Gas Price Impact & U.S. Economic Outlook Todd Hale SVP – Consumer & Shopper Insights Nielsen Consumer Panel Services Augus...
U.S. Economic Outlook:  How Rocky Is The Road? Gas Price Impact Page  Page
The Answer Is…..….Pretty Rocky <ul><li>-  Minutes of the Federal Open  Market Committee, June 24-25, 2008 </li></ul>Gas Pr...
Forces at Work:  Consumer Wallet Pressures Gas Price Impact Page  <ul><li>Personal debt servicing </li></ul><ul><li>Home e...
Overall Cost of Living Rising Sharply Consumers Can Not Keep Up With Necessities Gas Price Impact Page  Source: U.S. Depar...
On pace to lose nearly 1,000,000 jobs Gas Price Impact Page  Source: Bureau of Labor Statistics – Payroll report June payr...
No Signs of a Turnaround in Housing: 1990 was the last time at current level Gas Price Impact Page  Building Permits In th...
Declining Home Values  12 Month Pricing % Change in 20 Major Markets, Jan 2007 vs. Jan 2008   Gas Price Impact Page  Sourc...
Declining Savings & Increased Borrowing Gas Price Impact Page  Source: U.S. Federal Reserve Analysis 1980 2008 0% 10% 1980...
Energy Needs Becoming the #1 Household Spending Item Gas Price Impact Page  Annual household spend fueling up; assumes 12,...
Consumers Are Not Secure  <ul><li>Almost half feel somewhat worse off financially than a year ago </li></ul><ul><li>1/4th ...
Consumers believe we are  already  in a recession Gas Price Impact Page  85%
Declining Consumer Confidence (Index  100  = 1985 Confidence Level) Gas Price Impact Page  March 2008 January 2008 January...
Global Demand Pushes Gas to $4/Gallon; Can $5/Gallon Be Far Off? Gas Price Impact Page  Dept of Energy
Oil Disruptions Are the Wild Card <ul><li>May 22, 2008: </li></ul><ul><li>“  NOAA Predicts Near Normal or  Above Normal  A...
Forces at Work:  CPG Margin Pressures Gas Price Impact Page  <ul><li>Commodities at all time highs </li></ul><ul><ul><li>B...
Gas Price Impact Page  Pain at the Pump! Gas Price Monitor
Gas Price Impact Page  Source: Homescan® Total ShopperView, a service of The Nielsen Company―Total US―52 weeks ending 06/2...
Changing Behaviors as Economy Weakens Gas Price Impact Page  2Q08 vs 2Q07 Percent Change Source: Homescan®, a service of T...
Low Income Taking More Drastic Trip Cuts Gas Price Impact Page  2Q08 vs 2Q07 Percent Change Source: Homescan®, a service o...
Low Income Stocking Up Across Most Channels Gas Price Impact Page  2Q08 vs 2Q07 Percent Change Source: Homescan®, a servic...
Retailers Performing Well In Tough Economy <ul><li>Costco   July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s ...
Retailers Performing Well In Tough Economy <ul><li>Costco   July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s ...
Retailers Performing Well In Tough Economy <ul><li>Costco   July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s ...
Retailers Performing Well In Tough Economy <ul><li>Costco   July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s ...
Other Retailers Struggling <ul><li>Gelson’s Markets  …”rising costs for food & fuel “may have caused some customers to mak...
<ul><li>Circuit City  1 st  qtr sales off 7.4%, comp- store down 11.3% </li></ul><ul><li>Williams-Sonoma  1 st  qtr total ...
Gas Price Impact Page  Gas Price Impact – Attitudinal Insights
Consumers Combining Trips, Eating Out Less, Staying Home, Cutting Spending @ Alarming Levels! Gas Price Impact Page  78% c...
Consumers Combining Trips, Eating Out Less, Staying Home, Cutting Spending @ Alarming Levels! Gas Price Impact Page  78% c...
Households Combining Trips, Eating Out Less & Staying Home @ Alarming Levels! Gas Price Impact Page  Nielsen Homescan Surv...
2008 could be tough year for mainstream full-service restaurants  & opportunity for manufacturers & retailers <ul><li>Cons...
Except for Low & High Income, Similar Response to Combining Trips, Eating Out & Staying Home Gas Price Impact Page  Index ...
63% Reducing Spending; up 27 pts from ’05 & up 18 pts from last June Gas Price Impact Page  Nielsen Homescan Surveys Impac...
Lower Income Households Making More Drastic Spending Reductions Gas Price Impact Page  Index of Responses to Total Househo...
Saving Money in What & How they Buy & Where They Shop Gas Price Impact Page  Nielsen Homescan Surveys Impact higher gas pr...
Saving Money in What & How they Buy & Where They Shop Gas Price Impact Page  Nielsen Homescan Surveys Trading down & coupo...
Private Label & Lower-Priced Brands Should Benefit from Higher Gas Prices <ul><li>35% of consumer looking to buy less expe...
Trading Down is Viable Option for 35% of Households & Similar Response Across Most Income Groups Gas Price Impact Page  In...
Private Label: Inflation Driving Dollar Growth;  Unit Sales Flat Until Recent Periods Gas Price Impact Page  Source: Niels...
Greater Absolute PL Dollar Growth in Just One Department, But Greater % Growth In All But Four Gas Price Impact Page  Sour...
Gas Price Impact Page  Branded versus Private Label Absolute & Share of Growth Source: The Nielsen Company; Food, Drug, Ma...
Consumer Response Says that 2008 is an Opportunity for Coupon Incentives <ul><li>One-third of consumers using more coupons...
Increased Coupon Usage From All Income Groups Gas Price Impact Page  Index of Responses to Total Households *Read as:  Hou...
Continued Interest in Shopping Supercenter Format  – a Great Place to Save <ul><li>With continued squeeze on discretionary...
Continued Interest in Shopping Supercenter Format  – a Great Place to Save <ul><li>Store expansion has these formats close...
Lower Income Households Likely to Shop More @ Supercenters Gas Price Impact Page  Index of Responses to Total Households *...
Gas Price Impact Page  Mass Supercenters Draw 31% of Their $ Sales From More Affluent Hhlds versus 41% for Grocery % $ Sal...
Gas Price Impact Page  But Strongest $ Sales Increase For Mass Supercenters Came From More Affluent Households Annual % $ ...
Opportunity to Leverage Larger, Economy Sizes or Multi-Pack Promotions Gas Price Impact Page  Index of Responses to Total ...
More U.S. Households Turning to Club Stores & Internet; Carpooling & Public Transportation Helping Few Gas Price Impact Pa...
Affluent More Likely to Shop More @ Club Stores Gas Price Impact Page  Index of Responses to Total Households Nielsen Home...
Jump in Internet Shopping Should Be Wake-Up Call for Manufacturers & Retailers <ul><li>We will not likely see a big increa...
Gas Price Impact Page
Gas Price Impact Page  <ul><li>They also serve 250,000 small outlet purchase occasions like hotels, health clubs, etc. wit...
Average Internet Opportunities Among Middle Income; Above Average Among More Affluent Gas Price Impact Page  Index of Resp...
Lower Income Households Not Leveraging Gas Savings Tied to Grocery Spend Gas Price Impact Page  Index of Responses to Tota...
49% Households Drive > 100 Miles Per Week   Drop in Those Driving > 150 Miles Per Week   Gas Price Impact Page  Source:  N...
Affluent Households More Likely to be Driving Longer Distances Each Week Gas Price Impact Page  Index of Responses to Tota...
Gas Price Impact Page  Summary & Closing Thoughts
2008 & 2009 Will Be Challenging <ul><li>Record high gas prices, food & beverage inflation, along with declining consumer c...
2008 & 2009 Will Be Challenging <ul><li>Those serving lower income groups will be especially impacted: </li></ul><ul><ul><...
2008 & 2009 Will Be Challenging <ul><li>Profit pressures will: </li></ul><ul><ul><li>Drive increased product downsizing  <...
2008 & 2009 Will Be Challenging <ul><li>Winners will be those who seize the opportunity to minimize sales risks & maximize...
2008 & 2009 Will Be Challenging <ul><li>Winners will be those who recognize the offerings or categories needed to win </li...
2008 & 2009 Will Be Challenging <ul><li>Winners will be those who: </li></ul><ul><ul><li>Focus on flawless execution </li>...
Nielsen Economic Impact Segmentation Gas Price Impact Page  In April 2008, 47,000 Homescan panelists were surveyed & subse...
Economic Impact Segmentation Survey Design <ul><li>If the economic conditions got worse (e.g. recession and/or inflation) ...
Economic Impact Segmentation Survey Design <ul><li>Margarine </li></ul><ul><li>Mayonnaise </li></ul><ul><li>Salad dressing...
Segmentation Composite Action Scores Gas Price Impact Page  * Read as: Recession Indifferent segment would not change how ...
Nielsen Economic Impact Segmentation <ul><li>Recession Indifferent  (12%) – are not likely to change how they shop. These ...
<ul><li>Recession Indifferent  – smaller households with higher income who are not likely to change how they shop. They fe...
<ul><li>Panic Stricken  - larger ‘Bustling Families’ will do whatever it takes to save money . . .  switch stores, brands,...
Consumer Reaction Varies by Category Gas Price Impact Page  The most recession-proof category is laundry detergent - the o...
Household Size Varies by Segment <ul><li>‘ Recession Indifferent/Insensitive’  & ‘ Light Coupon’  are smaller households  ...
Income Influences Segment Membership <ul><li>‘ Stock-Up & Save’  segment is the most affluent </li></ul><ul><li>‘ Switch t...
Diverse Shopper Profiles Gas Price Impact Page  Source: Homescan®, a service of The Nielsen Company Total US—52 weeks endi...
> Private Label Opportunity for Dollar General & Wal-Mart; > Large & Multi-Pack Promotion Opportunities @ Walgreens & Krog...
Gas Impact Survey Design <ul><li>Nielsen Homescan Surveys fielded: </li></ul><ul><ul><li>2 waves (June & July of ’05) </li...
Survey Design – Question # 1 <ul><li>How many miles do you & members of your household drive each week? </li></ul><ul><ul>...
Survey Design – Question # 2 <ul><li>What impact has higher gas prices had on your household’s driving & spending habits? ...
Survey Design – Question # 3 <ul><li>Are you and/or other household members buying more gas at locations because of incent...
The Aging Globe Slide  For daily news and the latest studies, reports, and whitepapers visit www.nielsenwire.com Thank you...
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Gas Price Impact & U.S. Economic Outlook

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Record high fuel prices, soaring commodities costs, and declining consumer confidence have changed the way U.S. consumers shop, according to a recent Nielsen consumer survey. Results from the survey indicate that 63% of U.S. consumers have reduced their household spending this year. The findings also suggest that consumers will continue to combine shopping trips, eat at home, and seek out at-home entertainment. (Read more at http://blog.nielsen.com/nielsenwire/consumer/us-shoppers-adapt-to-higher-gas-commodities-costs/)

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  • This is our sixth update to some work that we began in 2005 regarding consumer reaction to rising gas prices.
  • Transcript of "Gas Price Impact & U.S. Economic Outlook"

    1. 1. Gas Price Impact & U.S. Economic Outlook Todd Hale SVP – Consumer & Shopper Insights Nielsen Consumer Panel Services August 14, 2008 as seen on: nielsenwire.com
    2. 2. U.S. Economic Outlook: How Rocky Is The Road? Gas Price Impact Page Page
    3. 3. The Answer Is…..….Pretty Rocky <ul><li>- Minutes of the Federal Open Market Committee, June 24-25, 2008 </li></ul>Gas Price Impact Page “… economic activity has remained soft in recent months. Manufacturing activity had deteriorated , business investment in equipment appeared to have moved down , and residential construction had continued its steep descent . Labor market conditions had weakened further, and consumer sentiment was at historical lows , but despite these developments, consumer spending appeared resilient . Core consumer price inflation had been stable over recent months, but headline inflation had remained elevated ...”
    4. 4. Forces at Work: Consumer Wallet Pressures Gas Price Impact Page <ul><li>Personal debt servicing </li></ul><ul><li>Home energy </li></ul><ul><li>Transportation </li></ul><ul><li>Food </li></ul><ul><li>Healthcare </li></ul><ul><li>Education </li></ul><ul><li>Home & stock portfolios losing value </li></ul><ul><li>Tighter credit </li></ul><ul><li>Flat income in existing jobs </li></ul><ul><li>Unemployment rate increasing </li></ul><ul><li>Weak dollar </li></ul>Average U.S. Consumers Getting Squeezed Lower Spending Power Falling Wealth, Income & Credit Rising Costs Rising Living, Household Expenses
    5. 5. Overall Cost of Living Rising Sharply Consumers Can Not Keep Up With Necessities Gas Price Impact Page Source: U.S. Department of Labor Statistics (Consumer Price Index; U.S. City Average); USDA, NAR, BLS Fuel Oil Gallon Gasoline Gallon Bread pound Ground Beef pound Chicken pound Eggs dozen Milk half gallon 3% Wages Housing - 8% 12 Month Percentage Increase, Selected Items (March 2007 vs. March 2008) 48% 35% 27% 16% 10% 13% 7%
    6. 6. On pace to lose nearly 1,000,000 jobs Gas Price Impact Page Source: Bureau of Labor Statistics – Payroll report June payrolls -62,000, Apr & May revised downward, Unemployment Rate 5.5%
    7. 7. No Signs of a Turnaround in Housing: 1990 was the last time at current level Gas Price Impact Page Building Permits In thousands Apr 2008 -40% Vs yago Sept 2005
    8. 8. Declining Home Values 12 Month Pricing % Change in 20 Major Markets, Jan 2007 vs. Jan 2008 Gas Price Impact Page Source: Standard & Poor’s S&P/Case-Shiller Home Price Indices (Published March 25, 2008) (19%) (19%) (18%) (17%) (17%) (15%) (15%) (13%) (11%) (10%) (9%) (7%) (6%) (5%) (5%) (3%) (3%) (1%) (1%) 2% Declining Metro Markets Increasing Metro Markets Charlotte Portland Seattle Dallas Boston Atlanta Detroit New York Chicago Cleveland Minneapolis Washington D.C. San Francisco Tampa Denver Los Angeles San Diego Phoenix Las Vegas Miami
    9. 9. Declining Savings & Increased Borrowing Gas Price Impact Page Source: U.S. Federal Reserve Analysis 1980 2008 0% 10% 1980 Note: blended ratio includes all U.S. households, including those who have income BUT do not have mortgage (e.g.house is fully owned or rented) and/or no other consumer debt. Many average Americans have much higher ratios, approaching 30% or more. 2008 0% 10% 15% Personal Annual Savings Rate Debt Service Ratio Payments on all outstanding mortgage and consumer debt as percentage of all household post-tax income 10% 0.7% 11% 14%
    10. 10. Energy Needs Becoming the #1 Household Spending Item Gas Price Impact Page Annual household spend fueling up; assumes 12,000 per year, average 20 miles per gallon Dept of Energy—2 car households—approx 60% Consumer Expenditure Survey <ul><li>Household Spending: </li></ul><ul><ul><li>Food $6,111 </li></ul></ul><ul><ul><ul><li>At Home $3,417 </li></ul></ul></ul><ul><ul><ul><li>Away From Home $2,694 </li></ul></ul></ul><ul><ul><li>Gas – only $4,921 </li></ul></ul><ul><ul><li>Health Care $2,766 </li></ul></ul><ul><ul><li>Entertainment $2,376 </li></ul></ul><ul><ul><li>Apparel & Services $1,874 </li></ul></ul>
    11. 11. Consumers Are Not Secure <ul><li>Almost half feel somewhat worse off financially than a year ago </li></ul><ul><li>1/4th of consumers don’t feel secure they’ll keep their job & two thirds don’t have enough savings for potential disasters or retirement </li></ul>Gas Price Impact Page Source: Homescan®, a service of The Nielsen Company, PanelViews Economic Impact Survey – April 2008 % of U.S. Households
    12. 12. Consumers believe we are already in a recession Gas Price Impact Page 85%
    13. 13. Declining Consumer Confidence (Index 100 = 1985 Confidence Level) Gas Price Impact Page March 2008 January 2008 January 2007 January 2006 February 2008 107 92 110 94 87 69 76 58 65 48 Source: The Conference Board Consumer Confidence Index Consumer Expectations Index Worst since 1992 Apr 2008 May 2008 45 57 62 50
    14. 14. Global Demand Pushes Gas to $4/Gallon; Can $5/Gallon Be Far Off? Gas Price Impact Page Dept of Energy
    15. 15. Oil Disruptions Are the Wild Card <ul><li>May 22, 2008: </li></ul><ul><li>“ NOAA Predicts Near Normal or Above Normal Atlantic Hurricane Season” </li></ul><ul><li>May 27, 2008: </li></ul><ul><li>“ Nigerian Rebels Blow Up Pipeline Forcing Cut in Oil Production </li></ul>Gas Price Impact Page
    16. 16. Forces at Work: CPG Margin Pressures Gas Price Impact Page <ul><li>Commodities at all time highs </li></ul><ul><ul><li>Barley (+47%) Corn (+59%) Wheat (+63%) </li></ul></ul><ul><li>Fuel Prices at record levels </li></ul><ul><ul><li>transportation of goods plus pressure on the consumers wallet </li></ul></ul><ul><li>Pricing Decisions </li></ul><ul><li>Value Retail Expansion—competitors must hold/lower prices in their path </li></ul><ul><li>Growth of private label </li></ul><ul><li>Discount food retailers </li></ul>Margin Pressures on both CPG Manufacturers & Retailers! Retail Prices Weaker U.S. Dollar Wal-Mart growth Discount player emergence Rising Commodity Prices Ingredient Cost Transportation Cost Packaging Cost
    17. 17. Gas Price Impact Page Pain at the Pump! Gas Price Monitor
    18. 18. Gas Price Impact Page Source: Homescan® Total ShopperView, a service of The Nielsen Company―Total US―52 weeks ending 06/28/2008; Average Weekly Gas Prices http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html Household-based Measures of Gas Buying As Prices Increase, Consumers Have Less to Spend & Must Make Trade-Offs Last week of November & December meal & holiday shopping
    19. 19. Changing Behaviors as Economy Weakens Gas Price Impact Page 2Q08 vs 2Q07 Percent Change Source: Homescan®, a service of The Nielsen Company Posting improvement in trip trends, some Electronic & DIY retailers appear to have benefited from rebate checks * Excludes gas only trips Trip Generators Trip Optimizers Trip Avoiders
    20. 20. Low Income Taking More Drastic Trip Cuts Gas Price Impact Page 2Q08 vs 2Q07 Percent Change Source: Homescan®, a service of The Nielsen Company Shopping Trips By Hhld Income Lower income drove Electronic trips, more affluent drove increased Supercenter, Club, Dollar & Liquor Store trips * Excludes gas only trips At Risk Trip Generators Trip Optimizers Trip Avoiders
    21. 21. Low Income Stocking Up Across Most Channels Gas Price Impact Page 2Q08 vs 2Q07 Percent Change Source: Homescan®, a service of The Nielsen Company * Excludes gas only trips Trip Generators Stocking Up At Risk Basket Ring per Trip By Hhld Income Trip Generators Trip Optimizers Trip Avoiders
    22. 22. Retailers Performing Well In Tough Economy <ul><li>Costco July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s July same-store sales up 16.7%, excluding gasoline, same-store up 7% </li></ul><ul><li>Dollar Tree posted 12.5% increase in sales during fiscal 2nd qtr, comp-store up 6.5% </li></ul><ul><li>Kroger 1 st qtr sales up 11.5%, identical supermarket sales up 9.2% with fuel & 5.8% without </li></ul><ul><li>Family Dollar July sales rose 7.2%, same-store up 4.6% </li></ul><ul><li>Walgreen Co. July sales up 10.7%, same-store up 4.1% </li></ul><ul><li>Wal-Mart 2 nd qtr sales up 10.1%, same-store up 4.5% </li></ul>Gas Price Impact Page Source: Industry e-newsletters & company web sites = Stock-up & Save Consumer Motivation
    23. 23. Retailers Performing Well In Tough Economy <ul><li>Costco July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s July same-store sales up 16.7%, excluding gasoline, same-store up 7% </li></ul><ul><li>Dollar Tree posted 12.5% increase in sales during fiscal 2nd qtr, comp-store up 6.5% </li></ul><ul><li>Kroger 1 st qtr sales up 11.5%, identical supermarket sales up 9.2% with fuel & 5.8% without </li></ul><ul><li>Family Dollar July sales rose 7.2%, same-store up 4.6% </li></ul><ul><li>Walgreen Co. July sales up 10.7%, same-store up 4.1% </li></ul><ul><li>Wal-Mart 2 nd qtr sales up 10.1%, same-store up 4.5% </li></ul>Gas Price Impact Page Source: Industry e-newsletters & company web sites = Value Seeking Consumer Motivation
    24. 24. Retailers Performing Well In Tough Economy <ul><li>Costco July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s July same-store sales up 16.7%, excluding gasoline, same-store up 7% </li></ul><ul><li>Dollar Tree posted 12.5% increase in sales during fiscal 2nd qtr, comp-store up 6.5% </li></ul><ul><li>Kroger 1 st qtr sales up 11.5%, identical supermarket sales up 9.2% with fuel & 5.8% without </li></ul><ul><li>Family Dollar July sales rose 7.2%, same-store up 4.6% </li></ul><ul><li>Walgreen Co. July sales up 10.7%, same-store up 4.1% </li></ul><ul><li>Wal-Mart 2 nd qtr sales up 10.1%, same-store up 4.5% </li></ul>Gas Price Impact Page Source: Industry e-newsletters & company web sites = Value & Convenience Consumer Motivation
    25. 25. Retailers Performing Well In Tough Economy <ul><li>Costco July sales rose 14%, same-store up 10% </li></ul><ul><li>BJ’s July same-store sales up 16.7%, excluding gasoline, same-store up 7% </li></ul><ul><li>Dollar Tree posted 12.5% increase in sales during fiscal 2nd qtr, comp-store up 6.5% </li></ul><ul><li>Kroger 1 st qtr sales up 11.5%, identical supermarket sales up 9.2% with fuel & 5.8% without </li></ul><ul><li>Family Dollar July sales rose 7.2%, same-store up 4.6% </li></ul><ul><li>Walgreen Co. July sales up 10.7%, same-store up 4.1% </li></ul><ul><li>Wal-Mart 2 nd qtr sales up 10.1%, same-store up 4.5% </li></ul>Gas Price Impact Page Source: Industry e-newsletters & company web sites = Value & 1-Stop Shop Consumer Motivation
    26. 26. Other Retailers Struggling <ul><li>Gelson’s Markets …”rising costs for food & fuel “may have caused some customers to make some or all of their purchases from our competitors,” 2 nd qtr same-store sales declined 2.7%”* </li></ul><ul><li>Target Corp. July sales up 4.7%, same-store off 1.2% </li></ul><ul><li>Safeway’s 2 nd qtr identical-store, excluding fuel, off 0.3% </li></ul><ul><li>“ Whole Foods Market weak 3 rd qtr sales … worst comp-store sales gains in 28-year history — up 2.6% — predicted comp-sales for the 4 th qtr would rise 1.5%”* </li></ul>Gas Price Impact Page * Source: Supermarket News Source: Industry e-newsletters & company web sites High or higher end retailers not immune
    27. 27. <ul><li>Circuit City 1 st qtr sales off 7.4%, comp- store down 11.3% </li></ul><ul><li>Williams-Sonoma 1 st qtr total comp-sales off 9% </li></ul><ul><li>Home Depot sales for their 1 st qtr were off 3.4%, comp- store off 6.5% </li></ul><ul><li>Barnes & Noble 1 st qtr sales up 1.1%, comp-store off 1.5% </li></ul><ul><li>Macy’s 1 st qtr sales off 2.9%, same-store off 2.6% </li></ul>Softness in Alternative & Specialty Channels Gas Price Impact Page Source: Industry e-newsletters & company web sites Anyone care to forecast the holiday season for these retailers?
    28. 28. Gas Price Impact Page Gas Price Impact – Attitudinal Insights
    29. 29. Consumers Combining Trips, Eating Out Less, Staying Home, Cutting Spending @ Alarming Levels! Gas Price Impact Page 78% combining shopping trips & errands (+ 10 pts from YAGO), 52% eating out less (+ 14 pts), 51% staying home more often (+ 12 pts) & 63% of U.S. consumers are reducing spending (+ 18 pts)! Nielsen Homescan Gas Impact Study
    30. 30. Consumers Combining Trips, Eating Out Less, Staying Home, Cutting Spending @ Alarming Levels! Gas Price Impact Page 78% combining shopping trips & errands (+ 10 pts from YAGO), 52% eating out less (+ 14 pts), 51% staying home more often (+ 12 pts) & 63% of U.S. consumers are reducing spending (+ 18 pts)! Nielsen Homescan Gas Impact Study Saving Money in What & How they Buy & Where They Shop Impact higher gas prices had on driving & spending habits? Check all Jun/Jul ‘05 Jun/Jul ‘06 Jun ‘ 07 Jun ‘ 08 Buy less expensive grocery brands 17% 22% 19% 35% Use more coupons 20% 24% 21% 32% Shop more @ Supercenters 22% 26% 23% 28% Buy Larger, Economy Size 10% 11% 10% 16%
    31. 31. Households Combining Trips, Eating Out Less & Staying Home @ Alarming Levels! Gas Price Impact Page Nielsen Homescan Surveys Impact higher gas prices had on driving & spending habits? Check all Jun/Jul ‘05 Jun/Jul ‘06 Jun ‘ 07 Jun ‘ 08 Combine errands/trips 61% 68% 68% 78% Eat out less 31% 39% 38% 52% Do more things @ home 30% 39% 39% 51% Reduce spending small degree 26% 33% 29% 37% Buy less expensive grocery brands 17% 22% 19% 35% Use more coupons 20% 24% 21% 32% Shop more @ Supercenters 22% 26% 23% 28% Reduce spending great degree 10% 15% 16% 26% Switch to lower price gas stations 30% 31% 26% 24% Buy Larger, Economy Size 10% 11% 10% 16%
    32. 32. 2008 could be tough year for mainstream full-service restaurants & opportunity for manufacturers & retailers <ul><li>Consumers will be eating more products in the home & doing more at-home entertaining </li></ul><ul><li>Look for continued growth in “better-for-you at-home meal solutions” </li></ul><ul><ul><li>Health & wellness should not take a back seat to this opportunity </li></ul></ul><ul><li>Look for additional focus to capture a larger share of “at-work” meals </li></ul>Gas Price Impact Page
    33. 33. Except for Low & High Income, Similar Response to Combining Trips, Eating Out & Staying Home Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes of $100k + are 10% less likely to eat out less & are 13% less likely to do more things at home. Nielsen Homescan Surveys Responses from affluent moving closer to the average Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Combine Errands & Trips 78% 91 101 103 105 104 102 98 Eat Out Less 52% 91 106 106 106 106 102 90* Do More @ Home 51% 96 102 108 109 104 101 87*
    34. 34. 63% Reducing Spending; up 27 pts from ’05 & up 18 pts from last June Gas Price Impact Page Nielsen Homescan Surveys Impact higher gas prices had on driving & spending habits? Check all Jun/Jul ‘05 Jun/Jul ‘06 Jun ‘ 07 Jun ‘ 08 Combine errands/trips 61% 68% 68% 78% Eat out less 31% 39% 38% 52% Do more things @ home 30% 39% 39% 51% Reduce spending small degree 26% 33% 29% 37% Buy less expensive grocery brands 17% 22% 19% 35% Use more coupons 20% 24% 21% 32% Shop more @ Supercenters 22% 26% 23% 28% Reduce spending great degree 10% 15% 16% 26% Switch to lower price gas stations 30% 31% 26% 24% Buy Larger, Economy Size 10% 11% 10% 16%
    35. 35. Lower Income Households Making More Drastic Spending Reductions Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes under $20,000 are 32% less likely to reduce their spending a small degree, but are 20% more likely to reduce their spending a great degree. Nielsen Homescan Surveys Retailers & Manufacturers serving lower income households will feel the greatest impact Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Reduce Spending Small Degree 37% 68* 87 97 111 113 116 108 Reduce Spending Great Degree 26% 120* 121 115 106 97 88 68
    36. 36. Saving Money in What & How they Buy & Where They Shop Gas Price Impact Page Nielsen Homescan Surveys Impact higher gas prices had on driving & spending habits? Check all Jun/Jul ‘05 Jun/Jul ‘06 Jun ‘ 07 Jun ‘ 08 Combine errands/trips 61% 68% 68% 78% Eat out less 31% 39% 38% 52% Do more things @ home 30% 39% 39% 51% Reduce spending small degree 26% 33% 29% 37% Buy less expensive grocery brands 17% 22% 19% 35% Use more coupons 20% 24% 21% 32% Shop more @ Supercenters 22% 26% 23% 28% Reduce spending great degree 10% 15% 16% 26% Switch to lower price gas stations 30% 31% 26% 24% Buy Larger, Economy Size 10% 11% 10% 16%
    37. 37. Saving Money in What & How they Buy & Where They Shop Gas Price Impact Page Nielsen Homescan Surveys Trading down & coupon use experienced biggest jump in rank order Impact higher gas prices had on driving & spending habits? Check all Jun/Jul ‘05 Jun/Jul ‘06 Jun ‘ 07 Jun ‘ 08 Combine errands/trips 61% 68% 68% 78% Eat out less 31% 39% 38% 52% Do more things @ home 30% 39% 39% 51% Reduce spending small degree 26% 33% 29% 37% Buy less expensive grocery brands 17% 22% 19% 35% Use more coupons 20% 24% 21% 32% Shop more @ Supercenters 22% 26% 23% 28% Reduce spending great degree 10% 15% 16% 26% Switch to lower price gas stations 30% 31% 26% 24% Buy Larger, Economy Size 10% 11% 10% 16%
    38. 38. Private Label & Lower-Priced Brands Should Benefit from Higher Gas Prices <ul><li>35% of consumer looking to buy less expensive grocery brands </li></ul><ul><ul><li>Up 16 percentage pts from year ago </li></ul></ul><ul><li>Manufacturers should be proactive in their defense of their “brand” space </li></ul>Gas Price Impact Page
    39. 39. Trading Down is Viable Option for 35% of Households & Similar Response Across Most Income Groups Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes under $20,000 are 10% more likely to buy less expensive grocery brands & private label, while $100k + households are 30% less likely to buy less expensive grocery brands & private label. Nielsen Homescan Surveys The majority of households will be sticking with the brands in their existing portfolio Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Buy Less Expensive Grocery Brands 35% 110* 116 113 113 103 91 70*
    40. 40. Private Label: Inflation Driving Dollar Growth; Unit Sales Flat Until Recent Periods Gas Price Impact Page Source: Nielsen Strategic Planner, Total U.S. Food/Drug/Mass Excluding Wal-Mart Private Label Share of Total Store Dollars for Each 4-Week Period
    41. 41. Greater Absolute PL Dollar Growth in Just One Department, But Greater % Growth In All But Four Gas Price Impact Page Source: The Nielsen Company; Food, Drug, Mass including Wal-Mart; 52 weeks ending 6/28/08 versus prior year Branded versus Private Label Absolute & % Growth Branded $ Growth (000,000) % Growth Private Label $ Growth (000,000) % Growth Total Dept. $14,183.8 3.6% $7,072.5 10.0% Dry Grocery $6,237.3 4.2% $1,690.2 6.9% Frozen Foods $771.5 2.6% $682.9 10.3% Dairy $2,552.8 9.1% $3,392.2 20.2% Deli $383.7 7.7% $254.4 17.2% Fresh Produce $941.0 7.3% $276.3 14.7% Fresh Meat $297.7 13.7% $26.0 6.4% Packaged Meat $375.3 3.5% $53.8 3.5% Non-Food $382.7 0.8% $257.6 3.6% Alcoholic Bev $1,075.8 5.5% -$0.8 -1.0% Gen Merch $249.1 0.7% $11.4 0.4% HBC $917.0 1.8% $428.6 5.9%
    42. 42. Gas Price Impact Page Branded versus Private Label Absolute & Share of Growth Source: The Nielsen Company; Food, Drug, Mass including Wal-Mart; 52 weeks ending 6/28/08 versus prior year 48% of PL Growth From Dairy Department; 44% of Branded Growth From Dry Grocery Branded $ Growth (000,000) % of Growth Private Label $ Growth (000,000) % of Growth Total Dept. $14,183.8 100.0% $7,072.5 100.0% Dry Grocery $6,237.3 44.0% $1,690.2 23.9% Frozen Foods $771.5 5.4% $682.9 9.7% Dairy $2,552.8 18.0% $3,392.2 48.0% Deli $383.7 2.7% $254.4 3.6% Fresh Produce $941.0 6.6% $276.3 3.9% Fresh Meat $297.7 2.1% $26.0 0.4% Packaged Meat $375.3 2.6% $53.8 0.8% Non-Food $382.7 2.7% $257.6 3.6% Alcoholic Bev $1,075.8 7.6% -$0.8 0.0% Gen Merch $249.1 1.8% $11.4 0.2% HBC $917.0 6.5% $428.6 6.1%
    43. 43. Consumer Response Says that 2008 is an Opportunity for Coupon Incentives <ul><li>One-third of consumers using more coupons to deal with high gas prices </li></ul><ul><ul><li>Up 11 pts from YAGO </li></ul></ul><ul><li>An opportunity for manufacturers to align coupon drops & trade events in stores serving consumers feeling the greatest impact </li></ul>Gas Price Impact Page
    44. 44. Increased Coupon Usage From All Income Groups Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes between $40 & $49.9k are 10% more likely to use more coupons, while $100k + households are 10% less likely to use more coupons. Nielsen Homescan Surveys Should coupons be dropped at middle or end of the month when dollars are tighter or at beginning of the month when all consumers can spend? Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Use More Coupons 32% 91 105 103 110* 106 103 90*
    45. 45. Continued Interest in Shopping Supercenter Format – a Great Place to Save <ul><li>With continued squeeze on discretionary spending, how can this format drive growth in grocery department sales & still drive sales in general merchandise, apparel & other non-food departments? </li></ul>Gas Price Impact Page
    46. 46. Continued Interest in Shopping Supercenter Format – a Great Place to Save <ul><li>Store expansion has these formats closer to more shoppers, but many shoppers drive great distances to shop </li></ul><ul><li>High gas prices reduce the # of quick or fill-in trips within the format </li></ul><ul><li>Format retailers need to entice non-core shoppers with stronger earning power to make more trips </li></ul>Gas Price Impact Page
    47. 47. Lower Income Households Likely to Shop More @ Supercenters Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes under $20,000 are11% more likely to shop more @ Supercenters, but $100k + households are 28% less likely to shop more @ Supercenters. Nielsen Homescan Surveys Given need to cut spending a great degree, will low income households reduce spending on non-essentials? Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Shop More @ Supercenters 28% 111* 115 114 107 102 93 72*
    48. 48. Gas Price Impact Page Mass Supercenters Draw 31% of Their $ Sales From More Affluent Hhlds versus 41% for Grocery % $ Sales by Hhld Income Source: Homescan®, a service of The Nielsen Company ― Total US — 52 weeks ending 06/28/2008
    49. 49. Gas Price Impact Page But Strongest $ Sales Increase For Mass Supercenters Came From More Affluent Households Annual % $ Sales Growth Affluent households who shop Supercenters are finding increased value as evidenced by their increased spending Source: Homescan®, a service of The Nielsen Company ― Total US — 52 weeks ending 06/28/2008
    50. 50. Opportunity to Leverage Larger, Economy Sizes or Multi-Pack Promotions Gas Price Impact Page Index of Responses to Total Households Nielsen Homescan Surveys *Read as: Households with incomes under $20,000 are 35% less likely to shop club store, while $100k + households are 17% more likely to shop club. With only a 16% response, should retailers shift focus on smaller packs to help consumers manage their total basket ring? Explore options to leverage multi-pack promotions to help w/stock-up trips. Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Buy Larger, Economy Size 16% 92 95 106 116 105 103 92
    51. 51. More U.S. Households Turning to Club Stores & Internet; Carpooling & Public Transportation Helping Few Gas Price Impact Page Nielsen Homescan Surveys 21% of households buying more gas at locations because of incentives tied to spending levels at a grocery store where they shop Impact higher gas prices had on driving & spending habits? Check all Jun/Jul ‘05 Jun/Jul ‘06 Jun ‘ 07 Jun ‘ 08 Use lower grade gas 16% 18% 14% 14% Shop more @ Warehouse Clubs 9% 10% 10% 13% Shop more on Internet 5% 9% 9% 11% Carpool more often 5% 7% Use Public Transportation more 3% 4% 3% 4%
    52. 52. Affluent More Likely to Shop More @ Club Stores Gas Price Impact Page Index of Responses to Total Households Nielsen Homescan Surveys *Read as: Households with incomes under $20,000 are 32% less likely to shop club store, while $100k + households are 20% more likely to shop club. Can other retailers win with permanent or in & out club pack promotions (or multi-pack promos) targeted in stores where more affluent shop? Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Shop More @ Warehouse Clubs 13% 57* 75 90 108 110 132 120*
    53. 53. Jump in Internet Shopping Should Be Wake-Up Call for Manufacturers & Retailers <ul><li>We will not likely see a big increase in internet food sales, but non-food and health & beauty manufacturers should look for “direct-to-consumer” sales opportunities </li></ul><ul><li>Now is the time to step up internet communications to attract shoppers & buyers </li></ul><ul><ul><li>Emphasis on value, variety, convenience, & a healthier lifestyle will be prominent in 2008 </li></ul></ul>Gas Price Impact Page
    54. 54. Gas Price Impact Page
    55. 55. Gas Price Impact Page <ul><li>They also serve 250,000 small outlet purchase occasions like hotels, health clubs, etc. with online orders </li></ul><ul><li>Testing Amazon Fresh in Seattle market – 35,000 items including restaurant quality meat, seafood & produce </li></ul><ul><ul><li>Minimum order sizes, but no delivery fee & they claim that pricing is competitive with Grocery stores </li></ul></ul>
    56. 56. Average Internet Opportunities Among Middle Income; Above Average Among More Affluent Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes under $20,000 are 20% less likely to shop more on the internet, while $100k + households are 15% more likely to shop more on the internet. Nielsen Homescan Surveys Behaviorally, 2007 on-line sales growth was strongest among households w/incomes < $39.9k Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Shop More On Internet 11% 80* 92 94 105 99 112 115*
    57. 57. Lower Income Households Not Leveraging Gas Savings Tied to Grocery Spend Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes under $20,000 are 11% less likely to buy more gas linked to grocery store where shopped, while $100k + households are 3% more likely. Nielsen Homescan Surveys Now that gas is above $4.00, these are catching the interest of affluent households (87 index in December 2007 survey) Impact higher gas prices had on driving & spending habits? Check all Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ Buy More Gas Linked to Grocery Store Where Shopped 21% 89* 96 97 102 103 109 103*
    58. 58. 49% Households Drive > 100 Miles Per Week Drop in Those Driving > 150 Miles Per Week Gas Price Impact Page Source: Nielsen Homescan Surveys
    59. 59. Affluent Households More Likely to be Driving Longer Distances Each Week Gas Price Impact Page Index of Responses to Total Households *Read as: Households with incomes under $20,000 are 99% more likely to drive 1-25 miles per week, while $100k + households are 55% more likely to drive >200 miles per week. Do you know how many miles your retail shoppers or brand buyers are driving? Source: Nielsen Homescan Surveys Weekly Household Miles Driven Total Hhlds < $20k $20 -$29.9 $30 - $39.9 $40 - $49.9 $50 - $69.9 $70 - $99.9 $100k+ 0 miles 5% 345 132 72 44 38 29 28 1-25 miles 10% 199* 145 106 90 74 51 49 26-50 miles 16% 127 138 119 107 92 77 61 51-100 miles 20% 99 112 110 109 103 93 86 101-150 miles 14% 58 96 112 117 110 108 107 151-200 miles 11% 52 78 95 103 114 119 130 > 200 miles 24% 38 53 77 93 114 142 155*
    60. 60. Gas Price Impact Page Summary & Closing Thoughts
    61. 61. 2008 & 2009 Will Be Challenging <ul><li>Record high gas prices, food & beverage inflation, along with declining consumer confidence will cause consumers to do more of what they have been doing: </li></ul><ul><ul><li>Combine shopping trips </li></ul></ul><ul><ul><li>Eat more meals at home & do more at-home entertaining </li></ul></ul><ul><ul><li>Seek the right mix of value, variety, & convenience </li></ul></ul><ul><ul><li>BUT AT ACCELERATED LEVELS </li></ul></ul><ul><ul><li>SO WHAT ARE YOU DOING DIFFERENTLY? </li></ul></ul>Gas Price Impact Page
    62. 62. 2008 & 2009 Will Be Challenging <ul><li>Those serving lower income groups will be especially impacted: </li></ul><ul><ul><li>Discretionary spending will take a hit – particularly in the “nice-to-have” not “need-to-have” departments & categories </li></ul></ul><ul><ul><li>Look to value pricing, coupons, private label, & focus on food and household basics to win </li></ul></ul>Gas Price Impact Page
    63. 63. 2008 & 2009 Will Be Challenging <ul><li>Profit pressures will: </li></ul><ul><ul><li>Drive increased product downsizing </li></ul></ul><ul><ul><li>Negatively impact store expansion & remodeling efforts </li></ul></ul><ul><ul><li>But, sustainability initiatives will thrive as retailers & manufacturers look for cost savings </li></ul></ul>Gas Price Impact Page
    64. 64. 2008 & 2009 Will Be Challenging <ul><li>Winners will be those who seize the opportunity to minimize sales risks & maximize sales opportunities: </li></ul><ul><ul><li>Ensure presence in trip generating channels & retailers </li></ul></ul><ul><ul><li>Store-by-store assortment, pricing & promotions is a must </li></ul></ul><ul><ul><ul><li>Align with store trading area shopper income mix </li></ul></ul></ul><ul><ul><li>Gas promotions to capture more gas trips or more in-store buying on gas trips will be on the rise </li></ul></ul><ul><ul><li>If you don’t offer gas savings, what are your options? </li></ul></ul><ul><ul><ul><li>Tie-in grocery spend w/gas vouchers in other retailers or offer savings on other department spending </li></ul></ul></ul>Gas Price Impact Page
    65. 65. 2008 & 2009 Will Be Challenging <ul><li>Winners will be those who recognize the offerings or categories needed to win </li></ul><ul><ul><ul><li>Grocers will win with focus on food, but how do they also capture non-grocery, general merchandise & HBA trips? </li></ul></ul></ul><ul><ul><ul><li>Mass-Merchandisers will win with non-food & HBA, but how do they maximize food & protect general merchandise, apparel, & household good trips? </li></ul></ul></ul><ul><ul><ul><li>Drug retailers will benefit from continued aging population through Rx & HBA, but need to protect food & general merchandise business </li></ul></ul></ul><ul><ul><ul><li>Dollar Stores should see a strong year in food & household basics, but nice to have departments will struggle </li></ul></ul></ul><ul><ul><ul><li>Conv/Gas will win with vice categories & increased focus on food service, but in-store sales will struggle when gas prices are at highest </li></ul></ul></ul><ul><ul><ul><li>Warehouse Clubs will continue to thrive (in-store & on-line) </li></ul></ul></ul>Gas Price Impact Page
    66. 66. 2008 & 2009 Will Be Challenging <ul><li>Winners will be those who: </li></ul><ul><ul><li>Focus on flawless execution </li></ul></ul>Gas Price Impact Page
    67. 67. Nielsen Economic Impact Segmentation Gas Price Impact Page In April 2008, 47,000 Homescan panelists were surveyed & subsequently scored into 8 segments based on their proclivity to change their shopping behavior across 36 categories during an economic downturn Numbers reflect % of U.S. Households
    68. 68. Economic Impact Segmentation Survey Design <ul><li>If the economic conditions got worse (e.g. recession and/or inflation) please tell us all the things you would do to save money when shopping for <INSERT PRODUCT>. Please select all that apply. </li></ul><ul><ul><li>I will not change how I shop for this product </li></ul></ul><ul><ul><li>Switch to generic or store brand </li></ul></ul><ul><ul><li>Switch to a less expensive name brand </li></ul></ul><ul><ul><li>Stop buying this product </li></ul></ul><ul><ul><li>Buy this product less often </li></ul></ul><ul><ul><li>Limit use of this product to specific household members </li></ul></ul><ul><ul><li>Use coupons whenever I buy this product </li></ul></ul><ul><ul><li>Only buy it when it’s on sale </li></ul></ul><ul><ul><li>Switch stores to search for savings </li></ul></ul><ul><ul><li>Stock-up more when purchasing </li></ul></ul><ul><ul><li>I do not purchase this product </li></ul></ul>Gas Price Impact Page
    69. 69. Economic Impact Segmentation Survey Design <ul><li>Margarine </li></ul><ul><li>Mayonnaise </li></ul><ul><li>Salad dressings </li></ul><ul><li>Tea bags </li></ul><ul><li>Personal cleansing (soap and body wash) </li></ul><ul><li>Hair care (shampoos, conditioners, etc.) </li></ul><ul><li>Ice cream </li></ul><ul><li>Dry side dishes (rice or pasta based) </li></ul><ul><li>Frozen dinners </li></ul><ul><li>Hand & body lotions </li></ul><ul><li>Antiperspirant/deodorants </li></ul><ul><li>Laundry detergents </li></ul><ul><li>Cookies </li></ul><ul><li>Spaghetti sauce </li></ul><ul><li>Peanut butter </li></ul><ul><li>Olive oil </li></ul><ul><li>Face cleansers, creams & lotions </li></ul><ul><li>Household cleaners </li></ul><ul><li>Cold ready-to-eat cereal </li></ul><ul><li>Soda/pop </li></ul><ul><li>Beer or wine </li></ul><ul><li>Disposable razors </li></ul><ul><li>Diapers </li></ul><ul><li>Air fresheners </li></ul><ul><li>Fresh meat/seafood </li></ul><ul><li>Salty snacks (chips, nuts, etc.) </li></ul><ul><li>Canned soup </li></ul><ul><li>Canned vegetables </li></ul><ul><li>Vitamins or supplements </li></ul><ul><li>Personal paper products (tissues, toilet paper) </li></ul><ul><li>Yogurt </li></ul><ul><li>Coffee </li></ul><ul><li>Pet food </li></ul><ul><li>Baby food </li></ul><ul><li>Pain relievers & cold remedies </li></ul><ul><li>Batteries </li></ul>Gas Price Impact Page 36 product categories in survey
    70. 70. Segmentation Composite Action Scores Gas Price Impact Page * Read as: Recession Indifferent segment would not change how they shop in 22.8 of the 36 categories N = % U.S. Households Recession Indifferent Recession Insensitive Switch to Private Label Light Coupons & Sales Stock-Up & Save Switch Stores for Best Deal Brand Disloyal/ Promo Sensitive Panic Stricken (5,854) (10,100) (5,305) (10,479) (5,868) (3,193) (3,575) (2,657) 12.4% 21.5% 11.3% 22.3% 12.5% 6.8% 7.6% 5.6% Composite Score - 36 Categories Not change how I shop 22.8 10.0 4.5 4.7 1.7 3.3 3.0 1.3 Switch to generic or store brand 1.4 3.3 12.6 3.7 4.0 5.5 15.8 15.9 Switch to less expensive name brand 1.0 3.2 7.9 3.3 4.2 5.6 14.9 17.1 Stop buying this product 0.2 0.9 2.4 1.0 0.7 1.6 1.8 1.7 Buy this product less often 1.7 4.4 4.6 4.6 5.1 6.6 7.9 10.9 Limit use of this product 0.1 0.5 0.7 0.6 0.7 1.0 1.1 2.0 Use coupons 1.0 4.2 3.1 9.7 22.4 14.9 16.8 23.7 Buy on sale 1.4 5.4 4.1 15.2 24.2 18.0 17.9 24.3 Switch stores for savings 0.3 1.4 1.5 1.6 4.4 16.3 3.3 22.3 Stock up 0.7 2.6 1.6 4.1 9.4 6.6 6.5 13.9 Do not purchase 7.3 9.1 6.5 7.9 6.3 7.5 6.3 5.4 Avg Action (excluding not change) 0.9 2.9 4.3 4.9 8.4 8.5 9.6 14.6
    71. 71. Nielsen Economic Impact Segmentation <ul><li>Recession Indifferent (12%) – are not likely to change how they shop. These consumers are smaller households with higher income. They feel more secure about their financial situation (keeping their job, having enough for retirement) & making major purchases in the next six months. They show no desire to reduce entertainment expenses. </li></ul><ul><li>Recession Insensitive (21%) – are slightly more likely to take some action to save money. They are not as financially secure so they are more likely to cut back on entertainment expenses & eat at home. </li></ul><ul><li>Switch to Private Label (11%) – would switch to generics or store brands rather than use coupons or sales to save money. They tend to be younger, larger households with lower incomes. They represent the ‘Plain Rural Living’ of ‘Young Bustling Families’. </li></ul><ul><li>Light Coupon & Sales (22%) – will take advantage of coupons & sales, but do much beyond that. They are older, smaller households. </li></ul><ul><li>Stock-Up & Save (13%) – although they remain loyal to brand names they depend on coupons & sales to stock up when they can. They tend to be ‘Older Bustling Families’ or ‘Empty Nest Couples’ in ‘Affluent Suburban Spreads’ & ‘Comfortable Country’ settings. </li></ul><ul><li>Switch Stores for Best Deal (7%) – will switch stores based on the best coupons & sales. They index high in ‘Cosmopolitan Centers’. </li></ul><ul><li>Brand Disloyal/Promo Sensitive (8%) – willing to switch to generics or less expensive name brands if on deal (coupon or sale). They tend to be in ‘Modest Working Towns’ or ‘Plain Rural Living’ environments. </li></ul><ul><li>Panic Stricken (6%) - these larger ‘Bustling Families’ will do whatever it takes to save money . . . switch stores, brands, take advantage of deals, stock up or use less. They are the least financially secure, will greatly reduce most living expenses, & cut back in all departments across the store. </li></ul>Gas Price Impact Page The groups range from the relative inaction of Recession Indifferent (‘ I would not change how I shop’ ) to multiple drastic actions of Panic Stricken (‘ I would switch stores to search for savings’ & ‘I would buy this product less often’ ) ( ) = % of U.S. Households
    72. 72. <ul><li>Recession Indifferent – smaller households with higher income who are not likely to change how they shop. They feel more secure about their financial situation & making major purchases in the next six months. They show no desire to reduce entertainment expenses. </li></ul>Gas Price Impact Page
    73. 73. <ul><li>Panic Stricken - larger ‘Bustling Families’ will do whatever it takes to save money . . . switch stores, brands, take advantage of deals, stock up or use less. They are the least financially secure, will greatly reduce most living expenses, & cut back in all departments across the store. </li></ul>Gas Price Impact Page
    74. 74. Consumer Reaction Varies by Category Gas Price Impact Page The most recession-proof category is laundry detergent - the only category where no household indicated they would stop buying to economize Air fresheners is one of the most recession sensitive categories with 16% of households indicating they would stop buying to economize Percent who would stop buying the category Laundry detergents 0.0 Personal cleansing (soap and body wash) 0.1 Personal paper products (tissues, toilet paper) 0.1 Pet food 0.2 Hair care (shampoos, conditioners, etc.) 0.6 Antiperspirant/deodorants 0.7 Household cleaners 0.9 Pain relievers & cold remedies 0.9 Batteries 0.9 Face cleansers, creams & lotions 5.5 Yogurt 5.7 Salty snacks (chips, nuts, etc.) 9.7 Ice cream 10.4 Soda/pop 10.5 Frozen dinners 10.7 Beer or wine 13.8 Cookies 14.1 Air fresheners 15.9
    75. 75. Household Size Varies by Segment <ul><li>‘ Recession Indifferent/Insensitive’ & ‘ Light Coupon’ are smaller households </li></ul><ul><li>‘ Panic Stricken’ & ‘Switch to Private Label ’ households are generally larger households </li></ul>Gas Price Impact Page
    76. 76. Income Influences Segment Membership <ul><li>‘ Stock-Up & Save’ segment is the most affluent </li></ul><ul><li>‘ Switch to Private Label’ segment is the least affluent </li></ul>Gas Price Impact Page
    77. 77. Diverse Shopper Profiles Gas Price Impact Page Source: Homescan®, a service of The Nielsen Company Total US—52 weeks ending 03/29/2008
    78. 78. > Private Label Opportunity for Dollar General & Wal-Mart; > Large & Multi-Pack Promotion Opportunities @ Walgreens & Kroger Gas Price Impact Page Source: Homescan®, a service of The Nielsen Company Total US—52 weeks ending 03/29/2008
    79. 79. Gas Impact Survey Design <ul><li>Nielsen Homescan Surveys fielded: </li></ul><ul><ul><li>2 waves (June & July of ’05) </li></ul></ul><ul><ul><ul><li>Regular Gas @ $2.17 to $2.31 a gallon* </li></ul></ul></ul><ul><ul><li>2 waves (October & November of ’05) </li></ul></ul><ul><ul><ul><li>Regular Gas @ $2.72 to $2.26* </li></ul></ul></ul><ul><ul><li>2 waves (June & July of ’06) </li></ul></ul><ul><ul><ul><li>Regular Gas @ $2.88 to $2.98* </li></ul></ul></ul><ul><ul><li>1 wave (June ’07) </li></ul></ul><ul><ul><ul><li>Regular Gas @ $3.04* </li></ul></ul></ul><ul><ul><li>1 wave (Dec ’07) </li></ul></ul><ul><ul><ul><li>Regular Gas @ $3.06* during the 1 st week of the month </li></ul></ul></ul><ul><ul><li>1 wave (June ’08) </li></ul></ul><ul><ul><ul><li>Regular Gas @ $3.98* during the 1 st week of the month </li></ul></ul></ul>Gas Price Impact Page * Source: Energy Information Administration
    80. 80. Survey Design – Question # 1 <ul><li>How many miles do you & members of your household drive each week? </li></ul><ul><ul><li>Only count miles for vehicles owned/leased by members of your household? </li></ul></ul>Gas Price Impact Page
    81. 81. Survey Design – Question # 2 <ul><li>What impact has higher gas prices had on your household’s driving & spending habits? </li></ul><ul><ul><ul><li>Reduced spending in other areas to a small degree </li></ul></ul></ul><ul><ul><ul><li>Reduced spending in other areas to a great degree </li></ul></ul></ul><ul><ul><ul><li>Use public transportation more </li></ul></ul></ul><ul><ul><ul><li>Switched to lower priced gas stations </li></ul></ul></ul><ul><ul><ul><li>Use lower grade of gasoline </li></ul></ul></ul><ul><ul><ul><li>Try harder to combine errands/trips </li></ul></ul></ul><ul><ul><ul><li>Do more things at home rather than go out </li></ul></ul></ul><ul><ul><ul><li>Shop more at Supercenters where everything we need is in 1-store </li></ul></ul></ul><ul><ul><ul><li>Shop more at Warehouse Clubs where everything we need is in 1- store </li></ul></ul></ul><ul><ul><ul><li>Buy less expensive brands of grocery items </li></ul></ul></ul><ul><ul><ul><li>Buy larger, economy size grocery items </li></ul></ul></ul><ul><ul><ul><li>Eat out less often </li></ul></ul></ul><ul><ul><ul><li>Are considering a grocery home delivery service </li></ul></ul></ul><ul><ul><ul><li>Shop more on the internet rather than visit stores </li></ul></ul></ul><ul><ul><ul><li>Use coupons more often </li></ul></ul></ul><ul><ul><ul><li>Carpool more often (new on 2007 survey) </li></ul></ul></ul><ul><ul><ul><li>Other </li></ul></ul></ul><ul><ul><ul><li>None of the above/No Impact on driving & spending habits </li></ul></ul></ul>Gas Price Impact Page
    82. 82. Survey Design – Question # 3 <ul><li>Are you and/or other household members buying more gas at locations because of incentives tied to spending levels at a grocery store where you shop? </li></ul><ul><ul><li>Added to June 2007 survey </li></ul></ul>Gas Price Impact Page
    83. 83. The Aging Globe Slide For daily news and the latest studies, reports, and whitepapers visit www.nielsenwire.com Thank you! [email_address]

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