market trends impacting and opportunities for the u.s. peach market

www.perishablesgroup.com

Market Trends Impacting and

Opportunities for the U.S. Peach

Market

Presented by Nielsen Perishables Group

February, 2012

www.perishablesgroup.com 2

Agenda

Discussion Overview

Economic/Industry Trends to Consider

Peach Purchase Dynamics

Thoughts on Peach varietal marketing

Summary


PG 2012…

Exclusive Retail

Programs and

Advisory Board

Alliances with

Information

Leaders

Collaboration

with Trade

Organizations

http://images.google.com/imgres?imgurl=http://www.heroeswanted.org/images/Corp Partners Page/Hannaford_FULL_COLOR_LOGO.jpg&imgrefurl=http://www.heroeswanted.org/Bowl_For_Kids_Sake.htm&h=589&w=872&sz=77&hl=en&start=4&tbnid=4xBT-rWi6FvsEM:&tbnh=99&tbnw=146&prev=/images?q=Hannaford+Logo&gbv=2&hl=en&safe=strict&client=dell-usuk&channel=us-smb&ad=w5

http://www.instorebuyer.com/

http://www.nationalchickencouncil.com/


PG Overview

Data from 13,000 Supermarkets• 48 Markets, 100+ Retail Banners

Shopper Dynamics• Approx. 50,000 consumer interviews• Loyalty Card Data—30 million households

Consumer Demographics-Spectra demographic profiles

Advanced Analytics• Price Elasticity• Promotional impacts


Strategic Considerations

Economy improving but consumers are changed

Consumers 2012 are in pursuit of “value”

The soft fruit category is confused, largely undifferentiated

and dominated by commodity products

Do Peaches have a Red Delicious problem?

Retailers have no road map for success

How do you drive success at retail?

Success 2012 = Store specific marketing:

Consumer usage and

demographics

2012: Markets and consumers driven by uncertainty

Source: Yahoo Finance; DQNews; ChicagoFed.org; EIA.gov

FUEL COSTS

EQUITY MARKETS LABOR MARKETSHOME PRICES

INFLATION


“Median household income on downslide

$49,445

$50,599

$50,939

$52,823

$52,124

$51,739

$51,174

$51,353

$51,398

$52,005

$53,164

'10

'09

'08

'07

'06

'05

'04

'03

'02

'01

'00

Median household income in 2010 inflation adjusted dollars

Source: THE CINCINNATI ENQUIRER, The New York Times, Census Bureau & USA Today

-2.3%

-0.7%

-3.6%

1.3%

0.7%

1.1%

-0.3%

-0.1%

-1.2%

-2.2%

-0.2%

'10

'09

'08

'07

'06

'05

'04

'03

'02

'01

'00

% Change from Previous Year


-2-10123456

% Change Unit Price

-6-30369

12

4-weeks ending versus year ago

% Change Any Feature or Display Unit Volume

Supermarkets—Prices Up, Volume Down

Source: Nielsen Scantrack, (U.S. FDM w/ Walmart) 4 week increments (vs. prior year); UPC-coded

All Departments

18 periods of price gains; 4.0% increase in

latest period


The new economic recovery….

U.S. Consumer is becoming more

polarized


The “Consumer Hourglass Theory”

A wide swath of American companies are convinced that the consumer market is bifurcating into high and low ends and eroding in the middle—the consumer hourglass is more pronounced now than ever.

“(Proctor and Gamble) The world's largest maker of consumer products is now betting that the squeeze on middle America will be long lasting. "It's required us to think differently about our product portfolio and how to please the high-end and lower-end markets," says Melanie Healey, group president of P&G's North America business. "That's frankly where a lot of the growth is happening.“

Wall Street Journal

September 12, 2011

Increasingly polarized consumers

Source: msnbc.com; CNN Money*Supplemental Nutrition Assistance Program (SNAP)

1 in 7 Americans rely on food stamps

1 in 2 Americans own stock, mutual fund, 401K or IRA

20% of Americans earn less than $20,000 a year

87% of Americans earning over $75,000 own stocks


-6%

-4%

-2%

0%

2%

4%

< $20K $20K -$29K

$30K -$39K

$40K -$49K

$50K -$69K

$70K -$99K

$100K +

Household Income

Shopping Trips Shopping Dollars

Polarized consumers

Source: Nielsen Homescan, 52 w/e 10/1/2011 versus 10/2/2010excludes gas-only or Rx-only trips

1 year trend

15% of USHHs

21% of USHHs


% Change in All U.S. Channel Shopping Trips

-8

-6

-4

-2

0

2

4

11/28/

09

12/26/

09

01/23/

10

02/20/1

0

03/20/1

0

04/17/1

0

05/15/1

0

06/12/1

0

07/10/1

0

08/07/1

0

09/04/1

0

10/02/1

0

10/30/1

0

11/27/1

0

12/25/1

0

01/22/1

1

02/19/1

1

03/19/1

1

04/16/1

1

05/14/1

1

06/11/1

1

07/09/1

1

4-week period ending

$70K +

$30 to $69.9K

< $29K

Affluent households buying, others not so much

* Latest Period

Source: Nielsen Homescan, excludes gas-only or Rx-only trips; versus year ago


It’s tough out there….even for college grads


15

WHAT DOES IT MEAN?

A Fresh Perspective on Category Development


Less Aggressive Deals, More Everyday Low Price

http://www.apfreshonline.com/pages_myAP_promotions.asp


Focus Shifts from Shelf to Shopper

Circular ad

counts2

Source: 1) 2011 Global Retail CIO Survey from Aldata; 2) Perishables Group, Market Track Promotional Reporting; 3) Perishables Group FreshFacts® Powered by Nielsen

Volume sold on promo3

Promoted volume lift3

Promotional Retail Prices

Peaches

+5.3%

-13.2%

-30.2%


Consumer “Value” Intersects with Price

Price:“I want to save money”

Convenience:“I want something that will

save time”

Dietary Restrictions:“I need to lower my cholesterol.

What can I make that is more

healthy?”

Specialty:“Certain products are worth

the money”

Occasion:“I want to bring something

fancy/trendy to this party”

Indulgence:“I want to treat myself to

something special”

Health:“I don’t want my family to

be unhealthy”

Portion Control:“I don’t want to stuff myself”

Product Success Has Many Faces


CONVENIENCE

“I have so much to juggle right now. How can I cut down on

the time I spend in the kitchen?”


-3.4%

Consumers Visiting Retailers More

Frequently for Value-added Products

CONVENIENCE

+4.8% +0.8%

Trips per

Buyer

Value-Add Fruit Value-Add Veg Total Produce

Average

Retail Price+4.5% +14.6% +5.0%

Source: 1) Perishables Group FreshFacts® Powered by Nielsen, YTD 2) Perishables Group FreshFacts® Shopper Insights Powered by Spire, YTD


Wider Assortment Fueling Value-Added Growth

Source: Perishables Group FreshFacts® Powered by Nielsen, YTD

Average Retail Price: 4.9%

Dollars: 0.3%

Volume: 4.4% Bulk W

hole

Waterm

elon

Value-A

dd

Waterm

elon

Value-Added Produce Item Count

2006-2010: + 50%+ from 2006 to 2010

2011: 9.2% more value-add fruit items sold

11.2% more value-add vegetable items sold

Average Retail Price: $0.40/lbs

Average Retail Price: $1.17/lbs


Dollars: 108.0%

Volume: 105.8%

CONVENIENCE


TRIED AND TRUE INCREASINGLY

LOSES OUT TO VARIETY

“Since my go-to item is more expensive, maybe I should try

this new variety everyone is talking about?”


Newer Varieties Experienced Growth

Despite Higher Prices

TRIED AND TRUE

Volume Velocity: 10.1%

Dollar Velocity: 7.0%

Trips per Buyer 1.0%

Bulk N

avel

Oranges

3-pound

Clem

entines

Volume Velocity: 32.7%

Dollar Velocity: 32.6%

Trips per Buyer 2.0%


Regular Price: 1.2%

Promoted Price: 3.4%


Regular Price: 1.2%

Promo Price: 0.9%


Cost Consumer = Price Value Consumer = Benefits/Price

Value increasingly the new category driver

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

Dollar Sales 3%Unit Sales 1%

Remaining Yogurt Total Greek Yogurt

Dollar Sales6%

Unit Sales

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 Sales4%

Unit Sales -4%


Mainstream Coffee Premium Coffee Pod Coffee


Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%

Super Premium Toothpaste

Avg. Price +63% Dollar Sales +4%Volume +8%

Roma TomatoesValue

Hot House Vine TomatoesAdded Value

Snacking TomatoesPremium Value

Avg Price +126%Dollar Sales +10%Volume +5%

Dollar Sales +.1%Volume -10%







Dollar Sales6%

Unit Sales






Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%



Roma TomatoesPrice






Cost Consumer = PriceValue Consumer= Benefits/Price





Dollar Sales6%

Unit Sales






Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%



Roma TomatoesValue






Cost Consumer = PriceValue Consumer= Benefits/Price





Dollar Sales6%

Unit Sales






Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%


Price Premium +63% Dollar Sales +4%Volume +8%

Roma TomatoesValue



Price Premium +126%Dollar Sales +10%Volume +5%


Premium Consumer







Dollar Sales6%

Unit Sales






Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%



Green PeppersValue




Dollar Sales +3%Volume +4%







Dollar Sales6%

Unit Sales



Dollar Sales-2%

Pound Sales 1%



Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%



Green PeppersValue

Orange PeppersAdded Value










Dollar Sales6%

Unit Sales






Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%



Green PeppersValue

Orange PeppersAdded Value

SpecialtyPremium Value









Dollar Sales6%

Unit Sales






Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%



Yellow Peaches White Flesh PeachesAdded Value

Strawberry PeachPremium Value


Dollar Sales +5%Volume -5%







Dollar Sales6%

Unit Sales






Dollar Sales4%

Unit Sales -4%




Mid-Tier Toothpaste


Dollar Sales-8%

Unit Sales -3%








The Face of Premium…

Category Average $1.34

Red Delicious $1.31

Honeycrisp $1.99 Households Buying

Trips per buyer

Dollars per buyer

Pounds per buyer

Dollars per trip

Total basket size

Average item value

Red Delicious Honeycrisp

HHs Purchasing

% Change YAGO -1.6% 17.3%

Trips Per Buyer

% Change YAGO -3.8% 4.8%Dollars per

Buyer % Change

YAGO -2.7% 20.5%

Lbs per Buyer %

Change YAGO 1.8% 10.6%

Dollars per Trip

% Change YAGO -3.7% 15.0%

Basket Dollars %

Change YAGO -1.2% 3.7%Average Item

Value % Change

YAGO -3.4% 10.9%Source: Perishables Group FreshFacts® Shopper Insights Powered by Spire


Dollars per Transaction by Variety

$3.37

$3.00

$3.37$3.16

$2.82

$4.15

$2.95

$3.08$3.14 $3.07

$3.26 $3.10

$3.44

$3.10 $2.97

$5.12

$2.97$3.01

$3.41$3.30

Gala Red Delicious

Fuji Granny Smith

Golden Delicious

Honeycrisp McIntosh Braeburn Pink Lady Empire

FreshFacts Shopper Insights - Retailer CompositeAverage Apple Subcategories Dollars per Transaction

52 Weeks Ending Q2 2011

Prior Year Current Year


“Value” Often More Powerful Than Price…

Success is about understanding your consumer and

innovating to create value beyond price

Where Price Matters

Where Innovation Pays

TRIED AND TRUE

CONVENIENCEORGANIC

SUBSTITUTION

NEW FLAVORS

COMMODITY ITEMS


The New Fresh Landscape

2000 2012

Consumers follow price cues Consumers optimize value

Narrow category assortment Complex categories

Commodity focus by retailers Store specific focus

Limited consumer understanding Diversified consumers

Few opportunities for supply-side engagement Retailer-supplier partnership expectations

New Challenges for the Industry



2000 2012








42

UNDERSTANDING PEACH

PERFORMANCE AT RETAIL


Q3, 2011 Performance Total

Peach dollars increased due to price increases while

volume declined

Source: Perishables Group FreshFacts® Powered by Nielsen, Q3, 2011 vs. YAGO

Product Dollars %

Change vs

YAGO

Volume %

Change vs

YAGO

Average

Retail

Average Retail %

Change vs YAGO

Stone Fruits 5.6% -0.4% $1.53 6.0%

Peaches 6.2% -3.6% $1.45 10.2%

Nectarines 7.0% 3.9% $1.54 3.0%

Plums 1.5% 2.1% $1.64 -0.6%


Baseline Up, Incremental Down

Product Baseline

Dollars %

Change vs

YAGO

Incremental Dollars %

Change vs YAGO

Stone Fruits 21.0% -48.9%

Peaches 24.1% -53.0%

Nectarines 19.4% -39.6%

Plums 15.6% -45.7%


Promotions Lose Impact

Product Dollars % on

Promotion

Dollars % on

Promotion YAGO

Dollars % Lift

on Promotion

Dollars % Lift

on Promotion

YAGO

Stone Fruits 37.7% 44.9% 41.2% 66.3%

Peaches 39.1% 47.1% 41.4% 69.2%

Nectarines 36.8% 44.1% 39.5% 59.5%

Plums 37.3% 41.9% 45.5% 74.0%

Very Similar Performance in Volume


Everyday Pricing

Product Average

Retail

Average Retail %

Change vs YAGO

Promotional

Average Retail

Promotional

Average Retail

% Change vs

YAGOStone Fruits $1.53 6.0% $1.27 3.2%

Peaches $1.45 10.2% $1.19 5.3%

Nectarines $1.54 3.0% $1.28 2.0%

Plums $1.64 -0.6% $1.42 -1.5%


Everyday Pricing

Product Average

Retail

Average Retail %

Change vs YAGO

Promotional

Average Retail

Promotional

Average Retail

% Change vs


Peaches $1.45 10.2% $1.19 5.3%

Nectarines $1.54 3.0% $1.28 2.0%

Plums $1.64 -0.6% $1.42 -1.5%


Items Per Store per Week

Product Impressions per

Store/Week

Impressions per

Store/Week YAGO

Impressions per

Store/Week %

Change vs YAGO

Peaches 6.0 5.4 9.6%

Nectarines 4.2 3.8 10.6%

Plums 5.7 5.3 8.5%


Peaches Underscore the Basic Grocery

Challenge

# of SKU’s

Space Available

Declining Volume


Consumer Purchase Dynamics

FreshFacts Powered by Spire, 2011

Product Household

Penetration

Trips per Buyer Multiple Item

Baskets

Peaches 36.1% 2.7 15.2%

Pears 28.8% 3.3 3.5%

Cherries 26.7% 2.1 1.0%


What can we learn?

Competition for consumer attention is high

Price alone has lost much of its allure

Retailers actively seeking “winners” vs. commodities

Variety itself doesn’t necessarily drive incremental

category dollars/volume

Consumers reward superior, differentiated products

Must be able to market at the store level

What peach will be the next Honeycrisp,

Clementine, Rainier cherry, specialty pepper?


Peach Success 2012 ….

Don’t just sell “Red Delicious, Navel Oranges,

Roma Tomatoes, Green Peppers, Iceberg lettuce….

You have to do more than offer “supply”

Understand/validate how new products drive

performance/consumers

Why should your product be on the shelf?

Quantify the opportunity

Connect with consumers at the decision point

Validate consumer purchase dynamics.

Who is/is not buying and why

What is the new definition of “value” for your products


Thank you!

Contact Steve Lutz at Nielsen Perishables Group:

509.884.2616

[email protected]


mailto:[email protected]

http://www.perishablesgroup.com/

market trends impacting and opportunities for the u.s. peach market

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