By James Tenser, Principal, VSN Strategies
(www.vsnstrategies.com)
The theme was "What's Next in Marketing, Consumer research and Technology?" as the ACNielsen Company and its VNU sister company Spectra hosted some 1,100 retailers, brand marketers and retail technologists at its 2006 Consumer 360 conference this week.
Among many highlights were remarks by Alan Noddle, "retired" former CEO of Ahold USA, who shared his seasoned and incisive perspective on what's coming in the supermarket industry. Evidently enjoying the intellectual freedom earned following a long record of accomplishment as an industry leader, Mr. Noddle worked the packed ballroom like a pro, provoking the audience with his views.
He was at his best in outlining what might be described as a massive shift in roles among food retailers in this country. Here are some of his sharpest observations on this topic:
- In 2002 the average U.S. household made 99 supermarket visits per year; by 2006 that number dropped to 84 visits per year.
- "The big guys are not leading the industry any more. The debt of Kroger and Safeway is rated one step above junk bonds. Also food sellers are everywhere today - drug, convenience store, dollar stores, office product superstores, home centers, and more. Everybody is in the food business, because it brings traffic."
- "The FMI CEO may deny there is a middle, but I've got news for you: There are thousands of stores in the U.S. that are basically the same. You could blindfold a consumer, drop him or her at a store in any town, remove the nameplate and they couldn't tell you where they are."
- With every major food company and many retailers developing organic, functional foods and nutraceutical product lines, there may be some question whether the producers are capable of responding with sufficient quantity and quality. "The Organic Trade Association is trembling over how the standards are going to continue to be met."
Mr. Noddle went on to detail what he called the "blurring of formats" among traditional and non-traditional sellers of grocery products. Among his best observations:
- Drug stores are largely displacing old-style convenience stores. Walgreen and CVS are leading the way with high-density strategies (stores three miles apart). Noddle doesn't think Rite Aid can keep up.
- Convenience stores are moving quickly into fresh fast food, especially salads and sandwiches. 7-Eleven, Wawa and Sheetz are leading the charge here.
- Wal-Mart is setting the reference prices for many products as it closes in on 15 percent of the grocery market after just 17 years selling food. It's continuing to improve its format and presentation, with 1,800 remodels planned in the coming 18 months.
- The role of supermarkets is changing. Mr. Noddle forecasts future stores where center store will be largely reduced in size relative to the perimeter. He sees "an enormous move by supermarkets into almost the restaurant business." He forecast three promising areas for grocers: (1) Prepared RTE meals; (2) Cooked meals that must be heated to eat, and; (3) "Modular cooking, where the retailer does all the value-added work - chopping, measuring, mixing, etc - and the customer can take the ingredients home and cook."
- Meanwhile, chain restaurants are fighting back. At Applebee's, Chili's and Ruby Tuesday's, all the closest parking spaces are reserved for carry out customers. Prepared meals are delivered to their cars, "and they're getting very good at it. About three years ago," he added, "restaurants captured more of the food dollar than supermarkets do. Now eating at home is starting to come back, but cooking at home is not."
Moderator's Comment: Alan Noddle's speech at the Consumer 360 Conference brought up many of the factors driving change on the retail landscape and the impact they are having on grocers. What do you see as some of the most significant?
There was much more detail to Mr. Noddle's talk, but the net result was a picture of an industry in tremendous flux as it scrambles to stay ahead of changing consumer lifestyles and innovation that comes from across channels, not just from within.
Alan Noddle has great standing as an expert observer. He's walked the walk. Now he's talking the talk. Besides, who else in this industry could possibly get away with calling Supervalu Inc. Chairman and CEO Jeff Noddle (his younger brother, who had addressed the same audience on the previous morning) "a terrific kid"?
Mr. Noddle did a fine job of synthesizing a "big picture" of American food retailing in his Consumer 360 presentation. Taken in aggregate, his observations point toward complex, disruptive challenges for the industry. Not only are changing consumer habits leading to strategic responses from retailers, but retailer innovations are leading consumers to reconsider and adjust their lifestyles.
Brand marketers will need to be prepared to reckon with shifting sands underfoot, and adjust their offerings and go-to-market strategies to suit changing channels. - James Tenser - Moderator