nd Value Study Consumables · Pinnacle Foods Mondelez Kraft Foods General Mills Church & Dwight...

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Tuesday, November 4, 2014Presented to POI Conference

2nd Annual CONSUMER Value Study

Consumables

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Our Mission: Use Analytical Innovation to Simplify and Improve the way sales analysis is conducted in

the CPG industry

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webinars.tabsgroup.com

Next WebinarDECEMBER 10, 2014, 2:00 PM

EST1st Annual Cosmetics Market

Study

3

TABS Group Expertise and Thought Leadership in Trade Promotion

CONSUMER Value Study

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Survey fielded by TNS to 1,000 Adults 18-75. August ‘13 and ‘14.

Areas of Questioning:

Consumables Categories Purchased and Frequency of Purchase (15 Categories)

Consumables Categories – Candy, Carb Bev, Salty Snacks, Ice Cream, Yogurt, Cereal, Refrig Drink, Fruit Juice, Cookies, Crackers

Strong Agreement on Types of Deal Tactics Utilized (10 Tactics)

Outlets where purchase Consumables Regularly (No specific Grocery breaks)

TABS Group Tests and Checks for:

Internal Data Validity

External Industry Corroboration (correlate data to Purchase Frequency by Category)

METHODOLOGY


5Source: US Bureau of Economic Analysis, Nielsen

DESERT OF DESPAIR

PROMOTIONS A PROBLEM

Pinnacle Foods Mondelez Kraft Foods General Mills Church & Dwight

4.2% 4.0%3.2%

2.3%1.5%

2009-2012Consumption

2009-2012Food/Bev

(AOC)

2012-2014Consumption

2012-2014Food/Bev

(All)

2012-2014Food/Bev

(AOC)

Why New Car Sales to the Youngest Generation of Drivers Slowed in 2013” Edmunds.com

“Millennials reject soft drinks, embrace energy drinks” Motley Fool

“Pop! How Mondelez lost millennial gum chewers” Crain’s Chicago Business

“McDonald’s Faces ‘Millennial’ Challenge”…Wall Street Journal

SOFT SALES AMONG MILLENIALS

Sluggish CPG sales, Industry Vets blaming Trade Promotions, Lower Sales from Millennials and Weaker Trade Promotion Efforts (Quality, not Quantity)BACKDROP


6

15.09

11.35

6.986.50 6.38

5.835.36

5.68 5.51 5.234.53

4.11 4.04 3.763.35

15.08

11.12

6.89 6.63 6.345.64 5.62 5.58 5.50 5.35

4.744.31 4.20

3.74 3.43

CARB BEVSALTYSNACK CEREAL YOGURT WATER ICE CREAM COOKIES FRUIT JUICE

REFRIGJUICE CRACKERS FROZ PIZZA

FROZNOVELTY CANDY POPCORN ISOTONIC

2013 2014

Avg. Reported Annual Purchases per Respondent

--- -2% -1% +2% -1% -3% +5% +3%----2% +4% +5% +4% -1% +3%

TABS Consumer Value Study corroborates industry trends showing flat sales for Consumables.

Source: TABS Group Consumer Value StudyAug. 2014. 1,000 General Pop Adults 18-75

Total Consumables Purchases

FLAT vs. YAG


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The divergent gender trends among Millennials is notable. Female -14%; Male

+6%


8

Demographic and Macroeconomic Trends of Millennial Women

• Living at home longer• Higher share of spending to tech• Married later


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9.89

7.517.89

7.517.08

6.306.04 5.94 5.94

6.18

5.51

4.85 4.824.39 4.41

8.15

6.47

7.276.81

6.02

4.91 5.075.36

5.025.32 5.44

4.22

3.35

3.94 3.97

CARB BEVSALTYSNACK CEREAL YOGURT WATER ICE CREAM COOKIES FRUIT JUICE

REFRIGJUICE CRACKERS FROZ PIZZA

FROZNOVELTY CANDY POPCORN ISOTONIC

2013 2014

F18-34 Reported Purchasing by Consumables Category (15% of Pop)

-14% -8% -9% -15% -22% -16% -14%-10% -1% -13% -30% -10% -10%

14 of 15 Categories show Sharp Declines among Female Millennials.

-18% -15%


Total Consumables Purchases

-14% vs. YAG

0 1 2 3 4 5 6 7 8 9 10

2013 6% 8% 13% 13% 15% 13% 13% 10% 6% 2% 2%

2014 8% 11% 12% 13% 14% 13% 11% 8% 6% 3% 2%

0%2%4%6%8%

10%12%14%16%

0 1 2 3 4 5 6 7 8 9 10

2013 6% 15% 27% 40% 54% 68% 80% 90% 96% 98% 100%

2014 8% 19% 31% 44% 58% 71% 82% 90% 95% 99% 100%

0%10%20%30%40%50%60%70%80%90%

100%110%

Total Deal Tactics Utilized

DISTRIBUTION CURVE - % of Total Respondents

CUMULATIVE - % of Total Respondents


92% of Shoppers Use at least 1 Deal Tactic; 42% Use at Least 5


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68%

49% 50% 49%45%

42%38%

35%32%

11%

66%

51%47%

45% 44%38%

36%33%

30%

12%

EDLPSHOP FOR

DEALS CIRCULAR PVL PURCH FSI LOYALTY DIGITAL CPN LRG SIZES BONUS PK REBATE

2013 2014

TIER 1 TIER 2 TIER 3 TIER 4

% of Respondents Using Specific Deal Tactics

-3% -6%+3% -5% -10% +15%-2% -7% -6% -6%


YET Shoppers increased their Deal Search activity across multiple retailers.

Lower participation in 8 of 10 Deal Tactics...


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49% 50%

45%42%

38%

11%

68%

49%

35%32%

51%47%

44%

38%36%

12%

66%

45%

33%30%

SHOP FOR DEALS CIRCULAR FSI LOYALTY DIGITAL CPN REBATE EDLP PVL PURCH LRG SIZES BONUS PK

2013 2014

ACTIVE2013 – 2.342014 – 2.29

% Chg -2%

PASSIVE2013 – 1.852014 – 1.74

% Chg -6%

% of Respondents Using Deal Tactics: Active vs. Passive

-3%-6%+3% -5% -10%+15%-2% -7% -6% -6%

Deal participation across both Active and Passive strategies, but Passive drops more pronounced.



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72%

64%

31%

17% 17% 17%20%

18%

11%9%

7%5% 6% 5% 4%

72%

63%

31%

23%19%

17% 16% 16%12%

10%8%

6% 6% 5% 4%

2013 2014

% of Respondents Making that Purchase at Outlet Regularly

--- +33% -14%-19% +6% --- +2% -2%--- --- +11% +2% +4% NA+9%

Higher outlet counts, in general, with clear uptick in shopping at smaller format outlets:

Drug, Value, and C-store.



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24%

21%

10%

6% 6% 5%7%

6%

4%3%

2%1%

2% 2% 1%

23%

21%

10%

7%6%

5% 5% 5%

4%3%

3% 2% 2% 2% 1%

GROCERY WALMART TARGET DOLLAR WALGREENS CVS COSTCO SAMS NTRL FOOD CSTORE RITE AID OTHER BJS OTHER MASS ONLINE

2013 2014-Adj

Share of Mentions for Outlets Where Purchase Consumables Regularly

-2%-2% -2% -20% -16% -1%+31% +9% +9% +4% +39% --- -3%--- +2%

Traditional channels still dominate the Consumable landscape. The “hyped” outlets of

Natural Food and Online are only 5% of the sector sales. Online -3% vs. YAG.



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Clear Cause and Effect between higher deal activity and higher purchasing. For

clarity: MORE PROMOTIONS MEANS MORE SALES



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Heaviest Deal Users Account for more than 70% higher Consumables purchases per buyer

than the Lightest Deal Users.


Demographic Profile of Heavy Deal Buyers


Meaningful skew to Larger Households with Kids and certain Regions

<$30,000

$30,000-

49,999

$50,000-

74,999

$75,000+

KidsNo

Kids

NeverMarrie

d

Married

FormerMarrie

d

ACounty

BCounty

CCounty

DCounty

White Black AsianHispani

c

NewEnglan

d

MidAtlanti

c

SouthAtlanti

c

EastSouthCent

WestSouthCent

EastNorthCent

WestNorthCent

Mountain

Pacific

2014 18% 19% 17% 19% 23% 17% 15% 21% 14% 18% 20% 20% 15% 20% 7% 6% 13% 18% 19% 22% 29% 11% 20% 9% 19% 17%

0%

5%

10%

15%

20%

25%

30%

F18-34 F35-44 F45-54 F55-64 F65+M18-

34M35-

44M45-

54M55-

64M65+ Female Male

FemaleAlone

Femalew_NonRelativ

e

Femalew_Rela

tive

Husband &Wife

MaleAlone

Malew_NonRelativ

e

Malew_Rela

tive

1Memb

er

2Memb

er

3Memb

er

4Memb

er

5+Memb

er

2014 16% 33% 24% 25% 13% 10% 17% 21% 15% 15% 21% 16% 14% 7% 17% 21% 18% 15% 15% 16% 16% 19% 21% 28%

0%

5%

10%

15%

20%

25%

30%

35%

% of Group Heavy Deal Users (7-10 Tactics) US AVG = 18.4%

US AVG = 18.4%% of Group Heavy Deal Users (7-10 Tactics)


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58%59%

25%

17%

13%11%

13% 13%11% 10%

5% 4%2% 3% 4%

81%

60%

34%

23%20%

16% 17%

13%11%

7% 6% 6%8%

5%2%

84%

73%

39%

30%29%

26%

20%22%

13%12%

13%

10% 10% 9%7%

GROCERY WALMART TARGET DOLLAR WALGREENS CVS COSTCO SAMS NTRL FOOD CSTORE RITE AID OTHER BJS OTHERMASS

ONLINE

ACTIVE 1 ACTIVE 2 ACTIVE 3

% of Active Buyer Group Making that Purchase at Outlet Regularly

Avg Outlets per Active Buyer Group

2013 2014 % ChgActive 1 2.29 2.48 +9%Active 2 3.20 3.31 +3%Active 3 3.67 3.96 +8%

All shoppers purchase across multiple outlets, with Active 3’s being much more vigorous in

their cross-outlet purchase behavior.



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23%24%

10%

7%

5%4%

5% 5%5% 4%

2% 2%1% 1% 1%

26%

19%

11%

7%6%

5% 6%4%

4%2% 2% 2%

3%2%

1%

21%

18%

10%

8% 7% 7%

5% 6%

3% 3% 3%2% 3% 2%

2%

ACTIVE 1 ACTIVE 2 ACTIVE 3

Share of Outlet Mentions by Active Buyer Group

We see Walmart losing share of purchases among the more Active Deal seekers. Drug is

the primary beneficiary of this share shift.



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63%

51%

29%

13% 13% 14% 15%

10% 11%

5% 7% 5% 5%1% 2%

77%

70%

31%

26% 24%

19%

14%17%

12% 12%

7% 8% 7% 8%6%

83%

77%

36% 36%

25%

19% 20%23%

13%15%

10%7% 8%

10%7%

PASSIVE 1 PASSIVE 2 PASSIVE 3

% of Passive Buyer Group Making that Purchase at Outlet Regularly

Avg Outlets per Passive Buyer Group

2013 2014 % ChgPassive 1 2.45 2.45 ---Passive 2 3.02 3.36 +11%Passive 3 3.48 3.89 +12%

We see a different pattern of changes in cross-outlet purchasing when we look at Passive

Groups, with only Passive 2’s and 3’s increasing their cross-outlet activity.



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26%

21%

12%

5% 5% 6% 6%

4% 4%

2%3%

2% 2%

1% 1%

23%

21%

9%

8% 7%

6%

4%5%

4% 3%2% 2% 2% 2%

2%

21%

20%

9% 9%

6%

5% 5%6%

3% 4%

3%2% 2% 3%

2%

PASSIVE 1 PASSIVE 2 PASSIVE 3

Share of Outlet Mentions by Passive Buyer Group

It is Grocery that loses among heavier Passive Deal Groups, with Dollar and Sam’s showing

gains.


Natural Foods Share by Income

<$150K per Year 3%

$150K+ per Year 9%


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CONCLUSIONS – CPG Trends

Most of industry weakness due to sharp declines in purchasing among Female Millennials AND weaker deal offers to shoppers.

The Millennial dropoff explained by numerous macro trends

Higher percentage living at Home

Higher unemployment

Delayed marriage and motherhood

Substitution effect in consumption to tech and entertainment

The weaker deals primarily a function of significant shift towards “loyalty”

and online promotions, which are less preferred and effective (Source:

webinars.tabsgroup.com).

Households with Kids and Females 35-54 continue to be the lifeblood of the industry.


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CONCLUSIONS – Deal Purchase Behavior

Just about every industry paradigm with respect to consumers reaction

to deals is flawed Consumers are not “trained” to buy on deal; securing deals are a fundamental,

irreplaceable need of most shoppers.

Deal purchasing leads to more, not less or same, overall purchasing…MUCH more.

“Loyalty” is an illusory concept in CPG retail. Shoppers actively purchase across

outlets, and that behavior is increasing, not decreasing.

Higher Deal Quantity is not the culprit of weak sales and lower profits among CPG

manufacturers; IT’S THE WEAKER QUALITY OF THOSE DEALS


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CONCLUSIONS – Outlet Shopping Patterns

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Clear shift of Consumables shopping to smaller format channels. Deal Activity appears to be a contributor in that shift.

Dollar channel picking up heavy users of Passive Deals; Drug channel picking up

heavy users of Active Deals.

Deal activity explains several other retailer trends:

EDLP strategy inhibiting Walmart share among the heavier Active Deal buyers.

Lack of EDLP or credible hybrid strategy inhibiting many Grocers (explains Aldi

growth)

Similarly, Natural Food will struggle to secure sales among heavy Deal shoppers.

With a 1.3% share and down slightly from 2013, Online still many years away from being a factor in Consumables.


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RECOMMENDATIONS

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EMBRACE the fact that consumers will always want and need deals. Meet those needs by prioritizing a promotional strategy that includes by Active and Passive Deals tactics.

ESTABLISH promotional quality over quantity in your promotional strategy.

INCLUDE straight-forward and aggressive promotional discounting as part of that strategy. EDLP-only or Passive Deals-only limits the upside.

ACCEPT that “Loyalty” programs don’t really build loyalty, but ACKNOWLEDGE that these Rewards programs can be one of several effective and profitable deal tactics.

SUPPRESS your aspirations of being the next Futurist. Online is a non-factor in Consumables, Millennials are declining and relatively less important, and Old School deal tactics still draw better than New School.

FOCUS on what matters right now: Mass Market retailing, Broad-reach media, Households with Kids, Females 35-54 and regular and compelling promotions to shoppers.

nd Value Study Consumables · Pinnacle Foods Mondelez Kraft Foods General Mills Church & Dwight...

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