Confidential & Proprietary Copyright © 2009 The Nielsen Company PLMA Q3 2009 Return of the Cautious...

Confidential & Proprietary Copyright © 2009 The Nielsen Company PLMA Q3 2009

Return of the Cautious Consumer

15th December, 2009Rob Prosser


Today’s discussion

How has the global recession

impacted the industry?

How have consumers responded?

What’s the PL outlook for

2010?


• Consumers looking beyond the Global Economic Crisis and focussing on recovery

• Grocery channel still showing positive growth in Australia

• Grocery suppliers looking more optimistic but concern around external pressures and impact on profitability

How has the global

recession impacted the

industry?


Government spending at unprecedented levels

Source: The Standard, 2 April 2009


75

80

85

90

95

100

105

110

115

120

Apr 2007 Oct 2007 May 2008 Oct 2008 Apr 2009 June 2009 Oct 2009

Aus NZ Asia-Pac Global

Consumer sentiment plummeted in the midst of the GFC but latest data shows clear signs of recovery

Source: Nielsen Global Consumer Confidence survey

Consumer Confidence

+11

+11

+6

+4


Base (AUS): All Manufacturers: Nov 2005 (n=117) May 2006 (n=118), Nov 2006 (n = 131), May 2007 (n= 129). Nov 2007 (n=112), May 2008 (n=102) , Jan 2009 (n=93), May 2009 (n=105) Base (NZ): All manufacturers Feb 2006 (66), Nov 2006 (64), May 2007 (60), Nov 2007 (54), Jun 2008(67), Nov 2008 (55), Jun 2009 (66)Source: Aus – Homescan (Packaged grocery incl. Fresh); NZ – ScanTrack

Business conditions are improving but NZ suppliers still feeling the heat…

January 2009

+ 18%

- 49%Net:

- 31%

Q. Compared to the same time last year, do you think business conditions in your industry have improved or deteriorated?

May 2009

+ 38%

- 33%Net:

+ 5%

November 2008

+ 2%

- 85%Net:

- 83%

June 2009

+ 17%

- 61%Net:

- 44%

Packaged grocery growthMAT Oct 2009 vs YAValue: +5.6%, Units: +1.4%

Packaged grocery growthMAT Oct 2009 vs YAValue: -2.5%, Units: -9.1%


1. Global recession

2. Private Label growth

3. Increased cost of raw

materials

4. Increase in promotional

sales/ erosion in baseline

5. Pressure on trading

terms

1. Maintaining margins

2. Pressure on trading

terms

3. Ability to pass on price

increases

4. Australian recession

5. Private Label growth

Underlying supplier concerns centre on profitability driven by local economic conditions

Base: All Manufacturers: Aus (n=105); NZ (66) – Retail Barometer June 2009

Q Which of the following issues concern you in terms of the impact they may have on your business? Rank the top five issues that concern you.


• Global recession has changed consumer values, spending habits and lifestyle choices – restraint is the new mantra

• Thrifty consumers will refrain from unnecessary spending and are prepared to shop around for the best value

• Adoption of Private Label as an attractive value proposition

• The ‘Masterchef effect’ – consumers cooking and entertaining at home more often

How have consumers responded?


Consumers coming to terms with the new economy but underlying caution remains

Tough but moderating conditions:

Free fall is over

Fundamental shift in

consumer spending:

Restraint is the new mantra

DenialDenial

UncertaintyUncertainty

FearFear

Acceptance Acceptance

$ Food$ Food

$ Fuel$ Fuel

UnemploymentUnemployment

Savings?

Discretionary Spending?

Savings?

Discretionary Spending?


The worst might be over but we know we’re not completely in the clear…

Major concerns:

1) Work/life balance

2) Economy

3) Increase in utility bills

Impacting the way we spend our spare cash…

1) Saving

2) Debt recovery

… & influencing where we cut back expenses:

•↓New clothes•↓Take-away meals• Save on utilities•↓OOH entertainment• Switch to cheaper grocery brands

Source: Nielsen Global Online Consumer Survey, October 2009 (Pacific results)


Significant fragmentation – Increase in the amount of households now shopping across more than four banners

Source: Nielsen Consumer : Homescan

% households shopping across 4+ banners

Oct 2008: 58.7%Oct 2009: 60.8%

An increase of 219,694 additional households

Sept 2008: 63.9%Sept 2009: 64.5%

An increase of 6,600 additional households


PL $ share of grocery: 22.9%

Average household PL spend per QTR: $186

Average spend change vs YA: +4.6%

Private Label remaining an attractive proposition to the value conscious consumer

Source: Homescan, QTR to Sept09


Source: AC Nielsen | Homescan (Australia)

ALDI continues growth in penetration, almost a third of all Australian Households now shopping at ALDI



WW’s claw back average spend to Dec 08 levels as shoppers move back to more premium PL.



Coles reverse declines in spend per buyer somewhat. PL share remains consistently above that of WW & IGA


Source: AC Nielsen | Homescan (Australia) – Issue# 385957, 385995, 385994, 38591, 385990, 385989, 385988

IGA ‘Signature’ has done little to increase penetration or share. Average spend per buyer has also remained fairly stagnant


Opportunity for PL in a concentrated market

What’s the PL outlook for 2010?


Strong correlation between PL share and retailer concentration, except…

Is it scale that limits PL share in these markets?


The ‘Masterchef effect’: 15/20 fastest growing categories linked to in-home entertainment, cook-from-scratch meals and more inspired/gourmet cooking

35.0

23.4

15.7

14.9

14.0

13.7

13.1

13.1

12.4

12.2

11.7

11.2

10.0

9.9

9.8

9.2

9.2

8.8

8.6

8.4

Packaged Smallgoods

Fresh Cream

Ice Cream

Chilled Seafood

Vitamins

Milk Additives

Canned Vegetables

Cooking Needs

Skin Care

Packaged Cheese

Personal Wash

Oils

Snack Foods

Frozen Pastry

Coffee

Chilled Spreads

Eggs

Confectionery

Biscuits

Deodorants

% value change vs YA

Top 20 fastest growing categoriesBased on Top 50 fastest growing categories ($ value) and ranked by % value change vs YAMAT 03/10/2009, Australia – all outlets

NZ fastest growing categories reflect same trend:

• Pasta + rice: +29%• Fats+oils:+22.1%• Coffee: +14.5%• Canned fish/seafood: +13.7%• Tea: +13.5%• Bottled/canned sauces: +11.9%


• PL Tiers and exclusive brands will remain a key part of retailer strategy

• Innovation – delivering on today’s most exciting food trends

• Convenient packaging, portion sizes and nutrition

• Mainstream advertising support

• Converting consumers looking for value into shopper loyalty

• Poised to grow as a lifestyle choice

Private Label trends and outlook in the Pacific


• Consumers are more optimistic but their shift in spending behaviour (restraint) may be here to stay

• In order to feed their growing demand for value – shoppers will channel switch, rely heavily on promotions and buy more Private Label

• The grocery trade is performing better than other food trade channels, but we’re not out of the woods yet…

Key takeouts


Thank you

www.au.nielsen.com

Confidential & Proprietary Copyright © 2009 The Nielsen Company PLMA Q3 2009 Return of the Cautious...

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