Wednesday, October 10, 2007

Mid-Week Roundup

Wal-Mart Holds Live Better Sustainability Summit Today

Wal-Mart stores is holding a full-day environmental sustainability conference today in Arkansas. The "Live-Better Sustainability Summit" is part of the mega-retailer's ongoing green initiative and features 2,000 representatives from Wal-Mart's supplier-companies along with representatives from environmental groups like the World Wildlife Fund, Rainforest Alliance and many other non-profit groups, green businesses, academics, non-governmental organizations and others. The full-day conference is hosted by Wal-Mart CEO Lee Scott who plans to talk about the need for sustainability, transparency, efficiency and environmental accountability up and down the entire supply chain.

The summit is to include talks and presentations by Scott and others, breakout study sessions and an environmental sustainability resource fair (trade show) where hundreds of green businesses and organizations will have booths set up showing what they are doing in the sustainability realm throughout the supply chain. Wal-Mart has invited a diverse list of exhibitors for the sustainability trade show in addition to a diverse mix of groups to participate overall in the day-long summit.

Among the topics of discussion at the green conference will be: Driving Business Through Sustainability, Engaging Your Business in Sustainability, Sustainability and Product Innovation and others. You can read a summary of the session topics and presenters here.

Natural~Specialty Foods Memo (NSFM) will have a report from the summit tomorrow or on Friday in our Weekly Green Report environmental feature section.

Research: Two New Studies Shine Light on Organic Foods Consumers

Two new surveys, one conducted by Harris Interactive Research and the other by Scarborough Research, provide some new and important insight into today's organic foods consumers.

The Harris Interactive Organic Poll:
The first study, an online survey of 2,392 U.S. adults conducted by Harris Interactive between September 11-18, found those who identified themselves as organic food shoppers view the category as safer, better for the environment, and healthier--but more expensive. The majority said however they feel the extra cost is worth it even though they aren't particularly happy with paying more.

Only 7% of the 2,392 poll respondents said they purchase organic food "all or most of the time." Many more--31%--said they purchase organic "on occasion." The study then breaks these folks down into consumer segments. The consumer segments most likely to buy organic foods on a regular basis are college graduates (11%), political Liberals (11%), Western U.S. residents (10%), echo boomers, age 18-30 (10%), and Gen Xers, age 31-42 (9%).

All of the survey respondents who buy organics said their purchases have increased (32%) over the last couple years rather then decreased(5%). This finding mirrors the fast annual rate of growth in the organic category over the last few years.

The survey found some additional findings of key interest to organic food marketers and retailers. For example, a large majority (79%) of all poll respondents said they believe organic food is better for the environment. Further, 76% said organic foods are healthier. Among those who say they purchase organic foods frequently 98% said it's healthier and better for the environment. One finding demonstrates a major difference between those who said they buy organics frequently and all the others. Most (86%) of frequent buyers said organic foods taste better than conventionally-produced, while only 39% of all adults feel the same way.

Nearly everyone in the poll (95% of all adults and 88% of frequent organic buyers) believes organic foods are higher prices than conventional. In terms of a cost vs. benefit analysis, a third (36%) believe organics are "better for you" (91% of the frequent buyers do), while 29% of all adults believe organics are "a waste of money, as it's no better for you then conventional," according to Harris Interactive's data analysis.

Harris says overall the polls results show that with so many of the respondents positive attitudes towards organic foods category consumption and thus sales is likely to grow. The firm expects the category to continue to make up a greater share of the overall food market over the next few years.

In our analysis of the study, price does seem to be a bit of a barrier with all adults and as retails on organic food products come down more consumers should enter the category. Reduced retails--and a better perception of the price-value benefit of organics--is key we believe to bringing a larger consumer base into the regular purchase of organic foods. It's also key to generating new organic category trial purchases with the majority of consumers who don't yet buy organics at all.

The Scarborough Organic Research Study:
The second study, conducted by Scarborough Research, looked at organic foods consumers more on a geographical or regional basis. The study found that the U.S. West Coast is far and away the stronghold in terms of organic category consumers in the United States.

Scarborough measured 79 local markets in the U.S. Out of those 23 were found to be what the firm calls "organics markets," or those markets that have an above average percentage of organic foods consumers. Of these "organics markets" more than half (13 cities) are in the Western Census Region (West Coast). Six cities are in the Southern census region, three cities are in the Northeast, and one is in the Midwest (Minneapolis, Mn.).

Scarborough's study found the following city breakdown: San Francisco is the top city for organics users. In the past month 35% of San Francisco adults bought and used organic foods. Seattle, WA. is number two (32%), Portland, Or. is number three (27%), followed by Washington, D.C. and Denver, CO. (26% each) and San Diego at 24%. The six metro regions comprise the top organic foods markets in the U.S. according to the study.

Additionally, the study says in total about 17% of U.S. consumers are "organics" users, meaning they buy organic foods anywhere from regularly to sometimes. This leaves lots of room for growth in the category since, according to the study more than 80% of U.S. consumers aren't buying organic foods.

Among the study's other results, Scarborough says Whole Foods Markets leads all retailers in having the highest concentration of consumers/shoppers who buy organic foods. However, Wal-Mart is the total overall leader in terms of who sells the most dollar volume in the organic foods category, according to the study. Trader Joe's, Target, Safeway Stores, Inc. and Costco also have a higher concentration of organic foods consumers than all other food retailers. You can read more about the retail ranking of organics consumer concentration and some other general findings from the study here.

Natural~Specialty Foods Memo's Analysis:
Taken together these two studies of organic foods category consumers offer many positives but also some negatives--or rather opportunities. First, both studies demonstrate there is a solid and growing core of organic foods consumers in the U.S.--good news for manufacturers and retailers. However, both studies also show that there is a huge percentage of American consumers (about 75-80%) who haven't even purchased an organic foods product (or aren't aware they have) at all.

This is a huge opportunity for category marketers. Reaching these masses however will require work in communicating the price/value trade-off of organics over conventional products as well as (frankly) a reduction in retail price points on organic items. In other words, perhaps a little margin give on the part of organic category manufacturers and retailers is in order. Organic category margins are high all around and this is doable as Wal-Mart and a couple other retailers are demonstrating. We believe a 10-15% overall price reduction at retail could make a significant difference in reaching many of these 80% of consumers who are out in the shopping wilderness when it comes to buying organics. This 10-15% can be easily achieved with a combination of added efficiencies and slight margin reduction throughout the supply chain. For example, 3-4% from the manufacturer, 3-4% from the distributor and 3-4% from the retailer.

We aren't suggesting this retail price reduction will make the organic category a "mass market" one. But rather that it needs to be more "mass" than it currently is reaching only 17-20% of U.S. consumers. Further, this achievable reduction overall at retail will enable the category to be not only more competitive with conventional but will make telling the value/price story (better for you, better for the environment) much easier. When price points aren't out of consumers' mental range it makes it much easier for them to rationalize paying a bit more for items in a category that are better for them.

Grocery Marketing Research: The Come-Back of the Center-Store

A new study by Information Resources, Inc. (IRI) shows that after years of struggling sales "center store" (grocery) sales have stages a comeback, growing by 3.1% in the 52-week period ending August 12, 2007. The study, "Center Store Revival: Retailers and Manufacturers Stage a Come-back," found six key strategies food retailers and manufacturers have implemented to create excitement and invigerate center store grocery sales.

These six strategies are: a focus on health and wellness products and positioning, the growth of retailer private label offerings, especially organic and healthy grocery products, relevant and more localized grocery product assortments tailored to store neighborhoods, product and packaging innovations, with a particular focus on nutritious and healthy new product lines and "eco-friendly" packaging, merchandising innovation such as new displays the group like products together in the center-store but off the shelf, and pricing: the fact that price increases duo to higher ingredient costs have boosted dollar sales without compromising volume significantly.

The report says grocers and manufacturers have defended against center store share loss this year--a big win following a decade of share losses to supercenters, club stores and drug stores. Small format stores (like Tesco's new Fresh & Easy format opening in the Western U.S. next month) are the next frontier of competition grocery retailers will face, says IRI. High growth snack and beverage categories delivering wellness benefits are fueling center store momentum. Ready-to-drink tea, energy drinks and trail mixes, for example, are all enjoying double-digit growth, according to the study. You can download a copy of the full report here. You also can read an expanded summary of the study here.

Marketing: Think Category First, Brand Second

Marketing guru Al Ries has a piece in today's Advertising Age online that every food marketer should read. Ries says the relentless focus on brand marketing is fine but that category marketing is even more important. He says the objective of a marketing program isn't to merely to build a brand but rather to dominate a category. To do this Ries argues you must focus on the category you are in with your marketing efforts. He sights companies like Hellman's Mayonnaise (which owns its category), Campbell's in canned soup, Orville Redenbacher in popcorn and others as companies which understand category marketing (and ownership) in addition to brand marketing strategies. He also discusses companies like Coca Cola which have built a great brand but are in danger of losing the category--or having it slipped out from under them. Read more here.

Cause-Related Marketing: Safeway Promotes for Woman and Kids

Pleasanton, California-based Safeway Stores, Inc. has launched a major in-store and website cause-related promotion for Woman's breast cancer health and another for children's health in partnership with various manufacturers and suppliers. Both initiatives are being promoted all this month in Safeway-owned stores throughout the U.S., on the retailer's website and in other external media used by the chain.

The first cause-related promotion is for women's breast cancer. October is Breast Cancer Awareness Month and Safeway is promoting awareness of the disease through product promotions, public service announcements and financial donations. Safeway has enlisted singer Melissa Etheridge (a breast cancer survivor) as the spokesperson for a campaign which is encouraging woman to screen for breast cancer through self-examinations and mammograms
The retailer is merchandising the singer's new album, "The Awakening," in its 1,519 stores in the U.S. and donating all profits from the album sales to breast cancer causes. (Safeway participating retail banners include Safeway, Vons, Pavilions, Genuardi's, Dominicks, Randall's, Thom Thumb and Carr's.) Shoppers also can make a donation at every Safeway store checkout stand to the Safeway Foundation, which will give every cent collected to breast cancer research programs. Last year Safeway raised and donated $8.3 million to breast cancer research programs through a similar in-store promotion.

Safeway is featuring the breast cancer campaign in its weekly, mass-mailed advertising circulars throughout October in addition to on its website. In-store there are breast cancer awareness table displays, upfront stanchions, shelf signs, electronic POS screens at the checkouts and breast cancer awareness messages played over its in-store radio network.

Throughout the stores there are product displays featuring the pink breast cancer awareness month labels. Participating manufacturers include Colgate-Palmolive, Pepsico, Proctor & Gamble, Sun Chips, Kraft Foods and many more. In addition to the displays throughout the store every item participating (hundreds) has a pink shelf tag in front of it to designate that a donation is being made by the product's manufacturer and Safeway for every item sold in October. Safeway has pledged up to $2 million dollars in additional donations (in addition to the manufacturer donations) for pink product sales in October. Safeway also is donating 5% of sales (up to a total of $500,000) for all purchases of its Rancher's Reserve private label fresh meat line in October, which it's promoting in each store's meat department.

Safeway also is reaching out to kids with a cause-related promotion this month. In partnership with manufacturers like Del Monte Produce, Mariani Packing, Fresh Express, Washington State Apple Commission, NatureSweet Tomatoes and many other fresh produce companies, the retailer has launched "Sneak-a-Snack," a program designed to encourage kids to snack on fruits and vegetables rather than sweet treats. The healthy-snack promotion is centered in the stores' produce departments and features sports-themed signage and displays, posters, floor graphics and stand-up signs that offer temporary tattoos, activity booklets and other materials which appeal to kids. The theme is that it's "cool" to snack on fruits and vegetables. Safeway also has created a promotional website with recipes, snack ideas and nutritional information for parents and has fun produce facts, various activities and games for kids. (There is a link to the website here.)

Both these promotions are creating much activity in all 1,500-plus Safeway stores this month. Additionally the breast cancer awareness promotion will raise millions of dollars for breast cancer research and treatment programs. Safeway's share/donation is expected to be at least $10 million and the participating manufacturers will collectively end-up donating tens of millions more during the October promotion. Doing good while selling more is a win-win in this case we believe.

Product Marketing: Inside Tom's (of Maine) World

Natural products (toothpaste, personal care items) manufacturer and marketer Tom's of Maine is one of the pioneering companies in the natural products industry. Founded in 1970 by Tom and Kate Chappel the company has been on the cutting edge not only in terms of using all natural ingredients in its personal care products but also in the areas of ethical and environmental principles and marketing. Tom's products are biodegradable, packaged in recycled paper board with soy-based inks used in the printing, and the company does no testing on animals. The company uses wind power for most of its energy needs at its plant in Maine and donates 10 percent of its profits to charities.

Last year the Chappel's sold the majority of the company to consumer products giant Colgate-Palmolive. The husband and wife retain 14% ownership in the company and still run the business for Colgate-Palmolive. Today's San Francisco Chronicle has an interview with the Chappel's about life in "Tom's World" after selling majority ownership in the company as well as what the future holds for the company and its minority owners. You can read the interesting interview with these two natural products industry pioneers here.
Mid-Week Roundup Ender:
Survey: In the UK You Are Where You Shop

A new survey in Great Britain has found where consumers shop has emerged as an indication of a person's social standing. more than half (56%) of Brits surveyed by the food firm Ginsters, which conducted the survey, said they feel their choice of supermarket reflects their place on the social ladder. Even more interesting one in eight Brits surveyed said they believe shopping at certain stores can make a person appear wealthier and higher in social standing than they actually are. We will refer to this finding from now on as "aspirational shopping" and believe it warrants further research.
One in ten Brits surveyed admits to having been embarrased when spotted by someone they know while shopping in a supermarket with a more downscale image. In fact so important is the image of the supermarket they shop in for many of the Brits surveyed that nearly half of the 1,631 people surveyed thought the "right" grocery shopping bag from the "right" supermarket was a more important social status icon than carrying a fashionable handbag. And the most elite grocery bag to be seen toting ones groceries in is the one from Waitrose, Britian's most upscale of all supermarket chains.
"According to out study, the carrier bag is the accessory of 2007," said Larry File, the marketing director for Gingsters, the firm which conducted the survey. "Among the fashionable crowd, you need to be seen with the right supermarket bag to make an impression. In fact, a proportion of consumers felt that people would pay more attention to their shopping bag than to the design of their handbag," File says. "Knowing this might have saved someone like Victoria Beckham a fortune."
The survey didn't rank British supermarkets on a social cachet scale. However, industry experts have weighed in and a general agreement goes something like this on the supermarket social scale: number one is Waitrose, followed by Sainsbury's, Tesco, Asda and Morrison's. The Lidl, Aldi and Netto chains fill out the bottom tear.
Here is a rank-ordered summary on the "social snobbery scale" of Britian's top supermarket's put together by a group of retail food industry researchers and experts in the UK and published in the This is London Entertainment Guide.
~Waitrose: The supermarket to be seen in. Frequented by career professionals and the well educated, according to research conducted by the firm Experian.
~Sainsbury's: Broad appeal but particularly favored by young, well-educated shoppers who are cosmopolitan in their tastes, liberal in their outlooks and unlikely to have children.
~Tesco: Very broad appeal, attracting families, the more price conscious, and profesionals as one might expect of the supermarket chain that tops the UK retail food market share list at about 32%.
~ASDA: More down to earth type shoppers. Research firm Experian classifies ASDA shopperss as the "ties of the community" group, typically from former coalfield regions, old steel and shipbuilding towns and places with docks and chemical plants. Mingled with these consumer types are younger families living in newer homes, according to Experian.
~Morrisons: This chain attracts those from close-knit, inner-city manufacturing town communities which is a factor primarily of store location. Since Morrisons integrated Safeway Stores into the company, the chain has gain broader consumer appeal.
~Netto: Netto is rated at the bottom of the social status pile. The chain draws families with low incomes who often live on large council estates of the type found in the outer suburbs of provinvial cities. The distinct lack of truffle oil on the shelves means Waitrose shoppers wouldn't be caught dead there--if they even admit to have heard of Netto that is.
Although the survey is humorous in many ways, it also offers some interesting consumer research in terms of the strong affect institutions like supermarkets have on human behavior. The aspirational shopping aspect (consumers saying shopping at a more upscale supermarket can make them feel they have higher social status and wealth) also is very interesting. A consumer may be of modest means but doing some shopping at a Waitrose in the UK or a Whole Foods market in the U.S. can provide some psychological upward mobility. This is important data for retailers in terms of targeting shoppers and the messages (like shopping bags) they use as the marketing symbols of their retail brand.

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