Carrot Berry Veggie, Golden Corn Veggie Blue Hill Yogurt: Carrot, Sweet Potato, Beet, Parsnip Butternut Squash,Tomato Haagen-Dazs Ice Cream - Japan: Tomato-Cherry, Carrot-Orange Magnolia Ice Cream: Avocado, Purple Yam Green Giant Blend-ins: Carrot, Butternut Squash, Spinach

29 29 Copyright ©2014 The Nielsen Company. Confidential and proprietary. Fresh Pretzels$5K50.8% Salty Snacks$17K0.8% Fresh Mini Cookies$1577.1% Cookies$5K3.1% LINES ARE BLURRING BETWEEN AISLES, MORE WAYS TO SOLVE THE SAME THE SAME NEED STATE Source: Source: 1. International Dairy-Deli-Bakery Association, Nielsen Perishables Group FreshFacts® 52 weeks ending 3/29/14 WHAT’S IN? Low fat/low trans fat/low calorie High protein Nutrional ingredients Four to five smaller meals/day WHAT’S OUT? High fat/high calorie Traditional, unhealthy snacks Processed snacks Three large meals/day 90% of U.S. consumers eat at least one snack a day 1 FRESH CATEGORIES GAINING SHARE OF CENTER-STORE SNACKING OCCASIONS Category Dollar Per MM ACV % Change Dollars Per MM ACV WHAT WE BUY

30 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 30 TO RECAP, CONSUMER BEHAVIOR IS EVOLVING AND IN SOME WAYS IT’S FAVORED FRESH PARTS OF THE STORE More outlets offer us more options in more ways -> Wider, harder battle ground Understand us and connect with our priorities-> get in our basket more Stock-up trips still where we spend big -> but not the only opportunity to win our dollars Source: Nielsen Perishables Group WHERE WE SHOP HOW WE SHOP WHAT WE BUY SHOPPER Is the whole store going to be fresh soon?

31 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 31 Power Store ShopperPower Banana Shopper Power Packaged Salad Shopper Fresh Focused >32% Moderates 17-24% Center Store Enthusiasts 11-16% Center Store Focused <10% Fresh Enthusiasts 25-32% Percent of Households 10%23%33%23%10% Fresh Segmentation: All households segmented by ratio of fresh to total store spending Dividing Metric: % fresh share of all spending WE ARE ALL TOTAL STORE SHOPPERS We are all total store shoppers WHO BUYS WHAT Source: Nielsen Perishables Group

32 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 32 Fresh Focused & Enthusiasts Center Store Focused & Enthusiasts Frozen Frozen Vegetables Unprepared Frozen Meat Frozen Meals Frozen Novelties (Ice Cream Snacks) Frozen Pizza Frozen Potatoes Canned Canned Corn Canned Beans Canned Tomatoes Canned Green Beans Canned Pineapple Canned Peaches Canned Spaghetti Drinks Milk Refrigerated Juice Carbonated Beverages Shelf-Stable Juice Sweets Baking Supplies Bakery Desserts Chocolate Candy Cookies Bakery Desserts Fresh Fruits Fresh Grapes Fresh Oranges Fresh Stone Fruit Fresh Melons Fresh Bananas Fresh Apples Fresh Berries Fresh Vegetables Fresh Tomatoes Fresh Celery Fresh Peppers Fresh Mushrooms Fresh Lettuce Fresh Potatoes Fresh Onions Fresh Carrots CONSUMERS USE THE STORE TO SOLVE THE MEAL IN DIFFERENT WAYS Source: Nielsen Homescan Panel, 52 weeks ending 03/29/2014

33 THE FUTURE OF FRESH

34 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 34 FUTURE ISN’T A FRESH TAKE-OVER, BUT UNDERSTANDING THE ROLE FRESH IS GOING TO PLAY IN THE STORE We’ve already observed many factors have played a role in the growth of fresh Source: Nielsen Perishables Group Total store as a complex “ecosystem” with many players that have impact on one another

35 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 35 DRAWING CONNECTIONS Quantify impact, Identify friends and foes, Act with new paths to win Source: Nielsen Perishables Group 314 Categories across the entire store (incl. food & non-food) 49,449 Sales Correlations calculated for every store and every week +19 Million Trips across all outlets New dataset for Nielsen Advanced Analytics combining UPC and non-UPC category retail sales data NIELSEN TOTAL STORE CONNECTIVITY STUDY Improved Nielsen Homescan Total Shopper View, a specialty panel where shoppers track UPC items and random-weight category purchases Enabling Total Store Sales AnalyticsEnabling Total Store Buyer Analytics

36 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 36 DEFINING RANGES OF SALES CONNECTIVITY ACROSS THE STORE Source: Nielsen Total Store Connectivity Study, Strong positive correlation Weak correlation Strong negative correlation Average correlation factor between any two categories = Category sales trend in opposing direction measured over time (week/store level) Category sales trend in the same direction over time (week/store level)

37 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 37 INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT MEAT Average correlation between any two categories Average correlation between beef and any other category BEVERAGES: Tea & Cocoa: 0.70 Water: 0.64 New age bev: 0.63 INGREDINTS: Sauces/seasonings: 0.74 Condiments: 0.72 Fresh Onions: 0.65 SIDE DISHES: Fresh Potatoes 0.71 Canned goods: 0.68 FZ vegetables: 0.62 SNACKS: Salty Snacks: 0.69 Fresh Grapes: 0.68 Dairy Brick cheese: Fresh beef is an ANCHOR category with strong connections across occasions and aisles throughout the TOTAL STORE BEEF SWEETS/DESSERTS: Frozen Dessert: 0.69 Fresh Cakes: 0.68 Fresh Cookies: 0.56 Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

38 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 38 SHIFTS IN “ANCHOR” CATEGORY PERFORMANCE CAN IMPACT SALES ACROSS THE ENTIRE STORE Volume %Chg vs. YAGO Total Beef ARP* %Chg vs. YAGO +16%+11%+10%+11%+12% +13% +12%+15%+11%+9% Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined; *ARP = Average Retail Price (per pound) Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined; Many center-store products were directly impacted when fresh beef prices increased in What will happen in 2014?

39 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 39 Growth in INDEPENDENTS like deli prepared indicate a retailer is winning a unique buyer, a unique trip or both Average correlation between deli prepared categories and others.17 INDEPENDENT = Low number of touch points across the store DELI PREPARED FOODS $12.6 B, up 7.6%, 95% HH penetration INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT DELI PREPARED FOODS Despite their size and growth, some categories remain relatively independent Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July Average correlation between any two categories

40 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 40 STRONG SALES IN INDEPENDENT CATEGORIES CAN DRIVE INCREMENTAL GROWTH FOR RETAILERS Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending 03/29/2014 Quick trip Fill-in trip Stock-up trip Share of Sales By Trip Type TOTAL STORE DELI PREPARED SANDWICHES $1.3B, up 6%, 29% HH penetration DELI PREPARED PIZZA $667M, up 3%, 18% HH penetration <6 items in the basket 6-15 items in the basket 15+ items in the basket Most deli prepared buying happens on quick trips and does appear to cannibalize stock-up meal solutions from other parts of the store

41 CONCLUSION

42 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 42 KEY TAKE-AWAYS The market environment is always changing (economy, natural events, store openings and closings) There are some “constants” (the desire for quality, convenience, savings etc…) What’s evolving is how consumers solve for these “constants” – the increasing diversity of consumer types, store formats and products competing for the same need state makes this whole ecosystem a little more complex Today we’ve investigated some examples of fresh products that are winning in the current environment, but fresh success doesn’t always lead to total store success Success down the road relies on understanding how consumers use not only fresh, but all products in the store to solve the meal Source: Nielsen Perishables Group

43 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 43 PUT MORE SIMPLY The evolution of analytics is a model that puts the consumer at the center PAST FUTURE SUCCESS IN THE “ECOSYSTEM” Source: Nielsen Perishables Group

44 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 44 THANK YOU Source: Nielsen Perishables Group

45 QUESTIONS? CONTACT NIELSEN PERISHABLES GROUP CHRIS BALZER │

46 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 46 INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT MEAT Average correlation between any two categories Average correlation between beef and any other category BEVERAGES: Tea & Cocoa: 0.70 Water: 0.64 New age bev: 0.63 INGREDINTS: Sauces/seasonings: 0.74 Condiments: 0.72 Fresh Onions: 0.65 SIDE DISHES: Fresh Potatoes 0.71 Canned goods: 0.68 FZ vegetables: 0.62 SNACKS: Salty Snacks: 0.69 Fresh Grapes: 0.68 Dairy Brick cheese: Fresh beef is an ANCHOR category with strong connections across occasions and aisles throughout the TOTAL STORE BEEF SWEETS/DESSERTS: Frozen Dessert: 0.69 Fresh Cakes: 0.68 Fresh Cookies: 0.56 Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

47 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 47 SHIFTS IN “ANCHOR” CATEGORY PERFORMANCE CAN IMPACT SALES ACROSS THE ENTIRE STORE Volume %Chg vs. YAGO Total Beef ARP* %Chg vs. YAGO +16%+11%+10%+11%+12% +13% +12%+15%+11%+9% Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined; *ARP = Average Retail Price (per pound) Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined; Many center-store products were directly impacted when fresh beef prices increased in What will happen in 2014?

48 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 48 INITIAL FINDING: AN “ANCHOR” LIKE FRESH BEEF CONNECTS IN DIFFERENT WAYS TO DIFFERENT BUYERS Each connection reveals a unique buyer profile- showing opportunity for different solutions even in similar categories Sources: 1- Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014 ; 2- Nielsen Homescan Total Shopper View Specialty Panel, latest 52 weeks ending 3/29/14 SIDE DISHES 1 : Potatoes 0.71 Canned goods: 0.68 FZ vegetables: 0.62 BEEF Frozen Veg Canned Veg 2 Gen X to Boomers Affluent Higher Education HH with older children Fresh Enthusiasts Empty Nesters Less Educated Couples Hispanic-skew Fresh/Center Moderates Boomers and older Lower education levels Couples Hispanic-skew (Similar to Canned Veg) Rural Fresh Focused Fresh Potatoes SWEETS/DESSERTS 1 : Frozen dessert: 0.69 Fresh cakes: 0.68 Grocery cookies: 0.56 BEEF Grocery Cookies Frozen Desserts 2 Gen X Less educated Young families Mid-income Hispanic Empty Nesters and HH w older children Affluent Comfortable country Fresh Enthusiast Small and young families Mid-income to affluent Hispanic Fresh Enthusiasts Fresh Cakes Highest Indexing Demographics/Fresh Segment for Beef And Side Dishes:Highest Indexing Demographics/Fresh Segment for Beef And Sweets:

49 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 49 Growth in INDEPENDENTS like deli prepared indicate a retailer is winning a unique buyer, a unique trip or both Average correlation between deli prepared categories and others.17 INDEPENDENT = Low number of touch points across the store DELI PREPARED FOODS $12.6 B, up 7.6%, 95% HH penetration INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT DELI PREPARED FOODS Despite their size and growth, some categories remain relatively independent Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July Average correlation between any two categories

50 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 50 STRONG SALES IN INDEPENDENT CATEGORIES CAN DRIVE INCREMENTAL GROWTH FOR RETAILERS Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending 03/29/2014 Quick trip Fill-in trip Stock-up trip Share of Sales By Trip Type TOTAL STORE DELI PREPARED SANDWICHES $1.3B, up 6%, 29% HH penetration DELI PREPARED PIZZA $667M, up 3%, 18% HH penetration <6 items in the basket 6-15 items in the basket 15+ items in the basket Most deli prepared buying happens on quick trips and does appear to cannibalize stock-up meal solutions from other parts of the store

51 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 51 SOLUTIONS CENTER SHOPPING Trying to redefine convenience

52 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 52 FIGHTING FOR FOOT TRAFFIC Piggy backing partners

53 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 53 BLUR THE LINES TO CREATE AN EXPERIENCE Source: Mariano’s (Business Wire & Facebook); Leopardo (drawing); Source: KSDK-St. Louis; Photography by J. Pollack Photography Sources: Supermarket News; quote by Randy Edeker, Hy-Vee chairman, president & CEO

54 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 54 MAKE IT EVEN EASIER THAN EVER FOR SHOPPERS You don’t even have to leave your home

55 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 55 A FULL STORE PERSPECTIVE WILL HELP KRAFT… …understand how to maximize product performance based on understanding competitive threats in the store but also aligning more strategically with key fresh drivers … optimize trade investments by designing and evaluating more compelling cross-aisle partnerships … innovate new fresh concepts with Kraft product lines and identify white space opportunities (product innovation, acquisitions, retail targeting) …provide total store leadership to retail partners – new solutions to win bigger baskets and more frequent trips

56 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 56 TRIP TYPES: FREQUENCY OR SPEND? Source: 1- Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending March FreshFacts® Shopper Insights powered by DataLogix, 52 weeks ending May 2014 Share of Trips- Supermarket Grocery 2 Share of Store Sales Quick TripFill-in TripStock-up Trip 41% 32%27% 63%24%13% Larger item trips still drive two-thirds of a supermarkets’ bottom line – but they only happen around one-quarter of the time Shifting Focus Quick trips are becoming increasingly important to win

57 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 57 DESPITE TIGHTENING WALLETS, INTEREST IN TRADITIONAL PROMOTION WANES Source: 1. Nielsen; 2. Market Track Of the $216B in promoted sales, only 17% is mutual growth that benefits both retailers and suppliers Trade promotional spend is among the largest expenses for manufacturers, but success is low, even in a period of rising food costs. Discounts down 2 pts

58 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 58 Same-Store Sales: Average Growth, latest 52 weeks DESPITE TIGHTENING WALLETS, SPECIALTY RETAILERS WIN ON INNOVATIVE EXECUTION AND EXPERIENCE Successful retailers are nailing jobs Source: Company press releases; monthly or quarterly news releases – excluding gas Strong affluent shopper attraction Strong lower income attraction No strong attraction

59 59 Copyright ©2014 The Nielsen Company. Confidential and proprietary. 6-Count Muffins Deli Breakfast Eggs Strudel Mini Bagels Deli Breakfast Sandwiches French Toast/Pancakes/Waffles +94% +49% +47% +26% +22% +15% +76% +22% +31% +18% +13% +21% DOLLAR % GROWTH VS YAGO VOLUME % GROWTH VS YAGO FRESH BREAKFAST CATEGORIES Breakfast heating up outside store PRIORITY AREAS IMPACT MEAL OCCASIONS ACROSS THE STORE: BREAKFAST Source: 1. International Dairy-Deli-Bakery Association, Deli Business, Jan Nielsen Perishables Group 52-weeks ending 2/22/14 3. Supermarket News WHAT WE BUY

60 60 Copyright ©2014 The Nielsen Company. Confidential and proprietary. PRIORITY AREAS IMPACT RETAILERS: THE MOST HEALTH-ENGAGED SHOP AND SPEND Source: Natural Marketing Institute (NMI), Health & Wellness Segmentation, Nielsen Homescan for Total U.S. – 52 weeks ending 12/28/2013; segment definitions in appendix Across All Outlets Combined WELL BEINGS are active shoppers & spend the most annually WHAT WE BUY Concern Towards Health & Wellness

61 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 61 THESE CONCEPTS GO BEYOND FRESH Health, convenience, quality/value and global are driving trends: Inside the StoreAnd Beyond

62 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 62 WHO’S DRIVING YOUR GROWTH? While a category may be growing or declining overall, performance within segments varies signaling where focus should be to grow the category Fresh Focused Fresh Enthusiasts Moderates Total Center Store Enthusiasts Center Store Focused Fresh Chicken Canned Soup Wine Dollar Growth by Segment: Source: Nielsen Homescan Panel, 52 weeks ending 03/29/2014 & YAGO

63 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 63 Fresh FocusedFresh EnthusiastsModeratesCenter Store Enthusiasts Center Store Focused Who are they more likely to be? Affluent singles Affluent, mid-size families Large familiesStart-up familiesSenior singles THEY SHOP DIFFERENTLY- BUT EACH SEGMENT HAS AN IMPACT ACROSS AISLES AND OUTLETS Source: Fresh Segmentation, Nielsen Homescan Total Shopper View Panel, 52 weeks ending 03/29/2014 $36.85$37.35$35.15$33.22$ trips138 trips162 trips189 trips197 trips >120 <80 Index to Total Panel Channel:Mass/SuperWarehouseConvenience/GasDrug$2MM+ Grocery Avg Store Trip Store Visits Channel Trips Index Avg Fresh Trip Avg Center Trip $21.13$17.87$14.69$11.88$8.84 $23.31$25.36$25.39$24.64$23.25 WHO BUYS WHAT

64 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 64 Florist Cafe Dry Grocery HBC Frozen Beverage Center Produce Deli Seafood Meat Dairy Bakery Rx Non-Food BUT IT’S STILL ALL CONNECTED AND STEADY– BEYOND DEPARTMENT AND AISLE BORDERS Source: Nielsen Perishables Group Total Shopper Study, Homescan Total Shopper View Specialty Panel, 52 weeks ending 3/29/14 = size indicates % of trip dollars

65 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 65 EVOLUTION OF FOOD RETAIL PASTPRESENT FUTURE Fresh: commodity driven Put shoppers at the center, take a holistic approach SHOPPER Retailer: grocery dominated Center store: brands, innovation Fresh: growing more savvy Retailer: more & more competition Center store: disparate growth

66 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 66 CONVENIENT OPTIONS BECOMING MORE POPULAR; CONSUMERS PAY MORE FOR A DIFFERENT KIND OF VALUE Source: Nielsen Perishables Group FreshFacts ®, 52 Weeks Ending 12/28/13; Total U.S. FCA Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13 Fresh Cut Fruit Jars and Cups Overwrap Meal Prep Side Dish Snacking Trays HOUSEHOLD PENETRATION +0.8% PURCHASE FREQUENCY +2.1% DOLLAR SALES +11.9% HOUSEHOLD PENETRATION +2.0% PURCHASE FREQUENCY +4.0% DOLLAR SALES +13.5% VALUE-ADDED FRUITVALUE-ADDED VEGETABLES Frozen buyers are decreasing purchase of similar product

67 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 67 EXOTIC FLAVORS AND NEW CONSUMER EXPERIENCES Source: Nielsen Perishables Group FreshFacts ®, 52 Weeks Ending 12/28/13; Total U.S. FCA, PMA 2013 trade show Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13 DOLLAR SALES +14.9% SPEND PER TRIP +3.1% MANGO SALES +17.0% POMEGRANATE SALES +34.7% PAPAYA SALES +21.3% SPECIALTY FRUITS Milennialls pay a premium for a unique eating experience Old products deliver a new experience

68 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 68 HEALTHY ISN’T HEALTHY ENOUGH Source: PMA 2013 trade show, brand websites Opportunity for messaging of health benefits in produce SUPERFOODSCALORIE COUNTING These commodities didn’t actually become healthier did they?

69 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 69 CONNECTING TO A SPECIFIC EATING OCCASION Source: PMA 2013 trade show, brand websites Opportunities exist for premium-priced offerings RISE OF SNACKINGSTRONG GROWTH IN BRANDED OPTIONS

70 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 70 EXAMPLE OF CONNECTIVITY FINDINGS Source: Nielsen Perishables Group Total Store Connectivity Study BEEF Average correlation between any two categories Fresh meat sales connections strongest outside of fresh while the fresh departments are most tied to each other Growth in INDEPENDENTS like deli prepared foods indicate a retailer is winning a unique buyer, a unique trip or both INDEPENDENT = Low number of touch points across the store – incremental opportunities.32 Average correlation between deli prepared categories and others.17 Average correlation between beef and any other category.42 ANCHOR = Highly connected categories – critical to everyone’s success Correlations and household in common can confirm and surprise with the strength of what’s connected

71 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 71 The Power of Sales + Shopper in Connectivity Demographics and behavioral factors also play a vital role in understanding which consumers drive category connections Chicken breasts Pork chops Ground beef Macaroni and cheese Purchase pairing indexes high for… Price-focused Families with children Couples without children Purchase pairing indexes high for… Convenience and value focused Low – middle income Families with children in- home Source: Nielsen Perishables - The Full Article At EXAMPLE CONNECTIVITY STUDY FINDINGS Demographics and behavioral factors also play a vital role in understanding which consumers drive category connections across the store Health-focused Middle – affluent income Families with young children or Couples without children

72 Copyright ©2013 The Nielsen Company. Confidential and proprietary. 72 INITIAL FINDING: AN “ANCHOR” LIKE FRESH BEEF CONNECTS IN DIFFERENT WAYS TO DIFFERENT BUYERS Each connection reveals a unique buyer profile- showing opportunity for different solutions even in similar categories Sources: 1- Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014 ; 2- Nielsen Homescan Total Shopper View Specialty Panel, latest 52 weeks ending 3/29/14 SIDE DISHES 1 : Potatoes 0.71 Canned goods: 0.68 FZ vegetables: 0.62 BEEF Frozen Veg Canned Veg 2 Gen X to Boomers Affluent Higher Education HH with older children Fresh Enthusiasts Empty Nesters Less Educated Couples Hispanic-skew Fresh/Center Moderates Boomers and older Lower education levels Couples Hispanic-skew (Similar to Canned Veg) Rural Fresh Focused Fresh Potatoes SWEETS/DESSERTS 1 : Frozen dessert: 0.69 Fresh cakes: 0.68 Grocery cookies: 0.56 BEEF Grocery Cookies Frozen Desserts 2 Gen X Less educated Young families Mid-income Hispanic Empty Nesters and HH w older children Affluent Comfortable country Fresh Enthusiast Small and young families Mid-income to affluent Hispanic Fresh Enthusiasts Fresh Cakes Highest Indexing Demographics/Fresh Segment for Beef And Side Dishes:Highest Indexing Demographics/Fresh Segment for Beef And Sweets:


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