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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
Source: Food Marketing Institute 2005
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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
Source: Food Marketing Institute 2005
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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Privat e Label Evolut ion
1990sPremium
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Privat e Label Evolut ion
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