Does Price Still Rule in the ‘New Normal’?
By Ben Ball, Senior Vice President, Dechert-Hampe
The 2010 IIR Category Leadership
Conference, held in conjunction with the private brands Conference in Chicago
last week, raised this interesting question (somewhat serendipitously): Are
retailers and manufacturers right to stay laser focused on price in the post-recession
Due to a speaker cancellation, the panel discussion on “Responding
to the Changing Shopper” sponsored by SmartRevenue was preceded by a presentation
by Nielsen on retailer brands — a presentation originally geared to the largely
retailer audience in the private brands conference next door.
The Nielsen presentation
highlighted the fact that private brand unit growth has quickly returned to
its historical pattern of about +0.2 points per year post the recession and
suggested that U.S. private brand penetration will probably never reach European
levels due to lower retailer concentration in the U.S.
Lisa Rider, VP, retail
marketing at Nielsen, noted that shoppers’ willingness to embrace private brands
varies greatly by category, and that the relative importance of the purchase
ranks just ahead of unsatisfactory product experiences as the reason shoppers
don’t adopt private brands. Nielsen also noted that those
brands could soon encounter some stiff headwinds as the population shifts to
an older and more Hispanic profile — both typically underdeveloped segments
for private brands.
The panel discussion that followed featured some pre- and
post-recession shopper behavior tracking by SmartRevenue, along with panelists
from The Kellogg Company, Dole Packaged Foods and OfficeMax.
Among the tracking
study conclusions was the fact that, while more shoppers reported “making
a list” post-recession, only about two percent more shoppers interviewed
in-aisle actually had one in hand (31 percent post- versus 29 percent pre-recession).
Similarly, about the same percentage of actual purchase decisions were made in
aisle post- (45 percent) as pre-recession (47 percent).
The study did find a
much greater jump in the percent of shoppers who ranked “price” as
a top box purchase driver for National Brands (+16 points from 23 percent to
39 percent) than that for private brands (+3 points from 65 percent to 68 percent).
But it also found that “post-recession shoppers are not willing to sacrifice
quality and are, in fact, placing even more value on health considerations
[than before the recession].”
In discussing the study findings, both the
manufacturer and retailer panelists related specific instances of shoppers
valuing factors like “quality” and,
in particular, “health issues” equal to or just below price in driving
purchase decisions. And Reggie Jonaitis of OfficeMax pointed out that manufacturer
promotions are now essentially required to be totally self-funding because “the
incremental sales don’t offset the margin loss” anymore.
Discussion Questions: Are manufacturers and retailers placing undue emphasis
on price as the key driver in “the New Normal” economy? Are you surprised
by findings that there has been little change in shopper behavior due to the
recession? Do you agree that private label growth rates will ease post-recession?