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Value Defining Canada’s Future

Carman AllisonDirector of Consumer InsightsThe Nielsen Company

May 12, 2011

Q12011

The Recession Was A Wake-Up Call

Conscienti ConsumerSellerous

RisingPrices

The One Stop Shop

Slow CPG Growth

The Connected Consumer

The Value Driven Consumer

Tepid Consumer Confidence

Trends Defining a New Consumer Marketplace

Are consumers back in the game…

or sitting on the sidelines?

10294

8477

85

93 90 90 92

2H'06 2H'07 2H'08 Q12009

Q32009

Q22010

Q32010

Q42010

Q12011

Global consumer confidence is starting to show modest improvement in early 2011

Source: Nielsen Global Online Consumer Confidence Survey March 2011

Consumer Confidence Index

+2 pts

8482

8587

81 8183

113

104

84

9498

100102 101

99102

80

103

108106

10096

82

106

83

112110

105

111

96

114

1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

US Canada

Source: Nielsen Consumer Confidence Survey

Sentiment illustrates divergence between Canada & United States – US still struggling

61%

40%29%

46%

31%

59%

Job Prospects will begood or excellent

Personal Finances willbe good or excellent

Agree good time to buy

Canada U.S.

Canadians More Optimistic than U.S. Consumers

Source: Nielsen Global Online Consumer Confidence and Opinion Survey March 2011 Change vs. Q4 11 (Dec)

+5 +3 +3 +2 -2 0

1.3

8.5

2.33.0

7.7

3.0

Inflation Unemployment Prime InterestRates

Dec-09 Mar-11

Source: Statistics Canada

More Canadians are working but faced with threat of higher inflation and interests rates

Is the recession over in Canada?

Yes No

Economist Consumer

55% 51%

85%

Global Canada US

% who think we are still in a recession

Consumer perception is our reality –majority still think we are in a recession


19% 24% 14%% who think we will be out of a recession in the next 12 months

Signs of a Recovery

…but still counting our pennies

Savings

Canadians are focused on the their balance sheets


What consumers do with spare cash?

37% Pay off debt

But…26% have no spare cash!

33%

• 13% Health

• 12% Food Prices

• 12% Gas Prices

• 10% Debt

• 8% Job Security

• 13% Fuel Prices

• 12% Utility Bills

• 11% Food Prices

• 11% Economy

• 10% Health

2nd Concern2nd ConcernTop ConcernsTop Concerns

Rising food and gas prices are becoming more of a concern for Canadians


The concern over rising food and gas prices has increased substantially over last year

6%12%

5%12%

13%

6%

11%

8%2nd Concern

1st Concern

Q12010

Q12011

Q12010

Q12011

Rising Food Prices Rising Gas Prices

14%

23%

11%

25%


• 47% Save of gas & utilities

• 38% Reduce take-out

• 34% Spend less on CPG

• 28% Spend less on clothes

• 27% Use car less

• 60% Reduce take-out

• 58% Reduce entertainment

• 57% Spend less on clothes

• 56% Save on gas & utilities

• 54% Spend less on CPG

Will Continue to DoWill Continue to DoDid This Past YearDid This Past Year

Some behaviours will last


What are Canadians doing to save on household expenses?

The New Consumer Toll

Rising Gas Prices

Gas prices have increased over 30% in the past year

Weekly Dollars per Litre – Regular Gas

$1.33 5/11/110

The gas tank may be full but the wallet is empty

If gas increases…

– $0.10 / litre…$30 more / month

– $0.50 / litre…$124 more / month

$228

$323$306 $319

Gas for Car Grocery Composite

2009 2011

Source: Gasbuddy.com May 2011, Homescan Grocery Composite to April 2011April 2010 $0.99/L May 2011 $1.33/L

The increase in gas is costing the average household an additional $78 per month

+34%

+$78/mth-1%

Avg Monthly Household Spend

$460$437

$414$391

$368$345

$322$299

$276

$1.20 $1.30 $1.40 $1.50 $1.60 $1.70 $1.80 $1.90 $2.00

When gas exceeds $1.75 per litre, the monthly gas bill will exceed the grocery bill

Gas Cost Per L

Average Monthly

Grocery Spend $403*

Avg Household Gas Spend / Month

May 2011

Source: Gasbuddy.com April 2011, Homescan Grocery Composite to December 2010May 2011 $1.33/L -- * Homescan estimate (Groc Comp + Fresh)

Household budgets will be squeezed

Continued focus on getting bang for the buck

Return to retail growth

but CPG growth slowing

Stats Canada -- Retail Trade by Industry Report

5.9

3.7

-2.9

5.1

3.5

6.4

2006 2007 2008 2009 2010 YTD

Retail sales growth has started to recover

% $ Growth

$ Sales (Billions) 389 413 428 415

54

5

2 121

0

21

2007 2008 2009 2010 Q1 2011

$ %Chg

Unit %Chg

Current CPG dollar growth lags the previous 3 years – units starting to rebound

Inflation +3 +3 +5 0 +1

Source: Nielsen MarketTrack, National All Channels – Period Ending March 12, 2011 Total Tracked Sales excluding Fresh Random Weight

31

‐1

5

‐101

6

-4

-2

0

2

4

6

8

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4.10 Q1 11

Canada

Source: Nielsen MarketTrack – Total Tracked Sales excluding Fresh Random Weight

Inflation

Canada’s CPG prices are starting to rise after 9 months of deflation

Canada’s CPI is 3.0% (Mar 2010)

Jan +0.5Feb -0.8Mar +1.9

3

6

10 ‐1

5

‐11

-4

-2

0

2

4

6

8

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4.10 Q1 11

Canada US Europe

Source: Nielsen MarketTrack – Total Tracked Sales excluding Fresh Random Weight

Inflation

Canada’s CPG inflation is following a similar trend as per the US – but rising at a faster rate

3

6

10 ‐1

5

‐11

-6

-4

-2

0

2

4

6

8

10

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11

Total Sales Reg Price TPR Price

Source: Nielsen MarketTrack – Total Tracked Sales excluding Fresh Random WeightRegular and TPR Sales: National G+D+M only

Inflation

Canada’s CPG inflationary trends are being impacted by volatile feature pricing

28

Total CPG

Meat & Seafood

HABA

Bakery

Non Grocery

Grocery

Produce

Deli

1

8

1

1

1

0

0

-6

Meat & Seafood, HABA and Bakery are fuelling CPG inflation

12 wk Indicated Inflation: Department Performance

Source: Nielsen MarketTrack, National All Channels12 Weeks Ending March 12, 2011 - Total Tracked Sales Excluding Random Weight

Fresh Fruit +1

Fresh Veg +8

Fresh Meat +3

29

Rising commodities is fuelling price increases within the top 100 categories

22%

30%

26%

10%

10%

>5% increase

2-4% increase

Static (+1 to -1%)

2-4% decrease

>5% decrease

% of Top 100 Categories* Price Increases

Top Increases

*Top 100 = 75% of CPG sales

Price TonnChg Chg

Coffee +19 +2Bacon +17 -8Sugar +11 -1Headache Relief +10 -2Luncheon Meat +9 +6Wieners +7 -7Yogurt +5 0

Source: Nielsen MarketTrack, National All Channels12 Weeks Ending March 12, 2011

If costs increase and you need to make price changes…what would consumers prefer you do?

• 35% - Offer larger sizes (lower cost per use)

• 17% - Introduce smaller sizes at lower prices

• 16% - Downsize but keep same price

• 11% - Offer same # of sales with higher prices

• 8% - Offer fewer sales

• 8% - Increase price of existing items

• 7% - Lower quality

Source: Nielsen PanelViews Economy Survey - Canada - March 2011

Value Consumer = Price Value Consumer = Benefits/Price

Value is not about price, it’s about the balance between price & benefits

Avg Price +87% higherDollar Sales +2,376%Unit Sales +2,559%

Dollar Sales +4%Unit Sales +4%

Remaining Yogurt Total Greek Yogurt

Source: Nielsen MarketTrack, National GB+DR+MM, 52 weeks ending April 9, 2011



Avg Price +121% higherDollar Sales 160%Unit Sales 203%

Dollar Sales 3%Unit Sales 1%

Remaining Yogurt Total Greek Yogurt

Dollar Sales 6%Unit Sales 6%

Avg Price 83% higher Dollar Sales 9%Unit Sales 10%

Mainstream Chocolate Premium Chocolate

Dollar Sales -2%Pound Sales 1%

Avg Price 57% higher Dollar Sales 3%Pound Sales 5%

Pasta Excluding Health Healthy Pasta

Dollar Sales 4%Unit Sales -4%


Mainstream Coffee Premium Coffee Pod Coffee


Mid-Tier Toothpaste

Avg Retail Price +76% higherDollar Sales +21%Unit Sales +23%

Dollar Sales -4%Unit Sales -5%

Super Premium Toothpaste

Source: Nielsen MarketTrack, National GB+DR+MM, 52 weeks ending April 9, 2011



Dollar Sales +16%Unit Sales +9%

Avg Price 37% higher Dollar Sales +30%Unit Sales +22%

Mainstream Coffee Super Premium Coffee Pod Coffee

Avg Price 24% higher Dollar Sales +130%Unit Sales +104%

Source: Nielsen MarketTrack, National GB+DR+MM, 52 weeks ending March 12, 2011

Rising prices are motivating

consumers to seek value

• Only buy when on sale 70% ‐5

• Use coupons 52% +2

• Buy larger value packs 37% +3

• Shop at value retailers 34% ‐1

• Stock up when on promotion 33% ‐4

• Shop close to home 27% +1

• Buy smaller sizes (lower unit cost) 18% +6

Consumers are consciously trying to save on CPG

Top saving activities::

Source: Nielsen Global Online Consumer Confidence Survey March 2011 – Canada – Chg vs YA

Deciding where to shop consumers will…

Source: Nielsen PanelViews – Shopper Opinions Survey March 2011

ReadFlyers

95%

TargetTheir List

54%

PriceCompare

49%

Switch Stores

66%

24%

Deciding what to buy in-store consumers will…

will switch brands based

on lower prices

buy more than

needed

decide what brand to buy

in store

Source: Nielsen PanelViews – Shopper Opinions Survey May 2011

Brand Loyalty Brand Selection Pantry Load

70% 72%

The role of the Store Flyer

• 77% read flyers on a weekly basis

• 62% of shoppers read each page (+8 pts)

• 54% read only the flyers from where they primarily shop (‐8 pts)

• 54% of shoppers prepare their shopping list based on what’s featured (‐6 pts)

• 34% read flyers online (+9 pts)

Source: Nielsen PanelViews – Shopper Opinions Survey May 2011 – Point Chg vs 2008

Q1 2011 has seen the first sign that regular priced sales are no longer declining on dollars

Sales Condition $ % Chg Unit % Chg $ % Chg Unit % Chg

Source: Nielsen MarketTrack, National GB+MM+DG – Feature (Temporary Price Reduction) 52 week periods ending March 12, 2011

Total +1

+7

-1

+9

-4

TPR Sales

52 weeks Q1 2011

+5

+1

-2

+5

Regular Sales

+2 +2

0

The percent of retail sales sold with a price cut accounts for one third of total CPG sales% Dollars Sold on TPR

Source: Nielsen MarketTrack, National GB+MM+DG12 week periods ending March 12, 2011

Quarterly Periods

The Shopper Recession

2007 2008 2009

45% of

units

2010 2011

33

25 27 26 27 26 27 28 28 28

31 31 31 3133

31 33

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Store Choice?

• 59% - Good value for the money

• 59% - Great sales and promotions

• 56% - Products in stock

• 55% - Lowest price

• 53% - Convenient location

• 53% - High quality fresh & produce

• 48% - Quality meat department

• 48% - Carries a variety of items

Value is a key driver of store choice but not the only lever to pull

Source: Nielsen PanelViews – Shopper Opinions Survey May 2011

44

The Quest For Value: Discount retailers are capturing over one third of Grocery and Drug category sales

71.3 62.6 63.7

28.7 37.4 36.3Discount

Conventional

Total Cash Receipt

+1% +4% +1%

Drug Composite**

-3% -3% -5%

Grocery Composite*

*Categories typically sold in a Grocery Store**Categories typically sold in a Drug Store

Source: Homescan Retailer Watch, National All Channels52 Weeks to April 2, 2011

VALU 241OCT 1

1

YOUR DISCOUNT TO DISCOVER!

46

63.3

37.0

Dis

coun

tC

onve

ntio

nal

Based on *Grocery Composite

Source: Homescan Grocery Watch, National All Channels52 weeks to April 2, 2011, Grocery Composite

+4%

-3%

$ Share Discount Share & Growth

Maritimes 12.9 +2

Quebec 34.5 +6

Ontario 46.0 +3

West 34.0 +3

Discount retailers are gaining share in all regions of Canada

*Categories typically sold in a Grocery Store

26.527.9 28.4

29.330.8

26.6

2007 2008 2009 2010 2011Est

2012Est

Discounter retailers are forecasted to grow due to retailer format expansions

All Channel $ Share

Source: Homescan Retailer Watch, National All Channels52 weeks to April 2, 2011, Total Expenditures

+5 +1 +5 +1

32.7

34.4

32.0

32.4

31.0

28.7

24.0

<$20K

$20-30K

$30-40K

$40-50K

$50-70K

$70-100K

>$100K

Share of Wallet - Discount

Source: Nielsen Homescan -- Account Shopper Profiler --National Discount -- 52 Weeks to December 25, 2010

HH Income

Discount $ Spend

$1,749

$1,934

$2,179

$2,375

$2,379

$2,520

$2,356

Loyalty to Discount is increasing among all income groups – higher income spend the most

-0.1

+1.2

+2.2

+0.6

+0.5

+0.2

+0.4

Total $ Spend

$5,354

$5,617

$6,801

$7,334

$7,669

$8,792

$9,809

The moving Target Canada“acquisition of up to 220 Zellers

locations in Canada — with plans to open between 100 and 150

Canadian Targets in 2013 and 2014 — means the company anticipates sales will exceed $100 billion within

the next 6-7 years”

Source: LogoBase & wikimedia commons’; Supermarket News

2.4

-2.0

1.8

-1.8

Target US Walmart US

2009/10 2010/11

Target has momentum south of the border as Americans seek value and convenience

Same-Store-Sales Trends

Source: company press releases; latest monthly or quarterly news releases

Target has reported 10 consecutive months of growth

Target unveils small store format

Seattle 2012

“The new format, which will range in size from

60,000 to 100,000 square feet, is expected to be used in another 10

urban markets in the coming years, according

to comments from Target officials”

Source: LogoBase & wikimedia commons’; Supermarket News

Target unveils customized ad technology that makes shopping easier

Source: Target

Target printable coupons

Source: Target

What will the Target shopper potentially look like?

Source: Nielsen Homescan, Total U.S., Total Canada52-week period ending 12/25/2010 – UPC-coded purchases

Age

Household Income

Younger – Low Income

Older – High Income

Target draws disproportionately more dollars from affluent and younger shoppers than Zellers

Source: Nielsen Homescan, Total U.S., Total Canada52-week period ending 12/25/2010 – UPC-coded purchases

Age

Target US

52% >$70k (144 index)

53% <45 yrs old (136 index)

Household Income

Younger – Low Income

Older – High Income

40% >$70k (98 index)

35% <45 yrs old (95 index)

Zellers CA

Pointing to the future

2011

These habits will fuel

future dollar and unit growth

Consumers have come to terms with the new economy

Same game…

Bigger Baskets

Discount Retailers

Rising Prices

Return to Retail Growth

Awareness

Fewer Shopping Trips

Conventional Retailers

Declining Prices

Consumption Restraint

Habitual

The Conscientious Consumer

Value is the NormNeed for Value

The Market Has Adapted

Manage a blend of long and short term perspectives

Adapting to the Value Consumer

1

2

3

• consumers are ready to increase spend on non essentials• value will continue to be a key motivator for consumers• food will be a key traffic driver across channels

Maintain sustainable pricing strategies for growth• consumers continue to buy in inflationary price levels (2009)• need for promotions will continue in the next year, but continue

with higher promoted prices

Be creative with options when taking price increases• Consider new size formats to meet the consumers need for

value and spend control

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carman value consumer - worldwide | nielsen · value defining canada’s future carman allison...

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