This week's SN contains our 14th annual Financial Analysts' Roundtable, which carries a familiar format but reads differently than the ones that came before. This year a group of eight analysts faced the challenge of debating when and how the industry will emerge from this harshest of recessions.
In the introduction and transcript, you'll see the analysts aren't in full agreement on the paths to recovery. (After 14 roundtables, we've found that analysts are rarely in agreement.)
Still, the roundtable sheds light on how the industry will reemerge, and it also provides clues to how consumers will behave next year and beyond. That's an important service, given that, as one analyst put it, “At this point, consumers are in the driver's seat.”
The consumer's singular focus on price will not end any time soon, analysts said, and trading-down behavior will continue indefinitely.
That behavior involves not just shifting to less expensive supermarket products, but also switching to more discount-oriented retail channels, such as membership warehouse clubs and dollar stores.
Some consumers who traded down may be reticent to revert back to supermarkets. They got a taste of other formats, and may have liked what they saw.
Meanwhile, at some point consumers will have more access to discretionary dollars, and that will lead to some tough decisions. Should they spend it or save it? If they spend it, should it be for food, or for other types of products? One analyst is betting that “you may see a pick-up in some more discretionary categories before you see a pick-up in food because people don't really get a kick out of buying food and there's this mentality about saving pennies on food.”
One of the most permanent consumer shifts may be the flow of dollars to private label. “We are at a new structural point, and I don't think we're going to take many steps backward,” said one analyst.
There's a strong case for private label consolidating its recession gains and advancing further. Store-label products are better.is enhanced. Consumers are largely pleased with their trials, and some are even buying upper-tier store labels.
Analysts noted that CPG companies still have weapons to help them regain market share lost to private label, in particular the use of trade allowances to selectively make inroads.
While it wasn't discussed in detail at the roundtable, the importance of targeted retail programs can't be overestimated as a future driver of consumer spending. As we move into 2010, consumers will be attracted not only by conventional loyalty programs, but also by targeted efforts involving digital coupons, mobile marketing and other such initiatives enabled by new technologies. Assuming consumers are open to being reached in the next year, there will be more ways than ever to do so.
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