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Winter 2001

In s i g h t s t o d a y f o r t o m o r row’s d e c i s i o n s

Radio Frequency ID: A New Era for Marketers?

The Consumerization of Rx Products Meeting the Category Pricing Challenge: Finding a Simple Path A Look at Global Megabrands Category Masters of the Year Trend Watch: Biotechnology



the Voice of the Consumer

For More Information

ACNielsen U.S. 150 North Martingale Road Schaumburg, IL 60173 800.988.4ACN http://acnielsen.com/ci ACNielsen Canada 160 McNabb Street Markham, Ontario L3R 4B8, Canada http://www.acnielsen.ca

Winter 2001, Volume 3, No. 4
Radio Frequency ID: A New Era for Marketers?
While many advances in technology have made the CPG industry more efficient, few have transformed the way we market to consumers. The new advances in Radio Frequency ID have the potential to change this.


The Consumerization of Rx Products
Before 1984, many of the top-selling OTC medications were available only by prescription. The switch from Rx to OTC has had a profound impact on how manufacturers market, how retailers merchandise, and how consumers purchase these products.


Meeting the Category Pricing Challenge
Pricing is one of the more risky elements of Marketing. Mistakes can cost your brand dearly. By using a strategic framework for category pricing, one can drive profitability for the brand and the category.


A Look at Global Megabrands
What does it mean to be global? According to ACNielsen’s Global Services, there are 23 manufacturers responsible for the large global brands today.


Category Masters of the Year
For the third year, the annual Category Master of the Year awards were presented at ACNielsen’s Category Masters conference. This year’s winners had something in common: a desire to collaborate.


In every issue…
28 Trend Watch— Biotechnology

Business Tools
30 32 33 33 34 36 Consumer Behavior Merchandising Retailers KnowledgeWorks Retail Tracking Custom Research

Volume 3, No. 4 Publisher ACNielsen Editors Mark Chesney Art Massa Design & Layout Marina Quaranta Editorial Board Gary Binkoski Margaret James Kathy Mancini Elaine Noone Mark Puccetti ACNielsen Global Creative Services Laurel A. Kennedy Marketing/ Communications Slack Barshinger & Partners

Copyright © 2002 ACNielsen. Printed in USA. All rights reserved. ACNielsen, the ACNielsen logo, ACNielsen Workstation Information✽Server, Category Masters, Homescan, KnowledgeWorks, Priceman, Scantrack and Spaceman are trademarks or registered trademarks of A.C. Nielsen Company. Other brand, product or service names are trademarks or registered trademarks of their respective companies.

As for what happened as a result of the events of 9/11. Drilling down a bit further. While some of the findings below are not surprising. and at least one product that had been in decline: prepared foods (both dry mixes and ready-to-serve). flashlights and batteries. milk (fresh. the growth rate declined in Q2 and Q3. pet food. Among non-food products. I n these unique and trying times. shortening/oil. crackers.. is one of the declining departments. I believe that such trends present the CPG industry with equal doses of challenges and opportunities. liquor and wine have all seen growth rate declines in Q2 and Q3.7 billion) is another which has experienced a slowing growth rate. as people apparently took their attention off of personal care items and focused on essential food products. • Other categories that went up noticeably in the weeks following 9/11 included baby food. Trying Times Present CPG Industry with Challenges & Opportunities It is a time to continue the momentum of building your brand with existing consumers and key prospects. crackers. Beer.. While some companies will continue to be hurt by the lingering effects of the terrorist attack— the weakening economy and the tragic events of September 11th. soup and canned vegetables. in seven of the 11 departments we monitor (representing 72% of total dollar sales). Some of the categories that showed slower dollar volume growth rates in Q2 and Q3 included prepared foods. While the dollar sales growth rate in most departments went up during Q1. coffee. coffee. Among the frozen categories that have declined were frozen prepared foods and frozen vegetables. many of you have asked us about the impact of whose growth rates increased in Q2 and Q3 included costeffective frozen unprepared foods and comfort foods such as frozen desserts. ice cream and pizza/snacks.S. jelly. carbonated beverages. • The alcoholic beverages department ($15. we saw behavioral changes like stocking up on bottled water.9 billion) is another of the seven decliners.6 billion across f/d/m combined).Tim Callahan President ACNielsen U. The HBA department showed a decline. Unit volume growth rates for nine of the 11 departments also declined in Q2 and Q3. powdered. • The dry grocery department. canned goods. shelf-stable and canned). cookies. 3 | Consumer Insight | Winter 2001 • The frozen department ($28. those that spiked up included candles and food storage containers. Those Continued on page 27 . ($145. peanut butter.

.Cover Story 4 Consumer Insight | Winter 2001 | © David Gould and Steven Hunt/Getty Images/The Image Bank.

the latest development in the technology of convergent economics. loyalty cards were severely limited by the constraint of a single retailer view. Darwinian economic theory holds that adaptable methods of communication will prevail in the commercial jungle as well. ushering in a new era of high-speed checkout and data collection. consider the usage. Sometimes dubbed the quiet revolution. In addition to the constricting chain and channel blinders of scanner data and loyalty cards. always-aware. always-active pervasive c6ommerce initiatives. Ohio. . pervasive commerce is redefining the CPG landscape with technologies like smart labels embedded with transmitting sensors and intelligent readers built into key areas where consumers live and work. This skewed perspective gave retailers a view of in-store loyalty trends. but it only let them see the fraction of consumer spending at that format. serving the interests of consumers and producers via always-on. The emergence of pervasive commerce. at Marsh’s Supermarket in Troy. While these did a better job of linking consumers and their purchases. Although bar codes yielded significant efficiency and accuracy benefits. 1974. The next “big thing”? Frequent shopper cards. 5 | Consumer Insight | Winter 2001 From Bar Codes to Loyalty Cards Technology first made its mark on the CPG trade when bar codes debuted on June 26.Radio Frequency ID: A New Era for Marketers? by John Stermer Senior Vice President eBusiness Market Development ACNielsen Evolutionary theory holds that more adaptable species will prevail in the primordial jungle. Objects speak to objects in an unheard language. they proved to be just a better way to capture and track product sales and volume information. Wearable scanners convert painstaking inventory control exercises into a real-time action as simple as the nod of a head. serves as a case in point.

the order is placed via the Internet. Where once we collected purchase information. electronically stroll the aisles of a virtual grocery store. Each RFID tag is equipped with a digital memory chip bearing a unique electronic product code (EPC). Visor. RFID technology actually can enable tracking of a product through the entire life cycle. In the business-to-business venue. intelligent refrigerators and microwaves interpret smart labels to monitor storage requirements. Consumers armed with their personal digital assistant (e. As envisioned by the MIT Auto-ID Center. when and who of product use. to environmental conditions like temperature and moisture content that impact product freshness. Products with RFID embedded in labels can continuously transmit information ranging from a unique EPC. all via satellite to Internet-resident databases. Not just an efficiency enhancement. allowing detailed information for each product. Blackberry). Procter & Gamble and Wal-Mart. every smart label would contain up to 96 bits of information. attitudes and product usage. Palm Pilot. delivery preference. currently wiring the city of Tulsa. verifies accuracy. Oklahoma. As each order moves out the door. but a true paradigm shift— 6 Consumer Insight | Winter 2001 | one that offers the potential to connect consumer purchase to consumer usage across all classes of trade. In an industry first. Ticking off desired items on an electronic shopping list. As of this writing. Conceptually. water or even people. Accuracy improves from very good to near-perfect. reports that it has slashed the cost of even the smallest purchase transaction by as much as 70%. The Great Enabler Three words best capture the major benefits of pervasive commerce: speed. plastic. with RFID equipment for tracking microchip-equipped packages. determine cooking procedures and update the family shopping list based on actual consumption. at distances up to seven meters. and has been a step in the right direction. Savings range with the application.g. at a scant one error in 100 million reads. a pervasive commerce network could work like this. psychographic and economic blind spots of tracking data. Future Perfect Fully implemented.and off-line consumer purchase behavior. downloading relevant pricing information. a portal reader records purchased items. ice. The objective is to tag “everything that moves. . are part of a 36-company consortium called Auto ID Center. along with payment authorization. accuracy and savings. RFID enables the linking of all this product information with a specific consumer identified by key demographic and psychographic markers. steam. a group of thought leaders in the CPG However. something more integrated and holistic was needed to provide a ubiquitous understanding of on. from the production line all the way to the recycling center. The answer: RFID (radio frequency identification) technology.Cover Story consumer demographic. Once at the home.” and trace goods from plant to pallet to store shelf. the RFID tag is an elegant combination of the UPC with an Internet IP address. ACNielsen. telecommunications company. despite the presence of dirt. product and ingredient specifics provided via wireless RFID transmissions. maintain the appropriate temperature and humidity. paint. and transmits replenishment data. Philip Morris. The pace of commerce accelerates from rapid to immediate. in real time. address and driving directions. Consumer panel information was added to fill the gaps left by traditional tracking information. RFID: A True Paradigm Shift RFID represents the first true breakthrough in the CPG industry since the beginning of marketing time. but Swisscom. without human intervention. Switzerland’s largest The Missing Link The intelligent microwave and refrigerator loom as first order RFID applications—good news for CPG marketers. sell-downs are taken automatically. including a 40 bit serial number. wood. to consumption status. updates inventory at the retailer and manufacturer. world are putting pervasive commerce to the test. since 75% of the consumer products ACNielsen tracks can be found in the bathroom or kitchen.. along with Accenture. menu suggestions. now we can correlate multiple points of consumer product purchase with consumption specifics such as the how.

from factory location and date of manufacture. emits a signal activating the RFID tag so it can read and write data to it. product characteristics such as weight and category. Much like the current ACNielsen NetRatings product. will redefine the competitive landscape for the CPG industry. inexpensive tag (the transponder) containing a digital memory chip that bears a unique electronic product code. including shopping malls. an antenna packaged with a transceiver and decoder. ACNielsen has invested in a multi-year effort toward this goal. passive technology. pervasive commerce deploys non-intrusive. then transfer that information to the host computer for further processing. the self-monitoring infrastructure is put in place and operates unsupervised. While there may be some debate about the intelligence of objects. shipped under the correct temperature and moisture conditions. The market for RFID tags is growing explosively. they’ll simply have to load the mini-van. interpreting and analyzing ever richer and more robust data.The interrogator. 3] Sensitive microprocessors will be able to monitor the product environment to ensure that foods arrive fresh. ACNielsen Homescan panelists use a handheld scanner. safety and quality statements. convenience stores. manufacturers will be able to dynamically change text on the package. called Product Reference. Tomorrow. True intelligence still resides with the people who program these collection networks. there is no debate that pervasive commerce. projected to reach $10 billion annually within the decade. as well as the store-specific geographic database called Trade Dimension (TD) Linx.How It Works The basic operating principles of pervasive commerce are pretty straightforward. mass merchandisers. After securing a consumer agreement to participate. developing in-depth massive product reference databases. RFID in car One key to pervasive commerce success is the guarantee of 100% compliance after installation. each object is equipped with a small. warranty or other product information. TD Linx captures more than 40 individual attributes per product. intelligently deployed.S. to anti-counterfeiting. updating advertising. according to IDTechEx. a standard industry postal code and geographic availability data. digital images of each product. RFID tags boast some unusual properties: 1] Data can be changed as the product navigates the distribution system. To realize the full capability of pervasive commerce. walk in the door. In a typical RFID (radio frequency identification) system. ACNielsen believes that real value is derived only by linking the RFID to a source of intelligence. Today. While RFID is a very compelling and elegant technology enabler. pricing. including supply side characteristics such as case and pallet. The elegant enabler known as pervasive commerce requires a reference architecture robust enough to recognize and categorize every product and every retailer at every venue in the U. 7 | Consumer Insight | Winter 2001 RFID products in home © Siegfried Layda/Getty Images/Stone. food and drug stores. Pervasive Commerce and Object IQs One point of hot debate in the RFID arena involves the issue of object intelligence. or open the refrigerator for purchases to be recorded. 2] When electronic display technologies such as electronic inks hit the market. .

Feature The Consumerization of Rx Products by Bart Roselli VP. New Business Development ACNielsen 8 Consumer Insight | Winter 2001 | .

Label As a Consumer Brand (share to switch segment) ($) 9 | Consumer Insight | Winter 2001 OTC Category Share 9. Brand C went from a low 13 share of prescriptions to a whopping 42. . Research shows that while prescription products do carry their brand equity as they move to OTC status. Afrin.5 times the private label share of the category. Zantac 75. a prescription product may impact the sales of an existing OTC category. the manufacturers of competing drugs and the retailers that merchandise these products.6 9.1 Brand Position Brand A Brand B Brand C Brand D Share of Rx’s 54 24 13 9 Segment Share 26. Does Success Translate The success or leadership as a prescription product does not ensure leadership as an OTC product. but it does not guarantee success.8 3. the industry spent $2.6 share of the previous prescription segment.3 17. Consider the introduction of non-prescription smoking cessation products. Recent Rx to OTC Switch As an Rx Brand Brand Position Brand A Brand B Brand C Brand D Pvt.000-percent dollar volume increase in 1996. Aleve. supermarket or mass merchandiser and products such as Advil. Consider the impact the new blockbuster prescription drugs Vioxx and Celebrex are having on the OTC analgesics category.6 share of the OTC segment (prescription products) and a 9. it does not necessarily translate into a similar OTC share. For some.8 share of the total category. sales of OTC nicotine replacement generated just $300.2 billion in direct-to-consumer advertising last year. For perspective. Moreover. Prior to their introduction. HMO involvement.5 18. Pepcid AC. Rising health-care costs. Brand A maintained a 54 share of prescriptions as a prescription brand.6 A Profound Impact The switch from prescription (Rx) to OTC has a profound impact on the manufacturers that produce the drug. Chart 1 Consumerization of Rx Products Success or leadership as an Rx product does not ensure leadership as an OTC product.New Health Care Decisions Visit any drug store. is that the awareness of these prescription products is extraordinary. In some cases. In Chart 1. There is also concern about the increased cost to the consumer.0 7.5 share of the segment and 17. these two products spent $225 million in direct-toconsumer advertising in the year 2000. Does ‘First Switch’ Drive Success? The first product to enter a new category or segment has advantages. but as a consumer brand. in Canada. it now only delivers a 26. The private label counterpart in this category also caused a tremendous impact as it took a large share of the market.5 2. Consumer recognition and doctor recommendation undoubtedly played a large part.7 42. but it ended up in second place after the number-one prescription brand Zantac switched over. it is hard to consider life without their easy accessibility. Are the users switchers from existing analgesic products? Are they still purchasing OTC analgesics in addition to their prescription? These questions can be answered through additional research. For example. What is known. easy access to health care information and the explosion of direct-to-consumer advertising are just some of the reasons behind the expanding availability of over-the-counter (OTC) drugs reclassified from prescription status. according to Nielsen Media Research. Their introduction in 1995 created a new over-the-counter category and caused a 41.1 share of the total category. Rogaine and Nicorette Gum are all readily available. the upset stomach remedy Pepcid was the first to enter the OTC market. Proponents believe this availability allows consumers to take a more active role in their own health care and serves to reduce overall health-care costs. but before 1984 all of these drugs required a doctor’s prescription. nearly 2. It is important to note that private label captured an 18. however. Interestingly.1 1. Gyne-Lotrimin. Kaopectate. since OTC drugs are generally not covered by healthcare insurance.000 in sales across all retail channels in 1995. Opponents argue that forcing patients to selfdiagnose and self-treat takes the doctor out of the equation and raises questions about the quality of the patient’s care.

The benefits of testing products with consumers prior to a launch are significant. These ad spending levels are phenomenal for a new brand in year one [See Chart 2]. Given the huge media budgets. the opposite is true.Feature into a high degree of switch success. In addition. ACNielsen BASES. Other category switches proved disappointing. ACNielsen BASES has completed 11 validations and has been within their quoted confidence range 10 of those 11 times.S. For switches. far above the normal level for an OTC introduction. As the world moves toward one big market. two of these launches were characterized by multiple executions for each brand. Chart 2 Advertising Spending in Year 1 10 Consumer Insight | Winter 2001 | Case in Point Prescription remedies are globalizing and growing. this is not surprising. When validating a forecast. The fact that medical plans would no longer cover the product and the introduction of “newer” anti-smoking prescription products may have discouraged some consumers. Many prescription brands in the U. ACNielsen BASES re-runs the model with the actual executed marketing plan and then compares the results against actual sales. These media levels resulted in . often targeted to different demographic segments. price sensitivity and cannibalization are dissected. but efficacy and safety perceptions are also analyzed. the policy differences on prescription medications become more apparent. Advertising. has tested virtually every Rx-to-OTC switch in the last 15 years. may be OTC in Canada or Mexico. ACNielsen BASES research shows that the average switch brand spends seven times as much on advertising as an average non-switch OTC brand. After the switch of anti-smoking products. label compliance. To understand the magnitude of the consumerization and implications of prescription to OTC switching. In some cases. The Importance of Awareness How important is brand awareness for Rx-to-OTC switching to occur? In a word: very. the world leader in the simulated test marketing field. sales never materialized to anticipated results. And three of the brands examined spent at least $50 million on media. Not only are OTC usage patterns studied. consumer sampling and physician marketing all play critical roles in the successful marketing of the Rx-to-OTC switch. This translates Source: BASES Validations In addition to the extraordinary focus on media spending.

it is not surprising that “switch brands. Further increasing awareness. one of these brands dropped more than one sample for every household in the U. . ACNielsen found that two of four switch brands far surpassed a benchmark product launch distribution in the first four weeks of the introduction. with three of the brands approaching 90%. The result: Brand A was highly successful. The impact of prescription switches on product distribution is also evident. the same is true. while two switch brands hit 11 | Consumer Insight | Winter 2001 Source: BASES Tests Take Brand A. Backed by millions of dollars of consumer advertising. Chart 3 Concept Purchase Intent with Doctor Recommendation A Powerful Force The ripple effect of Rx-to-OTC switching has a powerful impact on the channel dynamics. In three separate cases.enormously high awareness. While two of the three brands started out with substantial awareness levels. one product built to 90% from virtually nothing. Not only is it important and quantifiable. In the examples studied. When comparing a switch brand to a leading product launch in OTC. the distribution of the product and the total category. which focused heavily on professional marketing. for example. the blockbuster OTC product achieved an 84% ACV distribution during the first four-week period.” the secondary alternative to the initial launched brand. followed by drug (39%) and food (33%). Chart 4 Physician Recommendations (post switch) The Doctor Is In Physician endorsement is another key marketing variable crucial to the success of a brand switch. gaining the majority of doctor recommendations [See Chart 4]. On a channel-bychannel basis. achieve quick distribution. ACNielsen research shows differently. dropped 80% of physician samples and was competitive on journal ads. It is evident that consumers take advantage of the deeper discounts found in the mass channel. It captured 71% of all details directed against physicians for the category.S. prescription switches established the largest proportion of total category sales in the mass merchandiser channel (43% of the new segment). the consumer’s intent to purchase was considerably higher after a doctor recommendation was given [See Chart 3]. While one might think that prescription switches would be most impactful in the drug channel. In drug. but it translates to a high degree of consumer acceptance.

Feature 91% and 93% during the first four weeks. • Switch brands receive very high in-store support early on in the switch.4 4. manufacturers and retailers of the base products need to understand their base product consumer differentiation from the switch products and think about how to target to the new prescription switch consumer. With OTC switches representing over 30% of the total category. the share of base brands changes dramatically.7 5. while the second-leading Base Brand B was negatively impacted [See Chart 5]. Consumers will become even more involved in their medication decisions both for prescription items as well as OTC products. • Successful brands add SKUs (sizes) over time and provide additional consumer benefits. and continue strong for the first year.9 8. ACNielsen and BASES research shows general observed trends: • Base brands do not react to higher-priced switch products with price reductions. In the example below.5 10. 12 Consumer Insight | Winter 2001 | Base A Base B Base C Private Label Base D Base E $ Share to Total Category Index 20.1 6.7 11.9 19. Switch brands have a tremendous impact on existing brands that may compete for similar consumers or that may be impacted by the prescription switch. The trends that currently drive the consumerization of prescription medications will continue.8 9. Base Private Label becomes stronger (156 index). Chart 5 What Happened to Major Base Brands? Industry Implications The growing importance of understanding the consumerization of prescription brands and the implications are far-reaching. Manufacturers and retailers need to better understand who their consumers are and what else they are purchasing as part of their medicine cabinet.2 13.5 16.4 Post Introduction 72 35 63 156 46 46 When switches occur in a category. 95% and 96% for switch brands). .6 Pre Introduction 15. The same held true in the mass channel (86% distribution for leading product vs. • Private label has a higher-than-average share in the prescription switch segment.

and finally. These questions are relevant to the key pricing “audiences” in retailer. Better to not change pricing. However. based on their pricing velocity and sensitivity. this thinking is not totally unfounded. and are adaptable to different pricing management environments and applications. goes the thinking. These four questions help to define a common set of information to drive better pricing decisions. First.” The underlying reason? Call it The Great Unknown. we can reduce the fear and drive profitability for the category. what the key price points are. broker and manufacturer organizations. “Which items are most important?” This can be done by breaking the category into strategic groups of items. KnowledgeWorks ACNielsen Jeff Ritchie Director. The next steps include: determining how the items respond to changing price. by using a strategic framework for item-level price management. However. One of the biggest issues with regard to category pricing is this “rule of fear. The Key Questions Within this framework. fear often causes the opposite reaction— an inability to act.Feature John Porter VP. And in our high-stakes marketplace. . than to change it and negatively impact sales. to do things we may not otherwise have done. KnowledgeWorks ACNielsen 13 | Consumer Insight | Winter 2001 F ear is one of the great motivators. It pushes us to go where we have not gone before. what the pricing environment is for key items. there are four key questions the category manager needs to answer.

Likewise.0 would show a two-percent Fear Rules Since price is the driver of revenue and profit. but not as loss leaders. etc. one needs to break the category into strategic groups of items. they have to be reduced (otherwise consumers will buy something else). consumers are also more aware of pricing changes for these items Price Sensitivity—this metric refers to the Margin—the revenue gained is different for different items based on purchase price. is that by performing category pricing analyses. Which items are most important? 2. What are the key price points? The good news. Items such as snacks. it is no wonder that marketers are hesitant to change a product price once it is established—the aforementioned rule of fear. cereals and carbonated beverages have high pricing priority and should be considered “flagship” in your pricing scheme— with pricing that calls attention to the items. What is the pricing environment for key items? 4. Chart 1 Start by Breaking the Category into Strategic Groups of Items Sensitivity High Response Medium Competitive Pricing Manage Margin Low Response Manage Margin Take Margin Build ROI 14 Consumer Insight | Winter 2001 | velocity and sensitivity should use appropriate pricing strategies. would indicate a one-percent decrease in revenue relative to the price change. items that have medium-to-low change at all. marketers are then faced with boosting volume to cover the difference—a slippery slope if there ever was one. Finally. For any given category. Typically. Four key questions 1. and that high-velocity items typically drive volume. An elasticity of 2. These groups can be used against any product category.0. trade promotions. Chart 1 shows that items with high velocity and price sensitivity should be given high pricing priority. for example. The goal is to provide reliable reporting of the sensitivity of an item to a change in shelf price.Feature Separate the Category To address the first question. And by reducing price. however. How do items respond to changes in price? 3. An elasticity of 1. combined with margin. and in some cases can even increase volume as a result. can help determine pricing tactics to support category strategy Velocity responsiveness consumers have to changes in price for a given item High Velocity (High Visibility) Middle Tier Slow Movers Flagship Pricing Competitive Pricing Elasticity—How Items Respond Elasticity is simply a measure of how items respond to changes in price. marketers can actually find the places where increasing price is a good thing. The key is to understand price elasticity. elasticity measures the impact of a one-percent change in shelf price (increase or decrease) on revenue. since they will have the greatest tactical impact. It is generally accepted that revenue for high sensitivity items is strongly influenced by price. those categories with more moderate velocity and sensitivity should be priced competitively. These factors. In analytical terms. The corollary is the impression that if prices are to . the following variables must be considered when understanding and implementing pricing plans: Velocity—high-velocity items move off the shelves more quickly.

Continued on page 17.4 oz Tube Toothpaste ❑ Pert Plus 13. A Test: Put the following products in order of elasticity. in the light duty detergent category. and so on.5 oz Shampoo with Conditioner ❑ Yoplait 6 oz Strawberry/Banana Yogurt ❑ Motrin 50 count Regular Strength Gelcap ❑ General Mills 20 oz Cheerios ❑ Kibbles & Bits 20 Pound Dry Dog Food ❑ Dawn 28 oz Liquid Dishwasher Detergent Answers on page 18. What we found was that there are distinct differences between channels [See Chart 2.decrease in revenue for the price change. however. mass merchandisers had the highest overall elasticity. ❑ Crest 6. and drug the lowest of all the channels. starting with the most elastic and finishing with the most inelastic.” For example. food and drug. as well as relatively inelastic categories [See Chart 3. 50 categories and roughly 35 items per category that were sold in all three channels.. During the late 1980s. Our latest look at the findings considered three channels. The important thing is to start by looking at facts. Clearly. While the median elasticity was near 1. etc. Within each channel. Perhaps not an earth-shattering discovery. these Food products were typically 30% to 40% more elastic when purchased in drug and mass. while food products are fairly inelastic when purchased in a food channel store (changes in price caused less drastic changes in sales). the variations make it difficult to generalize rules of elasticity relative to channels or categories – diversity in categories and channels is the rule. Perhaps the most enlightening insight from the research is that consumers seem to shop “in context. page 17]. The reason for this? One theory is that since shoppers visit channels based on destination products (healthcare remedies in drug. the price elasticity also varied widely by category. Aside from this finding. And that is why shelf price management must be a category/channel specific activity.) they are not as likely to buy the impulse (i. More study is definitely necessary for the underlying reasons. There are also differences in elasticities within categories. For example. Elasticity measures the impact of a one-percent change in shelf price (increase or decrease) on revenue. focusing on the category’s role in the store and the competitive environment in addition to price sensitivity. All channels had categories that were quite elastic. the variation ranged significantly among mass. the elasticity ranges from -0. Benchmarking Elasticity ACNielsen has been studying the relationship between price elasticity and channel for more than a decade. This means that changes in price more drastically affected volume in mass than they did in drug. as the elasticity numbers grow larger. bread and milk in food channel. which helps to focus on fast moving. Most categories show a range of item sensitivities—most have a mix of elastic and inelastic items. but when combined with the fact that mass merchandisers had the lowest overall prices while drug had the highest.6 (high sensitivity).7 (low sensitivity) to -1. one can begin to see that higher pricing does not always negatively impact volume. “non-context” items) unless the price is attractive. the item is defined as being more price sensitive. page 17].e. price-sensitive items as well as identify “margin improvement” items. 15 | Consumer Insight | Winter 2001 . But it is definitely important to consider when developing channel pricing strategy.

What the company discovered was good news for everyone. Premium Extra Virgin $1 1.99 Total 29.66 16 Consumer Insight | Winter 2001 | Private Label was most often parity priced with Extra Virgin and had a higher sales rate than Extra Virgin’s.66 — -0. 16 -0.60 5. This allowed determination of the effect of price changes on any of the three brands. Profitability was critical for each brand.20 20. ACNielsen looked at elasticity across brands for the two Premium Foods brands and Private Label. with the retailer increasing by 20%. Premium’s Extra Virgin Olive Oil impacted Private Label’s volume when Premium raised its price. Premium Virgin was not affected by either of the other two brands changing their price.99 profitability by 4%. since both Premium Foods product prices could increase. In addition to analyzing price points. Virgin Olive Oil and Extra Virgin Olive Oil (the higher end of the two brands). This supported the hypothesis that some consumers might switch to Private Label following a price increase.00 less than the other two and had the highest overall sales rate. Premium Foods could raise prices and increase profitability without putting much volume at risk.20% 4.99 $10.54% *Key information for this case study has been masked .99 $11.10% 5. Premium Virgin Olive Oil sales were entirely a function of that product’s own price and did not interact with the other two brands.59 -3. In addition. but Private Label did not impact Extra Virgin when Private Label increased in price [See Chart 2].Feature A Case Study From Canada* The Premium Foods Company was contemplating a price increase on their olive oils. Char t 2 Rela tionships Betw een Brands Premium Extra Virigin affects itself and Priv ate Label Elasticity -0.30% 1. — — -0.66 10 14 -0.99 Private Label $1 1. In addition.90 — — Premium Extra Virgin Private Label For Premium’s Extra Virgin brand. there was a price relationship with Private Label.80% 14% 19.59 $12. and they were able to present to retailers the feasibility of the 5% price increase. They had two products. The modeled result showed Premium increasing tic ands are inelas Char t 1: All br Average Price Range Premium Virgin Premium Extra Virgin Private Label $9. b) whether they could raise prices on both brands to maintain a premium positioning. All three brands examined were shown to be inelastic (less price sensitive). to show retailers that a price increase by Premium would not negatively affect either Private Label or the category as a whole.10% $12.99– $12. Premium Foods simulated a 5% price increase on both their brands and Private Label.00% 2. Extra Virgin could maintain its high-end positioning in the marketplace [See Chart 1].60% 3.77 -0.90 Across=brand s that affect yo u Down=brands you affect So how was this good news for Premium? Using Price Simulator. and c) how their products should be priced relative to Private Label.99– $13.30% The company also needed to understand the interaction between the Premium brands and Private Label in the face of a price increase.77 -0.70% 0 -2.79 Sales Rate Most Common Price $9.49 -3.90 Char t 3 A Pr ice Increase A cross the Broa d Increased Pr ofitability Brand Premium Virgin % Change % Current Prop osed % Chan Change % Ch ange ge in in Dolla Price r Premium Price Unit Sales Retail Volume Profits Profits $9. gaps and sales levels.77 — -0.99 $10.20% 1. A price increase by Premium’s Virgin Olive Oil would not affect the sales volume of either Extra Virgin or Private Label. The Premium Virgin brand was typically priced around $2. Brands Premium Virgin Premium Extra Virgin Private Label Premium VirginRate -0.99– $14. and the company also wanted to maintain the premium image of the higher priced Extra Virgin oil. Premium Foods needed to understand: a) how much of a price increase they could profitably take.99 $11. which was then accepted and subsequently implemented [See Chart 3]. Therefore.79 $5. Premium Elasticity used these results to develop their annual pricing plan.

” [See Chart 4]. depending on the individual category • All channels had categories that were quite elastic • All channels had relatively inelastic categories How does this look in the real world? Usually one needs to build pricing environment rules. according to the particular need. to understand how best to set and/or adjust price.11 $9. By understanding the pricing environment.19 $7.99 $7. relative to the market and channel. pricing rules are summarized in ways that support managers in making tactical pricing decisions: “I will be within 5% of the lowest price in my trading area” or “Price Zone 1 will be priced above 75% of the other retailers in the area.‘ Chart 3 Category Elasticity Findings Each channel had a wide range of elasticities. lowest price. rules are set relative to competition.99 $9.49 $8.99 $9. one can try to summarize pricing and positioning across channels.99 $8. average price.69 $8.Chart 2 Channel Elasticity Findings The channels are quite different in their price sensitivities The Pricing Environment Pricing is decided in a very competitive environment.99 Highest $9.29 $8.33 Market Retailer A Total Drug Total Food 50% .99 $9.99 $8. Sometimes. These can be defined in different ways.99 $9. One current method is to look at average price for a particular retailer compared to the overall trading area. 17 | Consumer Insight | Winter 2001 Consumers seem to shop ‘in context.99 $9.99 75% $9.69 $10. highest price or by key price points.39 $9. These price management tools provide the ability to systematically capture and present more pricing detail. Marketers need detailed. we can provide a richer view of the way a consumer sees pricing in a channel—whether by most common price. Chart 4 Building Price Environment Rules DESCRIPTION: BRAND B QUARTER: Q1 2001 Market Retailer A Total Drug Average Most Common Low Price 15% $9.99 25% 35% 50% Total Food $9.28 $9.99 $9. reliable reporting of how an item is priced.39 $9. Typically. By using a pricing environment template.29 $9.29 $8.

It is also a helpful tool in driving away the fear of implementing strategic pricing at the store shelf.69 $6.70 to $7.89 $6. Key Price Points So now we know the item’s role and margin.60 to $6. the price sensitivity (elasticity).86 -0.33 -0. we can.20 to $7.30 to $8.99 $6.70 to $8.39 $6.79 $6.99 $8.90 to $6.29 $8.10 to $6.19 $6.29 $6.30 to $6. It is very important to determine the thresholds for key items. however.09 $6.40 to $6.69 $8.90 to $5.80 to $7.59 $8. one can provide a fact-based approach to setting competitive pricing metrics. It should also be noted. that determining thresholds can be a very time-intensive analysis.80 to $8.90 to $7. and the pricing environment. All items come with price thresholds: prices that are accompanied by a marked change in consumer behavior [See Chart 5].93 -0.40 to $8.49 $5.19 $7.49 $8.69 $7.70 to $6.Feature Chart 5 Price Threshold Checks For Key Items 45 40 35 30 25 20 15 10 18 Consumer Insight | Winter 2001 | 5 0 $6.98 -0.49 $7.20 to $8.10 to $8.68 -1.50 to $7.20 to $6.50 to $8. Can we set any price? Usually.80 to $6.59 $6.30 to $7. Product Description Kibbles & Bits 20 Pound Dry Dog Food Yoplait 6 oz Strawberry/Banana Yogurt Dawn 28 oz Liquid Dishwasher Detergent General Mills 20 oz Cheerios Pert Plus 13.00 to $8.09 $7. and should therefore be used for key items only.79 $7.60 to $8.00 to $7. Answer to sidebar on page 15.00 to $6. but a final element in developing a pricing strategy is to determine the key price points.59 $7.40 to $7.53 -1.29 $7. Meeting The Challenge There are four questions related to pricing management: Which items are most important? What is the pricing environment for key items? How do those items respond to price? Are there key price points? Answering these four questions is the first step in defining a common set of information to drive better pricing decisions.4 oz Tube Toothpaste Motrin 50 count Regular Strength Gelcap Price threshold: price that is accompanied by a marked change in consumer behavior .5 oz Shampoo with Conditioner Crest 6.09 $8.99 $7.48 90 By using good environment summaries.79 $8.39 $7.60 to $7.19 $8.50 to $6.39 $8.89 $7.89 Elasticity -1.10 to $7.

restaurants and vending machines were not for the most part included. this study is heavily weighted towards purchases from retail stores. ACNielsen has measured actual retail sales from 30 countries that account for 90% of global GDP. Rather than providing a simple tally of shipment sales from a company’s annual report. Purchases from kiosks. it does provide a significant look into the globalization of our consumer brands. Global Reports and Communication ACNielsen Global Services 19 | Consumer Insight | Winter 2001 W hat does it mean to be global? Despite a proliferation of brands in the marketplace and a focus by major manufacturers on expanding into new territories. ACNielsen’s Global Services group recently completed a study of top global CPG brands.Feature Jane Perrin Managing Director ACNielsen Global Services Clare Nishikawa Manager. . Products most often purchased within a retail store benefit from ACNielsen’s retail coverage. bars. there are relatively few global megabrands in the consumer goods world today. The following is a rationale behind the choosing of the brands and a brief summary of the study. Note: Due to the fact that no one measure can include all channels of consumer purchasing. Although the list of brands may not be all-inclusive due to coverage limitations. The data in this study was sourced from local ACNielsen information.

Finally. including carbonated beverages. For three brands (Gillette. North America. ” we looked for consistency in terms of product packaging. and Europe. For example. nor were Always and Whisper (Asia) combined as a single sanitary protection brand. Asia Pacific. we segmented brands within their specific category. most had the largest concentration of sales in their region of origin. only 43 actually met the criteria of having a global presence in each region and having over $1 billion in sales. Additionally. Although local taste preferences may be accommodated *Denote sub-brands which independently meet the global billion dollar mark but are included in the total for the brand . Lays and Walkers (Europe) were not combined as a single chips & snacks brand. sports drinks. Of the total. they did not have more than $1 billion in sales. 30 maximum 30 Tabacco 25 Carbonated Beverages 30 20 Consumer Insight | Winter 2001 | pers. Beverages Are Number One Not surprising to any global traveler. Pedigree and Always). To define and determine a “brand. In addition. both North America and Europe had equal predominance [See Chart 1]. the cumulative sales for the 12 months ending with the first quarter of 2001 had to be equal to or exceed US$1 billion. most of the brands had a high concentration of sales in either North America or Europe (62% on average).Feature There were three main criteria that a brand had to meet to be included in the study. coffee and beer. For example. Second. Pampers wipes were not combined with Pampers diaChart 1 Billion Dollar Global Brands Brand Total Coke Coke (Regular)* Diet Coke/ Coke Light* Marlboro Marlboro (Regular)* Marlboro Lights* Total Pepsi Pepsi (Regular)* Diet Pepsi/ Pepsi Light* Budweiser Campbell’s Kellogg’s Pampers Benson & Hedges Camel Danone Fanta Friskies Gillette Huggies Nescafe Sprite Tide Tropicana Wrigley’s Colgate Duracell Heineken Kodak L&M Lay’s Pedigree Always Doritos Energizer Gatorade Guinness Kinder Kleenex L’Oreal Maxwell House Minute Maid Nivea Pantene Philadelphia Pringles Seven-Up/7-Up ) Tylenol Whiskas * Beer Soup Cereal Diapers Tabacco Tabacco Yogurt Carbonated Beverages Pet Food Blades & Razors Diapers Coffee Carbonated Beverages Laundry Detergent Still Beverages Chewing Gum Toothpaste Batteries Beer Consumer Films Tobacco Chips & Snacks Pet Food Sanitary Protection Chips & Snacks Batteries Sports Beverages Beer Chocolate Facial Tissue Colorants Coffee Still Beverages Moisturizers/Cleansers Shampoo/Conditioners Cheese Chips & Snacks Carbonated Beverages OTC Pain Remedies Cat Food 25 21 27 27 21 24 25 29 24 29 25 29 30 11 17 27 29 28 26 13 18 22 25 22 20 28 22 23 28 26 27 19 16 29 30 25 30 30 9 24 Segment Carbonated Beverages # of countries included. First. marketing and consumer views of the brand. sales outside of the home market had to represent at least 5% of the global sales value. Nearly one-third of the brands included in the final list (13 of the 43) were a beverage. Among the 43 brands. the category with the most billion-dollar global brands was the beverage category. We looked at well over 200 brands in this study and although more than half had a global presence. juice. The 43 brands on the list represent 23 global manufacturers and more than $125 billion in sales. the brand had to have a measurable presence in each of the four major geographic regions—Latin America. Brands also had to use a consistent name worldwide. Middle East and Africa.

film. Philip Morris and Gallaher.21 | Consumer Insight | Winter 2001 by different product formulations distributed under the same brand name. moisturizers & cleansers. all have an interest in Benson & Hedges. Benson & Hedges. toothpaste. there were three snack foods that stood out with over one billion dollars in global sales (Pringles. but consumers in every region are smoking these common brands. with its associated sub-brands. blades & razors. eight had more than one brand on the list. chewing gum. Gillette. they are often marketed under different brand names. The total Coke brand was number one among beverages at well over $15 billion in sales. Lay’s and Doritos). with 12 categories each having representation: battery. shampoo & conditioners.). OTC pain remedies. Coke and Diet Coke. the other two brands both have some type of multi-company relationship. with the Coca-Cola Company having four brands. a catfood brand (Whiskas) and one that caters to both cats and dogs (Friskies). no one category emerged as dominant. facial tissues. Like the beverage category. Soup. The Mega-Manufacturers Of the 23 manufacturers that are responsible for marketing these billion-dollar global brands.S. British American Tobacco. colorants. there was only one household product on the list: Tide Laundry Detergent. Interestingly enough. In the tobacco category. yogurt. essentially consumers around the world are all drinking variations of these same brands. Pet and Tobacco Also Strong Although no other single food group had as significant a number of brands included as the beverage category. diaper. Kimberly-Clark. having more than one billion dollars in sales in their own right. cereal. Pepsi and Diet Pepsi (including Pepsi Light. for example. local formulations may differ. which is distributed by Cadbury Schweppes in the U. Mars and Nestlé each had two brands included. The Remaining Mix Of the remaining fourteen brands. PepsiCo had the most brands with six (when including 7-Up. Pet foods were represented by a dog-food brand (Pedigree). Snack. and sanitary protection. cheese. Pepsi Max and Pepsi One) ranked as the number-two beverage brand. Four tobacco brands had a significant global presence and met the billion-dollar criteria: Marlboro. . although Marlboro and L&M are definitely Philip Morris brands. with its two sub-brands. Although manufacturers market similar household and cleaning products around the world. Camel and L&M. and chocolate all had one brand each on the list. Procter & Gamble and Philip Morris (Kraft included) each had five. Pepsi.

However. • On the opposite end of the spectrum. Middle East and Africa is the dominant region for 16 of the global brands. were significantly under-developed. such as snack food entries Lay’s and Doritos. • Eight of these brands have at least 70% of their sales within the region: Benson & Hedges. Kinder. such as juice. • Guinness Beer (country of origin: Ireland) and Kinder Chocolate (country of origin: Italy). and Always). and in fact. • Of the 43 brands that made the list. This is not surprising considering that based on the countries included in the report. Heineken. Middle East & Africa. have experienced double digit growth over the last two years. there are a few regional variations: Europe. two trends could be identified: Perceived healthy products. Latin America (Three countries) 22 Consumer Insight | Winter 2001 | Sales in Regions Closely Follow Global Findings Within each of the four regions (North America. • Although globally Benson & Hedges is larger than L&M tobacco products. Nivea. Middle East & Africa (Twenty countries) • Of the brands on the list. Tylenol has a fairly insignificant presence in Asia Pacific. Pedigree. L&M has a larger presence. the 43 brands reported in the study accounted for over $125 billion in sales. the regional sales of the global brands closely follow the global findings. Coke and Marlboro were consistently the top two brands of the 43 brands studied. This is not surprising. Guinness. L&M also has a fairly small presence in this region. Minute Maid and Tide) although present. each had over 90% of their sales within Europe. in each of the four regions. Over thirty percent of its sales are in this region. Nearly three-quarters of these sales were attributable to the eight manufacturers with multiple brands on the list. Nescafé had a strong presence in Asia Pacific as one the top five brands in the region. is one of the top five global brands in the region. Whiskas and Camel. Latin America. Asia and Latin America represent 20% and 5%. also showed significant growth. For example. North America & Europe Are the Largest Markets One key finding mentioned in the Global Summary is that all of the brands included in the global list had their largest markets in North America or Europe. sports drinks and yogurt. as with Europe. and Europe. Tylenol is in only a handful of countries in Europe and plays a relatively minor role in the region. • Gillette’s Razors and Blades brand has a strong presence in Latin America. Three of the 43 brands were equally strong in the two regions (Gillette. North America accounts for 32% of the world’s GDP and Europe 33%. none originated in this region. • As mentioned above. • One of the most significant findings regarding Latin America is that a number of global brands (Maxwell House. As mentioned earlier. L&M. . • Carbonated beverages rated high in this region. in Latin America. Europe. since Mexico has one of the highest per capita consumption of carbonated beverages around the world. Middle East & Africa).Feature and both RJReynolds and Japan Tobacco distribute Camel (depending on the country). respectively. Asia Pacific. as well as Wrigley’s gum. and products with a convenience image. Asia Pacific (Five countries) Global Growth Echoes Consumer Trends The growth across the 43 brands over the last two years shows little consistency. • P&G’s Always product plays a fairly insignificant role in Asia Pacific as another similar P&G product is marketed under the brand name Whisper. Regional Differences Although the global findings are fairly consistent across the regions. • In addition.

Lay’s.The study includes 30 of the world’s top markets divided into four geographical regions. Kleenex. Enfamil Infant Formula and Mountain Dew Carbonated Beverage). Although growth across the 43 brands is on average less than 10%. Campbell’s. For example. the beverage companies appear to be the farthest ahead on the globalization curve. more than 5% of a brand’s value sales had to be outside of the home market. Maxwell House. • Within categories. there are some strong regional preferences. • Kinder Chocolate and L&M are strongly European. • Eleven of these brands have at least 70% of their sales within the region: Budweiser. China Latin America Brazil Mexico Argentina North America 23 | Consumer Insight | Winter 2001 United States Canada A Sign of Things to Come Overall. Minute Maid. this study illustrates that there are a relatively few brands that one can truly call global. and although they have a presence in North America. • As detailed in the report. they do not play any major role in the market. The number of brands considered truly “global” should increase as businesses work to develop and grow new markets. Although in three of the four regions the carbonated beverage has a strong presence (within the top five global brands). an element of the criteria to be included in the global report was that in addition to having a presence in each region. Kodak. the picture is reversed. In Europe. both in the number of global products and in the magnitude of sales. Asia Pacific and Latin America. The complete text of Reaching the Billion Dollar Mark—A Review of Today’s Global Brands is available online at http://acnielsen. (South Korea) Australia Hong Kong. Although there is a proliferation of brands on the market. Tylenol.. Maxwell House ranks higher than Nescafé in North America. • Fanta Carbonated Beverage is somewhat unique. . Middle East and Africa Asia Pacific • Three brands had over 90% of their sales in North America: Campbell’s Soup. Rep. Gatorade. eight of the 43 brands have experienced double-digit growth in the most recent year. Over the next few years. Tide Laundry Detergent. North America (Two countries) • North America is the dominant region for 24 of the global brands on the list. Tropicana. and Tylenol Pain Remedies.com/billion or by contacting Matt Bell at 847-605-5686. we expect the picture of global brands to change significantly. These markets account for approximately 90% of the world’s consumer goods ACV: Europe. Germany United Kingdom France Italy Spain Russian Federation Netherlands Switzerland Belgium Sweden Austria Turkey Denmark Poland Norway Saudi Arabia South Africa Greece Portugal Ireland Japan China Korea. Tide. Tobacco companies also have a significant number of global brands on the list (four out of 43). the brand does not have a significant presence in North America. several other strong North American brands would have made the list (e. If this 5% criteria had not been included.g.

24 Consumer Insight | Winter 2001 | Feature .

Campbell leads teams specializing in technology and applications support. At headquarters. “Category managers are continually asked to improve our sales and shares and profits. and they’re also responsible for understanding the changing trends and wants of our customers. retail plan development and . training. Including field-based managers. Lakeland. Coca-Cola North America has been aiding retailers in the quest to expand the beverage category and increase sales for over a century. their sales will increase. Coke assembled a two-part team consisting of headquarters staff and field managers. Both manufacturers and retailers selected the sales agency. by Brand Marketing magazine and its sister publication. Publix has evolved from pilot efforts in selected categories to the creation of a purchasing department and a system consisting of 12 category managers and their category teams. while sales stayed the same in the category. vice president of grocery purchasing at Publix. has been utilizing category-management initiatives since 1991. Publix also looks for suppliers with new merchandising ideas and knowledge of trends and product attributes. Campbell added. Supermarket News. Since then. The common element to all the winners was a total management commitment to category management that included reorganizations of departments to address category management issues.” Publix: The Team Approach Publix Super Markets. the awards honor one manufacturer. who accepted the award at the event. who handle nearly all of the grocery purchasing for the 670-store chain. held in August in Boca Raton. Retailers were asked to choose the manufacturer winner and manufacturers the retailer. Bornmann points to the retailer’s strong working relationship with its suppliers. director of category-management services at Coca-Cola North America. When asked why he thinks manufacturers view Publix’s category-management initiative so favorably. Presented at ACNielsen’s Category Masters conference. 25 | Consumer Insight | Winter 2001 Coke: An Open Ear Although category management as a business term was coined in the early 1990s. when the company restructured its buying department. while leading sales growth. Florida. more than 600 associates are involved in the category-management team. Such suppliers know that. For example. has gotten our suppliers’ attention. But it’s not just about sales and efficiencies. “Having the ability to create excitement in the category is a lot of why we’re in this. meaning it listens to what retailers want to accomplish in a category and helps them build their businesses accordingly. “Consumers’ tastes are constantly changing.” Campbell said. Without that. To facilitate category growth among all its customers. with ACNielsen. It’s about excitement. Publix attributes its category-management success to its team approach. Winners were selected by polling a portion of the readership of Brand Marketing and Supermarket News. “We see category management as a means to increasing the size of the category. Publix works best with suppliers who view a category as a whole. These teams report to four business development directors. it would just be traditional buying. co-sponsored. consumer insights. Florida. Publix Super Markets and Acosta Sales and Marketing Company are winners of the third annual Category Master of the Year awards. one retailer and one sales agency (the last being a new category this year) in the consumer packaged goods industry that have achieved excellence in the field of category management. where it is mutually beneficial for Publix and our suppliers to reduce waste.The Coca-Cola Company.” Bornmann said. at one retailer. said Dave Campbell. Here are the profiles of this year’s winners and some examples of their category management expertise. according to Dave Bornmann.” Bornmann said. “Publix’s willingness to share more openly its data and future plans. said Bornmann. The system has been successful for Coke. in turn. CocaCola sees category management as a retailer’s business process. the number of stock-keeping units was reduced 30%.” he said. Publix’s best planning partners are suppliers who help drive total category sales.

brand and package within the two categories. but also the strength of the entire Disney franchise. Acosta business managers reviewed shares and trends by manufacturer. Acosta Sales and Marketing has been at the forefront. items that should be retained and items to be added. The Acosta business managers recommended the placement of the Disney line in a “Disney Zone” between the aseptic and multi-serve categories. They also reviewed pre-schematic share of shelf and space-to-sales for all items. Acosta utilizes all existing category management software. For each retailer. Acosta made objective recommendations on items to be discontinued. helping retailers and manufacturers increase sales and cut costs. One of our best assets is that we place precious knowledge at the business manager’s fingertips. so that it is compatible with any retailer’s system. It is not just data—it’s knowledge. Their first step was to execute a complete analysis of the aseptic and multi-serve juice and drink categories. . With the results of the analysis. and in training to get the job done. Each division is geographically focused on a major retailer to ensure that customer demands are met. Apart from its vast experience with category management. while also working closely with major brands. vice president of marketing at Acosta. including Clorox and Dannon.” Price added. The next step was to execute an efficient product assortment analysis to help retailers optimize their product lines for the aseptic and multi-serve juice and drink categories and to justify the new Disney items. Sales meetings were set up with all major accounts and the results of the category analyses were presented along with a strong sales pitch for the new Disney items.” he said. The sales presentations leveraged not just the strength of the Disney juice and drink items and the strong merchandising program for the line. that we provide more coverage than anyone else in the business. “We have constantly invested in the best people and systems. we take such a broad focus on so many categories. Price noted that what sets Acosta apart from its competition is the fact that it continues to invest in its category-management resources. The company provides category management expertise to major retailers like Kroger. “In addition. heads up an extensive category-management team that includes 400 associates across the country. The recommendation to add items often included items that Acosta was not representing. Paul Price. Acosta’s category management and merchandising skills were demonstrated with their recent introduction of the new line of Disney juice and drink items. Albertson’s and Safeway.Feature 26 Consumer Insight | Winter 2001 | Acosta From the early days of category management.

I am excited to announce that we have just completed some groundbreaking work that aligns with the University of Michigan Consumer Sentiment Index in linking total consumer purchasing behavior with those all-important consumer attitudes. Same Period Year Ago Source: ACNielsen Strategic Planner Source: ACNielsen Strategic Planner film and camera companies are hurt when people vacation less—in most other categories purchasing levels seem to be getting back to pre-attack levels. All Outlets Combined Percentage Growth Rate vs. However. Consumers are also eating out less often. . Shortly. as they tighten their belts. about both the war on terrorism and the economy. Question marks still remain.Trying Times Present CPG Industry with Challenges & Opportunities Continued from page 3 Chart 1 All Departments. This would be a good time to focus on helping consumers find easy and affordable meal solutions. All Outlets Combined Percentage Growth Rate vs. for example. however. Bottomline. it’s all about the consumer. a trend that could benefit food retailers. But it is also a crucial time to use the vast amount of consumer insights to build loyalty among your most valuable shoppers. Same Period Year Ago Chart 3 HBA Department Dollar Volume Percentage Growth Rate vs. To that end. Same Period Year Ago Chart 4 All Departments. Same Period Year Ago Source: ACNielsen Strategic Planner Source: ACNielsen Strategic Planner 27 | Consumer Insight | Winter 2001 Chart 2 Impact of 9/11 Dollar Volume Percentage Growth Rate vs. we will be offering a new service that will track key attitudinal and economic driving forces effecting changes in the American consumer’s purchasing habits. some retailers are noticing consumers “trading down”—switching from lunchmeats to peanut butter and jelly.

The difference is that today. and classic fables from Frankenstein to It would probably be surprising to many consumers how much biotechnology is already a part of our everyday lives. much of this is being done on the molecular level. anything with the prefix “bio” may cause great uncertainty. people have been combining different organisms to develop hybrids that serve human needs more beneficially. everyone knows that it is not nice to fool with Mother Nature. The FMI defines biotechnology as “the use of genetic science to create new products from plants or animals. Currently. Bioterrorism. But what many consumers probably don’t realize is that since ancient times. and what exactly is it? .” Now. biotech is used in the area of agriculture biotechnology that raises concern among consumers. Biowarfare. Biotechnology? What is it about Jurassic Park bear this message out.Trend Watch Biotechnology I 28 Consumer Insight | Winter 2001 | n these times. and even fear.

when asked in the IFIC survey how likely they would be to buy produce that was genetically modified to protect from insect damage (requiring fewer pesticides).” which are enhanced fruits and vegetables containing vaccines against deadly diseases such as hepatitis. After all. This presents a larger potential opportunity for retailers and manufacturers to become a trusted advisor to their constituents. A New York Times article that referenced the Trader Joe’s incident also interviewed specialty grocer Stew Leonard. cholera and malaria. food handling and disease/contamination before mentioning genetically engineered food (which only garnered a 2% response). consumer awareness about biotechnology and genetically modified foods is relatively low. biotech even makes possible something called the “edible vaccine. and Vitamin A to prevent blindness. gourmet chain Trader Joe’s announced it would be eliminating all genetically engineered foods from its private-label collection as a result of consumer pressure. Many vegetables and fruits. For example. they may see the advantages of biotech foods greatly outweighing any potential downsides. Even with the hype. coli bacteria and organic produce. key to any long-term relationship. however. 90% of consumers indicated “totally” or “very likely. According to the International Food Information Council (IFIC).” Over the next few years. biotechnology has been a focus point in the consumer news media. Even when specifically asked about their concerns of food safety. which recently conducted their fifth annual food biotechnology survey of American consumers. the Starlink incident— the modified corn that was FDA-approved for animal consumption but mistakenly found its way into human food products—was some consumers’ first introduction to biotech. top concerns included things like fats. they have sold poorly. biotech foods could offer enhanced nutrition. Providing consumers with accurate information about biotech food can create loyalty and trust. According to the Biotechnology Industry Organization (BIO). higher vitamin levels. This enormous information gap among most consumers is an opportunity for both CPG manufacturers and retailers to educate the consumer in advance of negative or sensationalistic media reports. The current lack of information has given consumers a one-sided (and primarily negative) message. since an informed consumer will be more confident in making sound decisions in choosing what to buy and eat. because the organic crops lacked visual appeal and because customers expressed concern about a link between E. and the focus is typically on the sensational. sugar and carbohydrates. only 36% of consumers are aware of the presence of biotech food in grocery stores. 29 | Consumer Insight | Winter 2001 . If the benefits and perceived issues are communicated honestly to consumers. who stated that although his stores carry foods that are certified organic (currently the only certification that ensures that food isn't genetically altered). cholesterol. including corn. More recently. reduced fat and increased fiber. What do consumers worry about in their foods? Not surprisingly. And there exists the potential to lead with positive news. Fruits and vegetables are also being modified to offer higher levels of anti-oxidant vitamins that help ward off cancer and heart disease.to reduce reliance on pesticides and produce higher volumes of food in less space. a decrease from last year’s IFIC survey. In the future. consumers named packaging. biotech foods will most likely become a larger consumer issue. The GMA estimates that as much as 70% of all processed foods may contain biotech corn or soy. are being developed to contain lower fat levels while tasting better. While not a new concept. soybeans and tomatoes.

Notable facts include: • Homescan panelists have shopped in more than 90% of all Wal-Mart stores over the past year. Also.S.S. the ACNielsen Homescan panel is the foundation for insights that are unmatched in the industry. ACNielsen Homescan also provides you insights into the Wal-Mart consumer. Now. Canada and a combined North American region. . Wal-Mart Supercenter Source of Business Analysis provides an assessment of volume gains from other retail outlets and retailers.S. Mirroring the landscape of the entire U. and Canada. • ACNielsen can report at both Division One and Supercenter granularity because of the high number of static panelists who shop in Wal-Mart. promotion and merchandising strategies by leveraging powerful consumer insights for the U. you can develop more effective marketing. providing an advantage in tracking Wal-Mart sales given the chain’s rural concentration. ACNielsen Homescan North America captures all-outlet purchase information from over 67.000 demographically balanced and statistically reliable U. Wal-Mart Demo-Fit Analysis correlates key consumer segments in Wal-Mart to their product-purchasing behavior. and Canada Consumer Behavior The ACNielsen Homescan® North America service provides three detailed summary reports for executives to make strategic decisions based on consumer purchases in the U. 30 Consumer Insight | Winter 2001 | Powerful New Insights into the Wal-Mart Consumer ACNielsen’s Homescan Panel is the Gold Standard for understanding why consumers buy. and Canadian households. Through the Market Summary Reports. Demographic Profiles help you to understand what type of household is currently shopping your category and brands as well as the various retailers.Understand Combined U. population. Six new Homescan consumer solutions provide powerful insights into the Wal-Mart consumer: Wal-Mart Private Label Pricing Analysis defines price gaps and illustrates consumer purchasing sensitivity to these differences. Wal-Mart Custom Category Cross Outlet✽Facts Report delivers new insights into outlet loyalty among Wal-Mart core and occasional shoppers.S. Wal-Mart Key Item Report identifies key items purchased in Wal-Mart.S. Panelists use patented hand-held scanners to record every UPC-coded item purchased.. • ACNielsen has very strong C and D County coverage. The Trial & Repeat Evaluations can assess introductory performance of your latest product launch or line extension by measuring initial product attraction (trial) and ongoing product acceptance or retention (repeat). The North American Homescan service helps you make sound strategic decisions based on a complete understanding of how consumers shop your categories and how consumers respond to brands differently. Promotional impact (measured via deal purchasing) on trial and repeat purchase occasions is included to evaluate the success of introductory marketing efforts. providing both manufacturers and retailers with a unique opportunity to manage assortment more effectively to better serve Wal-Mart consumers. • Homescan is the only source for price paid and dollar volume in Wal-Mart. Wal-Mart Private Label Brand Impact Analysis allows manufacturers and retailers to better understand the impact of Wal-Mart private label on consumer brand and retailer loyalty.

both acculturated and non-acculturated. from all retail outlets. For a manufacturer. please contact Simon Small at simon. The Promo Focus household segmentation includes six distinct segments: • Promotional Oblivious • Store Loyal/Brand Disloyal • Promotional Junkies • Multi-Store Shoppers • Branded Bargain Hunters • Opportunistic Price Savers Promo Focus tells which banner’s shoppers are likely to hold certain views towards price and promotion. bilingual and Englishonly/preferred. 31 | Consumer Insight | Winter 2001 Available in Canada only Available in USA only .ca. The Mid-year 2001 release is now available and includes the following: • Los Angeles market • All categories • Food only • Non-food only • Drug only • Individual categories • Custom category definitions available • Easy-to-use and improved CD-ROM application Call Sharon Abish at ACNielsen at 516-682-6011 for more information. Promo Focus segments enable retailers to increase the effectiveness of their marketing efforts by acquiring an in-depth understanding of how consumers respond to price and promotion activity. Hispanic Consumer*Facts compares the purchase behavior of Hispanics across all language segments including Spanish-only/preferred. understanding how consumer attitudes towards price and promotion differ by banner helps maximize the efficiency of trade spending. which banner’s shoppers… • always look for coupons or other promotions • will readily shop at different stores to get a deal • are intrigued by offers of a free gift and will purchase a product to get one • are brand loyal and very store loyal • are not interested in store loyalty cards and programs • are not enticed to switch from their favorite brand because of promotional offers For more information. Understand How Consumers Respond to Price and Promotions ACNielsen’s Homescan Promo Focus Segmentation provides essential information about consumer’s attitudes and perceptions toward price and promotion.small@acnielsen. Category and product group level information within almost 900 categories and more than 110 product groups reveals a wealth of consumer insight into the buying behavior of Hispanic households. For example.Understand Hispanic Consumer Shopping Habits The ACNielsen Homescan Hispanic Consumer✽Facts—Los Angeles Report captures the shopping habits of Hispanic consumers.

• Fixture assemblies can now be stored in and retrieved from the libraries for even more efficient replication of advanced merchandising situations. category and more. Spaceman® Suite v6. fixture number (total or by segment). department.0 includes more than 172 enhancements. • You can import data for Fixtures and Positions. information is now seamlessly passed between applications and stored in one common database. And Spaceman Store Designer is the only store-planning tool that utilizes an AutoCAD file. Spaceman Suite v6. With ACNielsen’s Spaceman. • The Renumber Fixture ID feature now supports flexible combinations of segment number. the space management process is streamlined and validated. Using Spaceman Store Designer. operations and buying to properly evaluate Category Management performance. user-selected separator. retailers and manufacturers spend valuable time analyzing the outcome of category changes or shelf resets that best maximize available space.Maximize Your Shelf Space In today’s competitive market. . 32 Consumer Insight | Winter 2001 | • Shelves can have a positive slope and/or can be rotated at any angle between 0 and 359 degrees. giving way to increased category management and competitive advantages. which returns information back to a merchandising environment.0 gives you a host of new features. such as a completely new Page Setup dialog box that combines all layout capabilities in a single location.1 and later. • The option to export only selected fields. • An easy-to-use Find Product/Fixture capability to locate a product or a fixture in any 2D planogram view and the Product List. Spaceman Store Designer links the traditional merchandising function with those of store planning. including improvements in Spaceman’s output capabilities. prefix and suffix to create unique Fixture IDs for all fixtures. Proven store footprints are developed to maximize investments and space management. • Direct import of ACNielsen data from ACNielsen Workstation Information✽Server™ 2. including: Aggregate Financial Performance for the Entire Store Spaceman Store Designer lets you accurately capture and aggregate financial performance by store.x and Workstation Plus 4.

By determining your brand’s elasticity.ca.Ljubicic@acnielsen. • Identify critical price points or price gaps that create tactical risks or opportunities. INSIGHT Pricing Solutions help you to: • Determine if your pricing strategy supports your brand goals. please contact Mike Ljubicic at Mike. • Pinpoint which regions are more price sensitive than others.3 strengthens the industry’s leading strategic pricing tool with new features and functions. Call your local ACNielsen Merchandising Services Representative for a product demonstration today. 33 | Consumer Insight | Winter 2001 Available in Canada Available in USA .Maximize Category and Pricing Management Endorsed by the Professional Pricing Society. Determine your Optimal Pricing Strategy ACNielsen’s INSIGHT Pricing Solutions can help you determine the optimal pricing strategy needed to achieve your brand marketing goals and identify the tactical activities most critical to successful implementation. INSIGHT Pricing Solutions assesses the volume risk associated with a price change. For more information. • Evaluate the sales and profit impact of price changes. • Analyze sensitivity to competitive price changes. Pricing✽Insights delivers information on elasticity. Priceman™ 3. including: • Increased performance • Ease of use • Rules integration • Processing large data pulls • Additional enhancement • Defaults on standard fields Also available. Pricing✽Insights combined with Priceman offers compelling insights to maximize category and pricing management. promotion and average price.

Convenience Store Measurement at the Local Level ACNielsen Convenience Track™ measures retail sales performance and conditions in convenience stores and gives you two levels of measurement (market-level and account-level).Additional Retailers Sign On for the New. quick to learn. delivering alerts and headlines for drilling down into the data to understand what is going on with a given category and why. Retailers such as SUPERVALU. Convenience Track is the only source for: • NACS Level II Category Management market level data • Fastest growing list of retail account reports • Year-over-year comparison for Total U. Wakefern. How? By delivering category information in the retailer’s customized view. Convenience Track Service—Total U. CVS and Hannaford have chosen Category Business Planner as their preferred method for performing category reviews.. effective category plans. HE Butt. improves efficiency and enables both client groups to focus on growth initiatives. Albertson’s. the revolutionary.S. product-level analysis— Celebrating three years of on-going service • Multi-channel/cross-channel analysis • Extensive market list that aligned with ACNielsen Scantrack® definitions 34 Consumer Insight | Winter 2001 | Category Business Planner provides the common ground for a true meeting of the minds between retailers and manufacturers. Imagine. Eckerd. the hours you once spent on data compilation and analysis can now be spent working together to create thoughtful. ACNielsen continues to provide clients with a service that focuses on the representation of the total convenience store environment and offers more than just a scanning view. Walgreen’s. fast to use and comprehensive in its ability to create actionable strategies and tactics. you can realize the full potential of category management. Category Business Planner uses patented modeling technology. Category Business Planner presents insights in a manner that is intuitive for you to understand. Powerful web-enabled tools let your drill down and do in minutes what once took weeks. Your productivity will be improved and your business partnerships strengthened. . The “one-number” method for delivering category information supports collaboration among retailers and manufacturers. Bruno’s. and 30 Markets Market representation is paramount to your information needs. Accessed through the ACNielsen Answers™ web portal. cross-market analysis. Visit http://acnielsen. a hybrid service of scan and audit is necessary to continue to measure all convenience store sales. With scanning penetration at less than 35%. local markets.com/cbp for a complete overview. web-based business solution for collaborative category management.S. Industry-Leading Category Business Planner The list of retailers continues to grow for Category Business Planner. Finally. which combine for incredibly powerful information. Meijer.

search for category opportunities. This helps identify top-selling items carried in markets but not carried by the retailers. Without local market data. Full Level I fact sets are available. pricing. New Convenience Track Account Level Services in 2002 • BP/Amoco • Crown Petroleum • Kum N Go 35 | Consumer Insight | Winter 2001 Market-level data allows a retailer and manufacturer to benchmark key elements such as sales. Available in Canada Available in USA . The service offers over fiftyfive retailer-specific data to lead to a better understanding of any category’s sales. and with weekly information. and help the retailers uncover new opportunities for the entire category in selected markets. retailers and manufacturers cannot perform the NACS Level II category management process. ACNielsen is the only data provider in the industry with this unique capability. cross outlet. With Convenience Track’s extensive list of market-level data.New Convenience Track Categories for 2002 • Cookies • Crackers • Salty Snacks • Nuts Current categories include: • Beverage • Beer • Malternative Beverage • Other Tobacco • Bulk Ice Cream • Frozen Novelties • Energy Bars • Meat Snacks • Candy and Gum Convenience Track Service—Account Level Services ACNielsen Convenience Track retailer account-level data is available in all categories. and assortment to a local convenience market. distribution and merchandising impact for both the retailer and their respective market. manufacturers can measure their performance.

How Satisfied are your Customers? The only true judge of quality is the customer. category users are interviewed to gain their perspective on the brands in the category. usage.Menzies@acnielsen. please contact Tim Hoddap at Tim. Using focus groups and quantitative interviews. For more information. Winning B®ands uses a flexible technique that allows the collection of various measures. beyond the limits of simple customer satisfaction measurement. The insights in this report will enable your business to identify and leverage opportunities by fine tuning target segments and integrating findings into: • Profitable online marketing and advertising programs • Relevant promotions . • Assess the impact of your own marketing programs and competitive activity on your brand’s equity.ca. depending on individual client and category needs. customer-driven strategy creates industry leaders. The Customer eQ Profitability-Loyalty Matrix provides organizations with a focus for customer satisfaction improvement directly linked to profitability. semi-annual or annual intervals to monitor any changes in brand equity over time. Winning B®ands tracks the underlying strength of the relationship between the customer and the brand. and creates effective strategies to enhance that relationship. which translates into profitability and success.Hodapp@acnielsen. It identifies “Star” customers—those who are loyal and highly profitable to the company—and those customers that are “At Risk”—highly profitable to the organization. ACNielsen’s Winning B®ands™ helps you achieve sustainable competitive advantage with your brands. And Winning B®ands provides monitoring to protect and improve your brand’s health. A total approach to the measurement and management of customer satisfaction. • Determine the long-term potential of your brand and its competitors. A qualityfocused. Winning B®ands helps you to: • Track your brand versus the competition in relation to consumer measures such as brand awareness. please contact Roxanne Menzies at Roxanne. All organizations must ask critical questions of their customers: • Are they satisfied? • What makes them satisfied or dissatisfied? • What drives their behavior? • What are their requirements? • What do we need to do to keep them loyal? • How do we perform against the competition? • How can we deliver best-in-class customer service? ACNielsen’s Customer eQ gives you the answers to these questions. • Identify opportunities and threats to your brand— not just from competitors but from the category as a whole. consideration and image and monitor changes in brand performance over time. For more information. Topics can include: • Integrate these findings to create better brand management strategies. 36 Consumer Insight | Winter 2001 | • Category usage and attitudes • Brand relationship. awareness. Interviews are repeated at regular quarterly.Maximize the Power and Potential of Brands The Power of brands is immense—strong brands lead to customer loyalty and company profitability. Target Canadians Online ACNielsen’s Internet Planner 2002 is a strategic blueprint for understanding and trending Canadians online.ca. but not particularly loyal. consideration and preference • Brand associations • Willingness to pay a premium price • Advertising awareness and diagnostics • Other marketing program awareness and diagnostics • Corporate image And Winning B®ands can be part of an on-going tracking program. Customer eQ offers long-term strategic direction to optimize resources and build and maintain customer equity.

• Usage and preferences with respect to advertising and permission marketing. • Financial Services—explores how online activity can be used to market greater use of services such as dayto-day banking. • Telecommunications. Arizona January 13–15 International Housewares Show McCormick Place Chicago. For more information. credit. • E-commerce purchasing behaviour. youth. Core areas explored include: • Effectiveness of web sites—tailor your online advertising programs to suit the needs and preferences of your target market. Portals and ISPs—focuses on emerging trends and opportunities. services and information.• Building brand awareness • Strengthening loyalty programs This annual study measures the attitudes and online behaviour of a representative sample of Canadians.Cirasella@acnielsen. Illinois February 3–5 Food Marketing Institute Marketechnics Convention ACNielsen Booth # 2033 Spectra Marketing Booth # 2133 San Diego Convention Center San Diego. Included is a comprehensive demographic section that profiles a wide range of target groups from adult females.ca. • Healthcare—examines the Internet as a source of health-related products. Nevada Available in Canada only Available in USA only . investment and insurance. • Government and Public Policy—focuses on trends and the potential for leveraging the Internet as a vehicle to enhance program delivery. 37 | Consumer Insight | Winter 2001 January 13–15 Food Marketing Institute Midwinter Executive Conference The Phoenician Scottsdale. CA February 11–14 National Grocers Association 2002 Convention Paris Las Vegas Hotel Las Vegas. and seniors to home-based businesses. • Online Transactions—attitudes towards pricing and online security. please contact Josie Cirasella at Josie.

. basket and stomach. ACNielsen Homescan gives you consumer share of mind.C.988.com. across channels Compete ? Emphasize e-commerce ? Consumer knowledge for the HIGHEST QUALITY DATA | FASTEST DELIVERY SPEED | BEST CONSUMER COVERAGE | BEST RETAIL OUTLET COVERAGE © 2002 ACNielsen. Or call 1.4ACN. Nielsen Company.800. wallet. Contact your ACNielsen representative to learn more. ACNielsen is a trademark of A. Visit acnielsen.do I target Who ? you face every day. real issues Who can afford to waste time wading through information? You need consumer knowledge for action. Scantrack offers unparalleled insight into the retail marketplace—plus the tools you need to act.

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