i Final Damon

8/3/2019 i Final Damon

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Consumer Trends andPrivate Label

John KrohnDirector, Category Management & Insight


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Todays Topics

Consumer TrendsFactors Driving Demand

Whats Coming

Private LabelGlobal Impact

Domestic ImpactPrivate Label Evolution

Trends in Product Development


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Whats Driving theConsumer


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SOURCE: Hartman Group Study on Shopper Insights 2005

Cultural Trends Driving Shopping Occasions11 Distinct Shopping Motivators

After-Work

Party Fixings

Traditional Weekly

Destination

Random Emergency

Crafting Recipes

Recreation

Coffee Shop Experience

Workout Fuel

Socializing with Friends

Meal Eaten in Store

What motivates Consumers?How do we fulfill their needs?


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Cultural Occasions Driving Demand

0

10

20

30

40

50

60

7080

90

100

Trad

itiona

lWeekly

Desti

nation

Rand

omEme

rgency

Craft

inga

Recipe

Afte

r-Wor

kSup

plement

Recratio

n

Coffe

eSho

pExp

erience

Mea

lInSto

re

Party

Fixings

Socia

lizing

w/F

riends

Wor

koutFu

el

In Past Month Most Recent

PercentofTrips

SOURCE: Hartman Group, Shopper Insights 2005


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Household Definitions are Changing

Independent singles

Increase in Men and Womenliving alone

Family structure is changing

Increased divorce rates

Significant decrease in MarriedCouples with Children


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Current US Consumer Trends:Natural & Organic US Diversity Shift

66% of Americans have used Organic productsin the past year, up from 55% in 2000.

61% of consumers who purchase natural andorganic foods buy them in supermarkets

By 2040, Hispanic, Asian, and AfricanAmericans will represent over 50% of theUS Population.

SOURCE: The Hartman Group


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Consumer Education


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An Educated Consumer

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

Less than High School

1-3 years High School

4 years High School

1-3 years College

4 years or more College

Years of Education Among All PeopleAged 25 or Older (U.S. Only)

Source: U.S. Census Bureau


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The Food Network: Impacting Consumers

Consumer choice and shopping motivationinspired by top chefs, are seeking out new

recipes and authentic ingredients


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Travel Abroad: New Culture, NewExperience

-

1

2

34

5

6

7

8

9

10

1

9

7

4

1

9

7

7

1

9

8

0

1

9

8

3

1

9

8

6

1

9

8

9

1

9

9

2

1

9

9

5

1

9

9

8

2

0

0

1

2

0

0

4

M

illions

# of U.S. Passports Issued Annually


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Experiencing Other Cultures with Food & Taste

2%Africa

3%Oceania

4%Middle East

4%Eastern Europe

7%Central America

9%South America

18%Caribbean

19%Asia

40%Western Europe

22%Nightclub/ Dancing

22%Water Sports/Sunbathing28%Art Gallery, Museum

31%Cultural Heritage Sights

35%Touring the Countryside

43%Sightseeing in Cities43%Visit Small Towns/Villages

51%Visit Historical Places

75%Shopping

84%Dining in Restaurants

Top Destinations

SOURCE: U.S. Department of Commerce, ITA, Office of Travel & Tourism Industries, "In-Flight Survey," May 2005

Top Recreational Activities

Among US Resident Travelers to Overseas Destinations


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The Aging Consumer


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To Put it in Perspective

No challenge is as certain as global aging, and noneis as likely to have as large and enduring an effect on the size and shape of government budgets, on thefuture growth of living standards, and on the stabilityof the global economy and even the world order.

-- Center for Strategic & International Studies


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Aging: Income & EducationThe Most Affluent Retirees in History, But Not All

Age 50+ individuals own 80% of U.S.

Financial assets & dispose of 50% ofdiscretionary income.

Todays workers feel optimistic about thefuture, but real savings are declining and

people are not planning for retirement. Resources that many boomers are

counting on to fund retirement are likely tobe cut drastically.

The aging population will more sharplydivide into haves and have nots.

10%

25%

40%

25%

Poverty Less than $35K $35K-$95K More than $95K

Bab Boomer Households

Source: Enhancing Volunteerism Among Aging Boomers, AARP 2003, AARP via Nielsen 360, www.marketingresearch.com


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Current US Consumer Trends:Baby Boomer/Aging Consumer Trends

By 2030, the percentage of persons 65+ in the US will almost double, growing fromthe current 12.5% to 23%

The Boomers are expected to utilize Drug stores for health needs, andconvenience for groceries.

0

2

4

6

8

10

12

14

Under 25 25-34 35-44 45-54 55-64 65+

Age Groups

%o

fExpenditures

HealthCare

Food atHome

Food Away

From Home

SOURCE: Willard Bishop; Competitive Edge Report Dec2004

VNU: The Aging U.S. Population


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Behavioral Trends in the Aging

Resulting EffectsBehavior Trend

Boomers will redecorate, renovate, and even move or buysecond homes in less metropolitan or rural areas.

Cocooning, Enjoying the Home

As the nest empties, couples with more time and money will turneating into a leisure activity seeking healthier, tastier foods and

cooking for two for fun.

Healthy Eating

Affluent Boomers will spend more money than ever before onhealth and appearance.

Do Not Want to Look or FeelOld

More working out, traveling, leisure, entertainmentContinue to Seek Adventure

Working past traditional working years, alternative careers arestarting earlier, The chance to contribute to society.

Desire to Stay Young & Active

As their children leave the home, empty nesters are finding more

time and money to spend on themselves.

Continued Desire for Comfort


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Convenience Meets Lifestyle Need

1. Easy I.D.The name of the drug is printed on the top of the bottle, soits visible if kept in a drawer.

2. Code red.The red color of the bottle is Targets signature and auniversal symbol for caution.

3. Information hierarchy.Adler divided the label into primary and secondary positions,separated by a horizontal line.

4. Upside down to save paper.

Klaus Rosburg, a Brooklyn-based industrial designer hiredby Target, came up with an upside-down version that standson its cap, so that the label can be wrapped around the top.

5. Green is for Grandma.Adler and Rosburg developed a system of six colored rubberrings that attach to the neck of the bottle.

6. An info card thats hard to lose.

A card with more detailed information on a drug (commonuses, side effects) is now tucked behind the label.

7. Take daily.Adler avoided using the word once on the label, since itmeans eleven in Spanish.

SOURCE: New York Magazine


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Health and Wellness


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To Put it in Perspective

For the first time in human history, the number ofoverweight people rivals the number of underweightpeople. ... While the worlds underfed population hasdeclined slightly since 1980 to 1.1 billion, the numberof overweight people has surged to 1.1 billion.

--American Obesity Society

Source: American Obesity Society


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Barriers to Eating Healthy

Cost

34% of shoppers say that the cost

of healthful foods deters them tofrom eating better.

Conflicting/Confusing information onhealthful foods

Atkins diet, low-carb diets Despite these barriers, shoppers tend

to make purchases based on healthand nutritional claims on the package

Source: Food Marketing Institute 2005


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Health and Wellness

Shoppers believe thatsupermarkets are not the bestoutlets for meeting their healthneeds.

The group mostly like to move

away from supermarkets are theyoung shoppers.

Shoppers want information,convenience, and products thathelp them to lose weight.

Gen.Y Gen. X Boomers MaturesHealth prepared

foods46 59 52 50 34

Foods without

trans-fatty acids45 52 43 51 36

Low fat foods 40 48 42 40 36

Low-carbohydrate

foods39 48 40 40 32

Information about

weight loss36 43 40 37 29

Organic foods 34 40 40 34 28

Herbal and naturalremedies

33 40 34 40 21

Vitamin and

mineral27 37 33 27 22

Generation %Want my store to

offer more

Total

%

Proportion of Shoppers Who Want Their Storeto Offer More of Each Product of service



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The Organic Consumer

The Hartman group reports that 66% havetried organic food and beverages.

Mainstream is moving the demographicprofile of the organic consumer

The Organic Shopper has less to do with

demographic and more to do withattitude toward food and health

concerns


43%

15%14% 14%

11%

Groc

ery

Supermark

ets

+Discou

nt

Specilaity

FarmersM

kts

HealthF

ood

Stores

% of Shoppers who Purchase

Organic Foods by Outlet:


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Natural & Organic Now Mainstream


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Private LabelWorldwide


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Privat e Label Evolut ionPrivat e Label Evolut ion

1970sGeneric


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Privat e Label Evolut ion

1980s Me Too


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1990sPremium


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TodayUnique


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Global Impact

$108B Global Grocery Sales

Global Growth 3% All CategoriesPrivate Label up 5%

National Brands up only 2%

Discount Retailers have seen the fastest growth in Private Label

Mature markets (Germany & Spain) are still experiencing stronggrowth

2/3rd of Consumers Consider PL Good AlternativeNorth America & Western Europe 4/5th

SOURCE: ACNielsen Power of Private Label 2005

Reuters: Fighting Private Label in Germany AiMark/Europanel

Datamonitor: How to Resist the Private Label Threat in 2006


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Private Label by Region

2%

4%

6%

16%

23%

17%

Latin America

Asia Pacific

Emerging Markets

North America

Europe

Global

5%

5%

11%

7%

4%

5%

Latin America

Asia Pacific

Emerging Markets

North America

Europe

Global

Private Label Dollar Share Private Label Dollar Growth

SOURCE: ACNielsen The Power of Private Label 2005


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Room for Growth

SOURCE: Reuters, Business Insights, Fighting Private Label in Germany 2005


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Private LabelDefined


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Private Label Defined

Exclusive Products only available at a specific chain of stores

Not limited to Food and Drug Industry

Not defined by Geography

Private Brands are Everywhere


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Brand Tiers

Banana Republic is known for casual luxury, with high-quality apparelfor men and women and sophisticated seasonal collections ofaccessories, shoes, personal care products, intimate apparel andgifts

for the home. The brand's timeless style and luxurious fabricationscapture a modern interpretation of classic fashion. Customers canexpect exceptional service from Banana Republic

Old Navy makes shopping fun again! With great fashion at great pricesfor adults, kids and babies, Old Navy is famous for the best in denim,graphic tees, cargos, Performance Fleece, plus the Old Navy Itemofthe Week; each and every week, a special item at a special price.

Gap has provided its customers with clothing and accessories thatenhance personal style. What began as one brand has grown to includeGap, GapKids, babyGap and GapBody. By providing great style, value

and service.


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Brand Tiers

Gap has provided its customers with clothing and accessories thatenhance personal style. What began as one brand has grown toinclude Gap, GapKids, babyGap and GapBody. By providing great

style, value and service.

Banana Republic is known forcasual luxury, withhigh-qualityapparelfor men and women and sophisticatedseasonal collections of

accessories, shoes, personal care products, intimate apparel andgiftsfor the home. The brand's timeless styleand luxuriousfabricationscapture a modern interpretation ofclassic fashion. Customers canexpect exceptional servicefrom Banana Republic

Old Navy makes shopping fun again! With great fashion at greatpricesfor adults, kids and babies, Old Navy is famous for the best indenim, graphic tees, cargos, Performance Fleece, plus the Old NavyItem of the Week; each and every week, a special item at a special

price.Value

Mainstream

Premium


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Private LabelGrowth


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PRIVATE LABEL GROWTH 2004

Private Label Growth Factors

Growth is outpacing National Brands

Breaking into new and diversecategories and channels of trade

Positioned to meet changingconsumers demands

Adding excitement to the consumersretail experience

Good and/or Better Quality as

compared to the National Brands


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Private Label Growth in Categories

Private Label has become the category share leader in 95 categoriesover the past 8 years.

SOURCE: ACNielsen Homescan; Total US, AllOutlets; Share measured in dollars

Total # of Categories

# of Categories with Private Label

# of Categories w/Private Label Ranked # 1a

1997 2005

1,022

709

146

1,062

832

241


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Global Private Label Product Development

SOURCE: Mintel, Global New Products Database 2006

Almost 12,000 New PrivateLabel Items launched in thelast year

Top two -USA (25%), UK(20%)

Canada, France & GermanyRounded out Top 5

26% of the Food items werepositioned as healthier


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Consumer Reports August 2004 Big name detergents arent much

better cleanersBut they cost 2 to 3times as much

Tide with Bleach Alternative

$0.31 /Load

Kirkland Signature

$0.11 /Load

3 of the 6 Best Buys were Own Brand LaundryDetergents

Kirkland Signature (Costco) was the highest overallrated detergent based on quality and value. Onlyproduct to get Excellent score in all categories.

Winn-Dixie and Sears Own Brand were also ratedCR Best Buys


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Consumer Reports August 2005

Tested 65 products in six categoriesincluding: facial tissues, paper

towels, plastic bags, cannedpeaches, french fries, and yogurt

Many store brands are at least as

good as national brands.

Switching to a store brand can cut thecost of a product by as much as half.

The companies that make store

brands are often household names.Our behind-the-scenes peek showsthat they include Sara Lee, DelMonte, and Birds Eye.


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Source: GNPD, Private Label Prices from Retail Audits

Brands are Positioning Themselves

Charmin Basic

Soft, Strong, Sensible.

KRAFT

Product Reformulations


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SKU Rationalization

Over 33,000 New Products introduced last year: Only 22 generated over $50 million in annual retail sales

Majority of which were line extensions, new flavors/scents, or Me Too Few meaningful to the Consumer

Major Brands are consolidating their Portfolios

Retailers are increasingly able to differentiate their productsand drive category innovation.


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Private Label Brand Loyalty


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Out-of-StoreEnvironment

Direct Mail

Advertising

OutDoor

Promotions

RetailerPositioning In-StoreEnvironment

Employees

Destination

Marketing/POP

Promotions

Retail Solutions

Demos

Creating a Consistent Brand Experience

Private LabelPortfolio

Product

Package

Tiers


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ConsumerUnderstanding


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Changing Attitudes Toward Private Label

THEN

Cheap goods, low quality

Blue collar, downscalefamilies

Not educated

Necessity

NOW

NBE or better w/ consistentquality

Everyone buys it

Smart, aware

Choice

No longer a homogenous view of the typical private label shopper


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Food Enthusiast Enjoy Cooking Try new Products/Recipes

Prefer Food Presented asan Art form Tend to watch Food Network,

Martha Stewart Living or ReadFood & Wine, Bon Appetite, andalso Shop at Williams-Sonoma

Core Corporate

Brand ShopperHave purchased a specificcombination of PL items fromboth High and LowPenetrated categories

Consumer Understanding

The Premium Target Consumer

Customer Consumer Skew HH Income $50K+

Some College Education 2+ Person HH

ThePremium

ConsumerTarget


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Findings based on Simmons 2003

Consumer UnderstandingMarketing to the Premium Private Label ConsumerFamily & Career Oriented:

Enjoy Entertaining People at Home

Like Spending Time with Family

Look at Work as a Career, not just a Job

Food Enthusiast:

Prefer Authentic Foreign, Gourmet, and Spicy Foods

Thoroughly Enjoy Cooking and Trying New Recipes and New Food Products.

Always look for the Freshest Ingredients when CookingThe Stores Environment makes a Difference whether I shop there or not.

Health Conscious:

Regularly Diet and Exercise

Make a conscious effort to Monitor Product Ingredients on Packaging

Though these consumers try to maintain a healthy lifestyle, they also agree that there isnothing wrong with indulging in fattening foods .


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Whats to Come?


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Building Loyalty


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Private Label Innovation


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Private Label Going Up-Scale


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Expanding Categories


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Thank You

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