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

Understanding

CONSUMER INSIGHT:

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.

4

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.

8

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.

13

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.

19

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.

24

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.

• The dry grocery department. cookies.9 billion) is another of the seven decliners. coffee. 3 | Consumer Insight | Winter 2001 • The frozen department ($28. While some of the findings below are not surprising.. I n these unique and trying times. Unit volume growth rates for nine of the 11 departments also declined in Q2 and Q3. coffee. As for what happened as a result of the events of 9/11. is one of the declining departments. milk (fresh. Drilling down a bit further. and at least one product that had been in decline: prepared foods (both dry mixes and ready-to-serve). soup and canned vegetables. peanut butter. those that spiked up included candles and food storage containers. flashlights and batteries. crackers.6 billion across f/d/m combined). pet food. Among the frozen categories that have declined were frozen prepared foods and frozen vegetables. 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. 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. ($145. shelf-stable and canned). • The alcoholic beverages department ($15. shortening/oil. I believe that such trends present the CPG industry with equal doses of challenges and opportunities. jelly. 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. liquor and wine have all seen growth rate declines in Q2 and Q3. Some of the categories that showed slower dollar volume growth rates in Q2 and Q3 included prepared foods. in seven of the 11 departments we monitor (representing 72% of total dollar sales). Those Continued on page 27 .S. Among non-food products.Tim Callahan President ACNielsen U.. Beer. While the dollar sales growth rate in most departments went up during Q1. 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. carbonated beverages.7 billion) is another which has experienced a slowing growth rate. powdered. ice cream and pizza/snacks. the growth rate declined in Q2 and Q3. canned goods. we saw behavioral changes like stocking up on bottled water. crackers. The HBA department showed a decline.

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

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. ushering in a new era of high-speed checkout and data collection. the latest development in the technology of convergent economics. Objects speak to objects in an unheard language. Sometimes dubbed the quiet revolution. always-active pervasive c6ommerce initiatives. 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. loyalty cards were severely limited by the constraint of a single retailer view. at Marsh’s Supermarket in Troy.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. Although bar codes yielded significant efficiency and accuracy benefits. consider the usage. . 1974. Darwinian economic theory holds that adaptable methods of communication will prevail in the commercial jungle as well. serving the interests of consumers and producers via always-on. The emergence of pervasive commerce. 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. they proved to be just a better way to capture and track product sales and volume information. 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. The next “big thing”? Frequent shopper cards. always-aware. While these did a better job of linking consumers and their purchases. In addition to the constricting chain and channel blinders of scanner data and loyalty cards. Ohio.

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

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

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

the industry spent $2.6 share of the previous prescription segment. For some. Research shows that while prescription products do carry their brand equity as they move to OTC status.2 billion in direct-to-consumer advertising last year.5 18. .7 42. Their introduction in 1995 created a new over-the-counter category and caused a 41. In Chart 1. 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. Rising health-care costs. but before 1984 all of these drugs required a doctor’s prescription.1 Brand Position Brand A Brand B Brand C Brand D Share of Rx’s 54 24 13 9 Segment Share 26. it does not necessarily translate into a similar OTC share. the upset stomach remedy Pepcid was the first to enter the OTC market. Consider the impact the new blockbuster prescription drugs Vioxx and Celebrex are having on the OTC analgesics category. it is hard to consider life without their easy accessibility. What is known.5 share of the segment and 17. a prescription product may impact the sales of an existing OTC category. in Canada.1 1. Does Success Translate The success or leadership as a prescription product does not ensure leadership as an OTC product. In some cases. nearly 2.6 9. since OTC drugs are generally not covered by healthcare insurance. Zantac 75. Interestingly. 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. Aleve. It is important to note that private label captured an 18.000-percent dollar volume increase in 1996. Does ‘First Switch’ Drive Success? The first product to enter a new category or segment has advantages. Prior to their introduction.1 share of the total category.000 in sales across all retail channels in 1995. For perspective. but as a consumer brand. There is also concern about the increased cost to the consumer. The private label counterpart in this category also caused a tremendous impact as it took a large share of the market. HMO involvement. Label As a Consumer Brand (share to switch segment) ($) 9 | Consumer Insight | Winter 2001 OTC Category Share 9. Consumer recognition and doctor recommendation undoubtedly played a large part. For example. Afrin.0 7. is that the awareness of these prescription products is extraordinary. however. sales of OTC nicotine replacement generated just $300.3 17.8 3.8 share of the total category. Chart 1 Consumerization of Rx Products Success or leadership as an Rx product does not ensure leadership as an OTC product. it now only delivers a 26. Recent Rx to OTC Switch As an Rx Brand Brand Position Brand A Brand B Brand C Brand D Pvt.5 2. Kaopectate. Brand C went from a low 13 share of prescriptions to a whopping 42. but it does not guarantee success. according to Nielsen Media Research.6 share of the OTC segment (prescription products) and a 9. Rogaine and Nicorette Gum are all readily available. 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.New Health Care Decisions Visit any drug store. Gyne-Lotrimin. these two products spent $225 million in direct-toconsumer advertising in the year 2000. Consider the introduction of non-prescription smoking cessation products. Brand A maintained a 54 share of prescriptions as a prescription brand. Pepcid AC.5 times the private label share of the category. supermarket or mass merchandiser and products such as Advil. the manufacturers of competing drugs and the retailers that merchandise these products. Moreover. 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. but it ended up in second place after the number-one prescription brand Zantac switched over.6 A Profound Impact The switch from prescription (Rx) to OTC has a profound impact on the manufacturers that produce the drug.

And three of the brands examined spent at least $50 million on media. These ad spending levels are phenomenal for a new brand in year one [See Chart 2]. The Importance of Awareness How important is brand awareness for Rx-to-OTC switching to occur? In a word: very. Advertising. price sensitivity and cannibalization are dissected. These media levels resulted in . may be OTC in Canada or Mexico. When validating a forecast. In some cases. consumer sampling and physician marketing all play critical roles in the successful marketing of the Rx-to-OTC switch. but efficacy and safety perceptions are also analyzed. ACNielsen BASES has completed 11 validations and has been within their quoted confidence range 10 of those 11 times. sales never materialized to anticipated results. This translates Source: BASES Validations In addition to the extraordinary focus on media spending. the policy differences on prescription medications become more apparent. ACNielsen BASES. For switches. ACNielsen BASES re-runs the model with the actual executed marketing plan and then compares the results against actual sales.S. Given the huge media budgets. often targeted to different demographic segments. 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. the opposite is true. this is not surprising. As the world moves toward one big market. After the switch of anti-smoking products. Many prescription brands in the U. the world leader in the simulated test marketing field. Not only are OTC usage patterns studied. To understand the magnitude of the consumerization and implications of prescription to OTC switching.Feature into a high degree of switch success. Other category switches proved disappointing. The benefits of testing products with consumers prior to a launch are significant. two of these launches were characterized by multiple executions for each brand. In addition. ACNielsen BASES research shows that the average switch brand spends seven times as much on advertising as an average non-switch OTC brand. has tested virtually every Rx-to-OTC switch in the last 15 years. far above the normal level for an OTC introduction. Chart 2 Advertising Spending in Year 1 10 Consumer Insight | Winter 2001 | Case in Point Prescription remedies are globalizing and growing. label compliance.

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

12 Consumer Insight | Winter 2001 | Base A Base B Base C Private Label Base D Base E $ Share to Total Category Index 20. 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.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. and continue strong for the first year. Consumers will become even more involved in their medication decisions both for prescription items as well as OTC products. • Private label has a higher-than-average share in the prescription switch segment. 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.9 8. • Switch brands receive very high in-store support early on in the switch.5 10. while the second-leading Base Brand B was negatively impacted [See Chart 5].4 4. The same held true in the mass channel (86% distribution for leading product vs.6 Pre Introduction 15. The trends that currently drive the consumerization of prescription medications will continue.5 16. . • Successful brands add SKUs (sizes) over time and provide additional consumer benefits. Manufacturers and retailers need to better understand who their consumers are and what else they are purchasing as part of their medicine cabinet. the share of base brands changes dramatically. ACNielsen and BASES research shows general observed trends: • Base brands do not react to higher-priced switch products with price reductions.7 11. With OTC switches representing over 30% of the total category.Feature 91% and 93% during the first four weeks.1 6.7 5. In the example below. 95% and 96% for switch brands). Base Private Label becomes stronger (156 index).8 9.4 Post Introduction 72 35 63 156 46 46 When switches occur in a category.2 13.

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

they have to be reduced (otherwise consumers will buy something else).0. marketers are then faced with boosting volume to cover the difference—a slippery slope if there ever was one. combined with margin. trade promotions. What are the key price points? The good news. The corollary is the impression that if prices are to . Likewise. those categories with more moderate velocity and sensitivity should be priced competitively. What is the pricing environment for key items? 4. Finally. These factors. 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.Feature Separate the Category To address the first question. In analytical terms. Which items are most important? 2. For any given category. items that have medium-to-low change at all. Four key questions 1. it is no wonder that marketers are hesitant to change a product price once it is established—the aforementioned rule of fear. How do items respond to changes in price? 3. for example. one needs to break the category into strategic groups of items. however. Chart 1 shows that items with high velocity and price sensitivity should be given high pricing priority.0 would show a two-percent Fear Rules Since price is the driver of revenue and profit. An elasticity of 1. since they will have the greatest tactical impact. and in some cases can even increase volume as a result. the following variables must be considered when understanding and implementing pricing plans: Velocity—high-velocity items move off the shelves more quickly. and that high-velocity items typically drive volume. marketers can actually find the places where increasing price is a good thing. These groups can be used against any product category. would indicate a one-percent decrease in revenue relative to the price change. And by reducing price. 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. Items such as snacks. but not as loss leaders. 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. The goal is to provide reliable reporting of the sensitivity of an item to a change in shelf price. An elasticity of 2. The key is to understand price elasticity. is that by performing category pricing analyses. etc. Typically. 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. It is generally accepted that revenue for high sensitivity items is strongly influenced by price. elasticity measures the impact of a one-percent change in shelf price (increase or decrease) on revenue.

Our latest look at the findings considered three channels. price-sensitive items as well as identify “margin improvement” items. as the elasticity numbers grow larger. while food products are fairly inelastic when purchased in a food channel store (changes in price caused less drastic changes in sales). Perhaps the most enlightening insight from the research is that consumers seem to shop “in context. page 17].) they are not as likely to buy the impulse (i.. one can begin to see that higher pricing does not always negatively impact volume. as well as relatively inelastic categories [See Chart 3. While the median elasticity was near 1. During the late 1980s. mass merchandisers had the highest overall elasticity.decrease in revenue for the price change. Perhaps not an earth-shattering discovery. The important thing is to start by looking at facts. starting with the most elastic and finishing with the most inelastic.” For example.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 18.4 oz Tube Toothpaste ❑ Pert Plus 13. A Test: Put the following products in order of elasticity. the variation ranged significantly among mass. food and drug. in the light duty detergent category. and drug the lowest of all the channels. the item is defined as being more price sensitive. The reason for this? One theory is that since shoppers visit channels based on destination products (healthcare remedies in drug. This means that changes in price more drastically affected volume in mass than they did in drug.7 (low sensitivity) to -1. Most categories show a range of item sensitivities—most have a mix of elastic and inelastic items. the variations make it difficult to generalize rules of elasticity relative to channels or categories – diversity in categories and channels is the rule. the price elasticity also varied widely by category. and so on. etc. There are also differences in elasticities within categories. For example. focusing on the category’s role in the store and the competitive environment in addition to price sensitivity.e. Within each channel. What we found was that there are distinct differences between channels [See Chart 2. And that is why shelf price management must be a category/channel specific activity. Benchmarking Elasticity ACNielsen has been studying the relationship between price elasticity and channel for more than a decade. Continued on page 17. ❑ Crest 6. page 17]. But it is definitely important to consider when developing channel pricing strategy. these Food products were typically 30% to 40% more elastic when purchased in drug and mass.6 (high sensitivity). Elasticity measures the impact of a one-percent change in shelf price (increase or decrease) on revenue. 15 | Consumer Insight | Winter 2001 . All channels had categories that were quite elastic. however. Aside from this finding. which helps to focus on fast moving. but when combined with the fact that mass merchandisers had the lowest overall prices while drug had the highest. 50 categories and roughly 35 items per category that were sold in all three channels. “non-context” items) unless the price is attractive. bread and milk in food channel. More study is definitely necessary for the underlying reasons. the elasticity ranges from -0. Clearly.

Premium Elasticity used these results to develop their annual pricing plan.59 $12. to show retailers that a price increase by Premium would not negatively affect either Private Label or the category as a whole. Char t 2 Rela tionships Betw een Brands Premium Extra Virigin affects itself and Priv ate Label Elasticity -0.49 -3.59 -3. The Premium Virgin brand was typically priced around $2.99 $10.79 Sales Rate Most Common Price $9. Premium Foods simulated a 5% price increase on both their brands and Private Label. What the company discovered was good news for everyone.10% 5. which was then accepted and subsequently implemented [See Chart 3]. Extra Virgin could maintain its high-end positioning in the marketplace [See Chart 1].30% 1.90 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. and they were able to present to retailers the feasibility of the 5% price increase. Premium Virgin was not affected by either of the other two brands changing their price. Premium Foods needed to understand: a) how much of a price increase they could profitably take.Feature A Case Study From Canada* The Premium Foods Company was contemplating a price increase on their olive oils.00% 2.80% 14% 19. with the retailer increasing by 20%.20% 4.99– $14.20 20. and c) how their products should be priced relative to Private Label. and the company also wanted to maintain the premium image of the higher priced Extra Virgin oil.30% The company also needed to understand the interaction between the Premium brands and Private Label in the face of a price increase. ACNielsen looked at elasticity across brands for the two Premium Foods brands and Private Label. Premium Virgin Olive Oil sales were entirely a function of that product’s own price and did not interact with the other two brands. Premium Extra Virgin $1 1. there was a price relationship with Private Label. b) whether they could raise prices on both brands to maintain a premium positioning.60% 3.10% $12.90 — — Premium Extra Virgin Private Label For Premium’s Extra Virgin brand. 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. Premium’s Extra Virgin Olive Oil impacted Private Label’s volume when Premium raised its price. Virgin Olive Oil and Extra Virgin Olive Oil (the higher end of the two brands). All three brands examined were shown to be inelastic (less price sensitive).99 profitability by 4%. This allowed determination of the effect of price changes on any of the three brands.77 — -0.99 Total 29. — — -0.70% 0 -2.66 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.54% *Key information for this case study has been masked .77 -0. since both Premium Foods product prices could increase. A price increase by Premium’s Virgin Olive Oil would not affect the sales volume of either Extra Virgin or Private Label.90 Across=brand s that affect yo u Down=brands you affect So how was this good news for Premium? Using Price Simulator.60 5.99– $13.99 $11. 16 -0.00 less than the other two and had the highest overall sales rate. In addition. In addition to analyzing price points.20% 1.99– $12. Premium Foods could raise prices and increase profitability without putting much volume at risk.77 -0.66 10 14 -0.79 $5.99 $11.99 Private Label $1 1. They had two products. Therefore. In addition. Brands Premium Virgin Premium Extra Virgin Private Label Premium VirginRate -0. This supported the hypothesis that some consumers might switch to Private Label following a price increase.66 — -0.99 $10. but Private Label did not impact Extra Virgin when Private Label increased in price [See Chart 2]. Profitability was critical for each brand. gaps and sales levels.

one can try to summarize pricing and positioning across channels.99 $9.99 $9. Sometimes. 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 $8.99 25% 35% 50% Total Food $9.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. By using a pricing environment template. Marketers need detailed. reliable reporting of how an item is priced. 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.29 $8. One current method is to look at average price for a particular retailer compared to the overall trading area.39 $9. By understanding the pricing environment.99 Highest $9.49 $8. 17 | Consumer Insight | Winter 2001 Consumers seem to shop ‘in context.99 $9.99 $7.11 $9.29 $8.” [See Chart 4].69 $10.99 75% $9. These can be defined in different ways. lowest price.‘ Chart 3 Category Elasticity Findings Each channel had a wide range of elasticities.99 $9.19 $7. we can provide a richer view of the way a consumer sees pricing in a channel—whether by most common price.29 $9.99 $9. highest price or by key price points. 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.39 $9.28 $9.99 $9. to understand how best to set and/or adjust price. relative to the market and channel. according to the particular need. Typically.33 Market Retailer A Total Drug Total Food 50% .69 $8. rules are set relative to competition. These price management tools provide the ability to systematically capture and present more pricing detail. average price.99 $8.

10 to $6.80 to $6.00 to $8.59 $8.29 $6. that determining thresholds can be a very time-intensive analysis.49 $8. but a final element in developing a pricing strategy is to determine the key price points. one can provide a fact-based approach to setting competitive pricing metrics. It is also a helpful tool in driving away the fear of implementing strategic pricing at the store shelf.50 to $6. 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 13.09 $6.79 $7. we can.30 to $8.19 $7.20 to $6. All items come with price thresholds: prices that are accompanied by a marked change in consumer behavior [See Chart 5].60 to $7.90 to $7.10 to $7. Can we set any price? Usually.4 oz Tube Toothpaste Motrin 50 count Regular Strength Gelcap Price threshold: price that is accompanied by a marked change in consumer behavior .39 $8.89 Elasticity -1.60 to $6.40 to $8.00 to $7. the price sensitivity (elasticity).79 $6.33 -0.5 oz Shampoo with Conditioner Crest 6. Answer to sidebar on page 15.40 to $7.50 to $7.53 -1.20 to $7. Key Price Points So now we know the item’s role and margin.40 to $6.90 to $5. It is very important to determine the thresholds for key items.69 $7.70 to $6.49 $5.86 -0.19 $8.90 to $6.70 to $8.30 to $6.93 -0.79 $8.39 $6.69 $6.59 $6.80 to $7.99 $8. 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.59 $7.49 $7.Feature Chart 5 Price Threshold Checks For Key Items 45 40 35 30 25 20 15 10 18 Consumer Insight | Winter 2001 | 5 0 $6.20 to $8.09 $7. and the pricing environment.99 $7.68 -1.50 to $8.48 90 By using good environment summaries.29 $8.89 $7.99 $6. and should therefore be used for key items only.89 $6.39 $7. It should also be noted.09 $8.69 $8.29 $7.10 to $8. however.80 to $8.60 to $8.00 to $6.30 to $7.98 -0.70 to $7.19 $6.

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

Pedigree and Always). the cumulative sales for the 12 months ending with the first quarter of 2001 had to be equal to or exceed US$1 billion.Feature There were three main criteria that a brand had to meet to be included in the study. Beverages Are Number One Not surprising to any global traveler. First. juice. coffee and beer. nor were Always and Whisper (Asia) combined as a single sanitary protection brand. only 43 actually met the criteria of having a global presence in each region and having over $1 billion in sales. For example. ” we looked for consistency in terms of product packaging. including carbonated beverages. North America. Of the total. and Europe. Among the 43 brands. both North America and Europe had equal predominance [See Chart 1]. Additionally. Middle East and Africa. we segmented brands within their specific category. 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 . 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. To define and determine a “brand. The 43 brands on the list represent 23 global manufacturers and more than $125 billion in sales. sports drinks. For example. In addition. marketing and consumer views of the brand. Asia Pacific. Nearly one-third of the brands included in the final list (13 of the 43) were a beverage. most of the brands had a high concentration of sales in either North America or Europe (62% on average). 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. Brands also had to use a consistent name worldwide. Finally. they did not have more than $1 billion in sales. sales outside of the home market had to represent at least 5% of the global sales value. 30 maximum 30 Tabacco 25 Carbonated Beverages 30 20 Consumer Insight | Winter 2001 | pers. most had the largest concentration of sales in their region of origin. the brand had to have a measurable presence in each of the four major geographic regions—Latin America. For three brands (Gillette. Lays and Walkers (Europe) were not combined as a single chips & snacks brand. Second.

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

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

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

24 Consumer Insight | Winter 2001 | Feature .

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

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

about both the war on terrorism and the economy. . Same Period Year Ago Chart 3 HBA Department Dollar Volume Percentage Growth Rate vs. All Outlets Combined Percentage Growth Rate vs. 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.Trying Times Present CPG Industry with Challenges & Opportunities Continued from page 3 Chart 1 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. This would be a good time to focus on helping consumers find easy and affordable meal solutions. Consumers are also eating out less often. some retailers are noticing consumers “trading down”—switching from lunchmeats to peanut butter and jelly. But it is also a crucial time to use the vast amount of consumer insights to build loyalty among your most valuable shoppers. however. it’s all about the consumer. as they tighten their belts. 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. 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. Same Period Year Ago Chart 4 All Departments. Question marks still remain. To that end. Shortly. All Outlets Combined Percentage Growth Rate vs. for example. Bottomline. a trend that could benefit food retailers. However.

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

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

ACNielsen Homescan also provides you insights into the Wal-Mart consumer. Wal-Mart Custom Category Cross Outlet✽Facts Report delivers new insights into outlet loyalty among Wal-Mart core and occasional shoppers. 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). • ACNielsen has very strong C and D County coverage. • ACNielsen can report at both Division One and Supercenter granularity because of the high number of static panelists who shop in Wal-Mart.S.Understand Combined U. Notable facts include: • Homescan panelists have shopped in more than 90% of all Wal-Mart stores over the past year. Mirroring the landscape of the entire U. Also. 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. Through the Market Summary Reports.S. 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. 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.S. 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. providing both manufacturers and retailers with a unique opportunity to manage assortment more effectively to better serve Wal-Mart consumers. Wal-Mart Supercenter Source of Business Analysis provides an assessment of volume gains from other retail outlets and retailers. population. 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.. . the ACNielsen Homescan panel is the foundation for insights that are unmatched in the industry.S. Now. Promotional impact (measured via deal purchasing) on trial and repeat purchase occasions is included to evaluate the success of introductory marketing efforts. promotion and merchandising strategies by leveraging powerful consumer insights for the U. providing an advantage in tracking Wal-Mart sales given the chain’s rural concentration. • Homescan is the only source for price paid and dollar volume in Wal-Mart. Demographic Profiles help you to understand what type of household is currently shopping your category and brands as well as the various retailers. and Canadian households. and Canada. you can develop more effective marketing.S.000 demographically balanced and statistically reliable U. Canada and a combined North American region. ACNielsen Homescan North America captures all-outlet purchase information from over 67. Panelists use patented hand-held scanners to record every UPC-coded item purchased. Wal-Mart Key Item Report identifies key items purchased in Wal-Mart.

Understand Hispanic Consumer Shopping Habits The ACNielsen Homescan Hispanic Consumer✽Facts—Los Angeles Report captures the shopping habits of Hispanic consumers. 31 | Consumer Insight | Winter 2001 Available in Canada only Available in USA only . 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. both acculturated and non-acculturated. 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.small@acnielsen. For example. understanding how consumer attitudes towards price and promotion differ by banner helps maximize the efficiency of trade spending. 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. For a manufacturer. 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. 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. 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.ca. Hispanic Consumer*Facts compares the purchase behavior of Hispanics across all language segments including Spanish-only/preferred. please contact Simon Small at simon. from all retail outlets.

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

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

. Your productivity will be improved and your business partnerships strengthened. Industry-Leading Category Business Planner The list of retailers continues to grow for Category Business Planner. Albertson’s.com/cbp for a complete overview. the hours you once spent on data compilation and analysis can now be spent working together to create thoughtful. HE Butt. and 30 Markets Market representation is paramount to your information needs.. cross-market analysis. 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. Category Business Planner presents insights in a manner that is intuitive for you to understand. 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. which combine for incredibly powerful information. you can realize the full potential of category management. How? By delivering category information in the retailer’s customized view. web-based business solution for collaborative category management.S. fast to use and comprehensive in its ability to create actionable strategies and tactics. Walgreen’s. delivering alerts and headlines for drilling down into the data to understand what is going on with a given category and why. effective category plans. Convenience Track Service—Total U. Finally. Visit http://acnielsen. 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. Category Business Planner uses patented modeling technology. Bruno’s. a hybrid service of scan and audit is necessary to continue to measure all convenience store sales. Retailers such as SUPERVALU. The “one-number” method for delivering category information supports collaboration among retailers and manufacturers. Eckerd. Imagine. Meijer.Additional Retailers Sign On for the New. CVS and Hannaford have chosen Category Business Planner as their preferred method for performing category reviews. With scanning penetration at less than 35%. local markets. Wakefern. quick to learn. Accessed through the ACNielsen Answers™ web portal. the revolutionary. Powerful web-enabled tools let your drill down and do in minutes what once took weeks.S. 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). improves efficiency and enables both client groups to focus on growth initiatives.

Available in Canada Available in USA . distribution and merchandising impact for both the retailer and their respective market. ACNielsen is the only data provider in the industry with this unique capability. pricing. retailers and manufacturers cannot perform the NACS Level II category management process. manufacturers can measure their performance. With Convenience Track’s extensive list of market-level data. and help the retailers uncover new opportunities for the entire category in selected markets. cross outlet. 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. Full Level I fact sets are available. Without local market 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. search for category opportunities. and with weekly information. This helps identify top-selling items carried in markets but not carried by the retailers. The service offers over fiftyfive retailer-specific data to lead to a better understanding of any category’s sales.

Interviews are repeated at regular quarterly. 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. and creates effective strategies to enhance that relationship.ca. Winning B®ands tracks the underlying strength of the relationship between the customer and the brand. customer-driven strategy creates industry leaders. 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.Menzies@acnielsen.Hodapp@acnielsen. semi-annual or annual intervals to monitor any changes in brand equity over time. please contact Roxanne Menzies at Roxanne. Target Canadians Online ACNielsen’s Internet Planner 2002 is a strategic blueprint for understanding and trending Canadians online. • Assess the impact of your own marketing programs and competitive activity on your brand’s equity. For more information. • Identify opportunities and threats to your brand— not just from competitors but from the category as a whole.Maximize the Power and Potential of Brands The Power of brands is immense—strong brands lead to customer loyalty and company profitability. but not particularly loyal. category users are interviewed to gain their perspective on the brands in the category. 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 . A qualityfocused. Using focus groups and quantitative interviews. which translates into profitability and success. Winning B®ands uses a flexible technique that allows the collection of various measures. 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. please contact Tim Hoddap at Tim. And Winning B®ands provides monitoring to protect and improve your brand’s health. 36 Consumer Insight | Winter 2001 | • Category usage and attitudes • Brand relationship. The Customer eQ Profitability-Loyalty Matrix provides organizations with a focus for customer satisfaction improvement directly linked to profitability.ca. ACNielsen’s Winning B®ands™ helps you achieve sustainable competitive advantage with your brands. For more information. Customer eQ offers long-term strategic direction to optimize resources and build and maintain customer equity. Topics can include: • Integrate these findings to create better brand management strategies. awareness. usage. A total approach to the measurement and management of customer satisfaction. Winning B®ands helps you to: • Track your brand versus the competition in relation to consumer measures such as brand awareness. • Determine the long-term potential of your brand and its competitors. depending on individual client and category needs. How Satisfied are your Customers? The only true judge of quality is the customer. consideration and image and monitor changes in brand performance over time. beyond the limits of simple customer satisfaction measurement.

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

Or call 1.C. ACNielsen is a trademark of A. Nielsen Company.com. Visit acnielsen. . 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. real issues Who can afford to waste time wading through information? You need consumer knowledge for action. ACNielsen Homescan gives you consumer share of mind. basket and stomach. wallet.988. Contact your ACNielsen representative to learn more.do I target Who ? you face every day.800. Scantrack offers unparalleled insight into the retail marketplace—plus the tools you need to act.4ACN.

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