Get Fired Up For Spring/Summer Planning A comprehensive look at key events, items and strategies

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1 Market Track Dimensions TM Get Fired Up For Spring/Summer Planning A comprehensive look at key events, items and strategies In Dimensions Page 2: Review of Insert and Page Counts Page 3: Volume of Promotions by Trade Class/Classification Page 4: Easter Promotions Page 6: Summer Holidays Page 7: Memorial Day Page 8: July 4th Page 10: Labor Day Page 11: Commodity Pricing/ Key Takeaways Even as the weather was warming up in the second and third quarter of 2011, the economy remained cool. With the continued rise of food and gas prices, consumers were forced to consolidate trips and to find new ways to save on necessities becoming much more deliberate and strategic in their decision making on where to shop and what to buy. In spite of the recent increase in optimism spurred by a better than expected Holiday Shopping Season, this shift in consumer behavior appears to be here to stay. Shoppers have adopted a new approach to how they buy everything from necessities to luxury items, and retailers are leveraging a multitude of ways to reach them. Given the surge in commodity prices, grocery chains are facing rising costs for various food products and prices are being passed on to the consumer, according to the AP. Whether it is through the circular, couponing, checking retailers websites, signing up for alerts or deals through Facebook and Twitter, there is more planning by consumers today. Retailers recognize that shoppers are taking full advantage of the various ways to find out where the best deals are and are employing a myriad of strategies to effectively communicate to audiences. These trends introduce a level of complexity never before seen in determining the effectiveness of promotions. In this Dimensions report we review the promotional activity that occurred during Easter, Memorial Day, July 4th and Labor Day to help as you plan your advertising strategies around the upcoming Spring/Summer Holiday Season. What are the most heavily promoted categories across the various mediums? How are key event/holiday items promoted throughout the spring and summer, with respect to the various holidays? How are retailers leveraging digital versus print promotions for key holiday events? These are just some of the questions we will examine in this analysis.

2 Review of Insert and Page Counts Grocery retailers decreased the number of print circulars in all months as compared to 2010 except for July. Conversely, Mass increased drops in most months with the exception of June and August. The number of print circulars sent by retailers typically averages five a month. This means that in most weeks there is a single circular, and once a month retailers are likely to publish more than one circular during a given week. The figure below shows that this extra circular is more likely prior to the key events that occur during these two quarters. This uptick in piece counts that appear in front of shoppers is particularly noticeable within the Mass segments. Just prior to July 4th nearly half of the retailers in their individual markets issued more than one circular. This is up from a period average of 25%. Grocery Flyers per Market Mass Flyers per Market Figure 1: Promotional vehicle counts Mother s Day July 4th Father s Day Back To School Labor Day Back To College/ Tailgate Memorial Day Target dropped two flyers the week of 6/26 in Denver Figure 2: Percent of retailers releasing multiple print circulars within a given week While grocers decreased the total number of drops for their flyers, page counts increased in all months except August, which was flat. Mass decreased page counts in the months following May, the most significant of which occurred in August, corresponding to the decrease in number of flyers as shown in Figure 1. It is interesting to see the delineation in strategy between Mass and Grocery, with Grocery producing larger inserts less frequently potentially to gain operational efficiencies. Conversely, Mass is sending more flyers into the market to gain more frequent contact with shoppers who are increasingly being hit with multiple messages through digital channels. Since 85% of consumers are influenced by the circular according to Acosta s The Why Behind the Buy, Mass merchandisers recognize the power of this medium to make an impact on purchase decisions. Grocery Pages per Flyer Mass Pages per Flyer Figure 3: Page counts in Grocery and Mass 2 Market Track Dimensions TM

3 Volume of Promotions by Trade Class/Classification Going deeper into the geographical spread of retailers, we have classified them as Local, Regional (having presence in a limited number of states) and National (stores across the country). Across all grocers there was a decrease in the number of flyers being sent into the market and an increase in page counts. The increasing costs of distribution and printing costs are likely driving the decision to compress the number of flyers being sent. Mass remained flat when compared to Figure 4: Promotional vehicle counts Figure 5: Promotional vehicle by page count; Top: Supplemental Inserts (4 pages or less), Bottom: Primary Weekly Inserts (8 or more pages) Mass merchandisers have increased the amount of supplemental inserts (4 pages or less) being sent into the market, in an effort to gain momentum in strategic growth areas such as grocery during key events and to be able to compete on a local level within grocery. In contrast, National Grocers decreased the amount of supplemental inserts and increased the amount of primary inserts. This would indicate a strategy to move toward consolidation of messaging and to create operational efficiencies. Local grocers continue to focus on the primary weekly inserts, taking advantage of fixed distribution costs by producing larger inserts on less frequent basis. In both instances of supplemental and primary inserts, Regional grocers are trying to find a balance between sending local messages and finding operational efficiencies. They still maintain a higher volume of primary inserts relative to supplemental as well as a higher amount when compared to Local and National grocers. If you are Local, capitalize on your knowledge of the shopper and hometown aspect of your relationship with the community. Regional grocers should try to break out of the trap of appealing to local communities and focus on finding efficiencies demanded in a tight economy. National grocers should capitalize on their scale to pass along the realized operational efficiencies as better shopper value by offering things such as deeper discounts and better bundled offers. When looking at the change in the number of pages published by a retailer the week prior to the event versus a normal week during that period, it is clear that retailers are placing a great deal of emphasis on this critical time. Local grocers recognize the importance of the Q2 and Q3 events by including over 10% more pages during the preevent week in both 2010 and 2011, and Regional and National grocers are increasingly focusing their promotions in the same manner. The same holds true for National Mass merchants, as inserts the week prior to an event contain almost 20% more pages than a typical week in Figure 6: Percent change in promotional activity versus a normal week The Power of Market Intelligence 3

4 Easter Promotions Easter is one of the largest grocery holidays of the year, as both Grocers and Mass merchandisers attempt to capture consumers during the first large scale spring event. With Mass increasingly focused on holidays that center around grocery, the trend may be to attempt to pull the holiday forward. In 2011, 25% of the ads that were classified as Easter ads were distributed two or more weeks before Easter, while there was a slight decrease in promotions the week prior to the event. Figure 7: Easter themed print circulars leading up to the event Meat/Seafood was most heavily promoted on the front page in Grocery, increasing slightly when compared to Produce showed the largest gain in SOV, while Drinks, Alcohol/Tobacco, Dry Grocery and Bakery all showed decreases relative to Figure 8: Front page features by department When comparing digital promotions to print for the same time period, the differences between what is promoted most frequently is pronounced. Digital promotions lend themselves more naturally to certain type of offers, and the target audience is typically different than for the circular. Brand Promotions, which encompass discounts such as % off Brand X or $ off Meat are more highly promoted by Mass in both and Online. Drinks are most heavily promoted in for Grocery, closely followed by Snacks, Meat/Seafood and Frozen. The top promoted categories in print for Grocery are promoted much less heavily in and online. As demographics vary across print and digital mediums, understand which is most appropriate to maximize the impact on the audience you are trying to reach. Figure 9: Digital features SOV by department 4 Market Track Dimensions TM

5 Easter: Snack/Candy One of the distinguishing characteristics of Easter from a promotional perspective is the relative importance of candy during this season. Mass merchants continue to leverage candy as a traffic driver with front page promotions, however, it is interesting to see that grocers have yet to catch onto this trend. The top snack category for most grocers remains Chips and Crackers, while there was considerably more emphasis by Mass placed on Multi- Pack Candy compared to 2010 with an increase of almost 24%. Figure 10: Easter promotions, front page SOV (print) Snacks Figure 11: Total circular (top) and front page share Candy Given the importance of Easter as a Candy event, manufacturers dedicate significant resources to ensure their products are featured within promotions. In 2011, Hershey lost its leadership on the front page to Mars. Position in the circular and timing are key considerations when evaluating ad impact. Without consideration to page position, both Hershey and Mars had virtually the same SOV. By the same regard, across the entire circular for the weeks leading up to Easter, Kraft s increase in SOV is significant at 2.8 percentage points. When only the front pages are considered, their SOV more than doubles with a significant portion of that growth occurring within their Cadbury brands. The Power of Market Intelligence 5

6 Summer Holidays Figure 12: Volume of promotions leading up to the week of the event Timing is everything when it comes to promoting key events. In typical fashion, the week prior to the holiday for Memorial Day, July 4th and Labor Day is the most heavily promoted timeframe prior to the event. When comparing activity on a year over year basis, there were few notable changes. There were slight increases in the volume of holiday related promotions for both Memorial Day and July 4th, where there was a slight decrease for Labor Day. There was also a slight increase in promotions 2 weeks prior to the event in the case of Memorial Day. Strategic Use of Promotions promotions continue to be an effective way to reach consumers in a timely and targeted fashion. Some retailers are leveraging them to promote exclusive offers on traffic drivers, such as Albertsons promoting ice cream before July 4th. also allows for messages that are in line with the trend of engaging customers on a level beyond purchase through sharing of recipes and tips, as well as personalities and contests. is also useful as a quick response mechanism, allowing retailers to respond almost in real time to competitive threats. For example, prior to Labor Day on 9/1/11, Dominick s in Chicago distributed an announcing price matching for products advertised at Target and Jewel-Osco. These types of tactics can help maintain customer loyalty and potentially reinforce a shopper s perception of a retailer as a low price leader. 6 Market Track Dimensions TM

7 Memorial Day When comparing what is promoted most heavily leading up to Memorial Day, there are clearly different strategies among Mass merchandisers and Grocers. Meat/Seafood has the largest SOV in Grocery, with Mass increasing the amount of promotions devoted to this department when compared to last year, as well as Deli/ Dairy. However, Drinks, Snacks and Frozen are most frequently promoted in Mass, with a significant drop in Produce and Dry Grocery promotions. Figure 13: Memorial Day promotions, front page share by department Rising commodity prices for Milk significantly impacted Ice Cream in 2011 (see page 11) price increases for Ice Cream were offset with more buy/get offers. In 2010 approximately 10% of the promotions were for free Ice Cream, in 2011, the percentage rose to 16%. Leading the way were Private Label Ice Cream which went from 6% free promotions in 2010 to 20% in 2011 and Ben & Jerry s which went from 9% in 2010 to 21% in Figure 14: Front page share by category Frozen In the Frozen category among Mass merchandisers, there was a large increase in front page SOV in Frozen Meat, with the nearly 17% bump giving the category as much presence as Frozen Desserts (Ice Cream). Memorial Day traditionally is viewed as the kick off for summer and is a key event for Ice Cream and Frozen Novelties manufacturers. Ice Cream is also a product that can be supplied nationally and is a therefore a tool in the mass merchants arsenal for strategically gaining further ground in the battle for food dollars. Among Grocers there is much less emphasis put on Frozen Meat and Frozen Shellfish, with Frozen Desserts and Novelties maintaining the largest SOV and making modest gains. The Power of Market Intelligence 7

8 July 4 Figure 15: July 4th promotions, front page share by department Drinks are a known traffic driver, and during the July 4th holiday Mass merchandisers and Grocers alike capitalize on the heat of the summer and promote this department heavily. There was an almost 3% decrease in Drink promotions in Mass, while conversely there was a slight increase in Grocery. As in the case of Memorial Day, in addition to Drinks, Grocers promote Meat/Seafood, Produce and Deli/Dairy most readily. Even though there was a slight decrease in SOV for Snacks, it receives the same SOV as Drinks. In Mass, Hot Dogs SOV increased by over 27% when compared to 2010, with over 63% of front page promotions during the July 4th timeframe. There was a slight decrease in Hot Dog promotions among Grocers, comprising 14% of front page SOV. Although Produce experienced a decrease overall in front page SOV in Mass, it remains one of the large areas of focus for Grocers and something they leverage strategically to distinguish themselves from their mass merchant competitors. In Mass there were substantial increases in SOV for Berries, Corn and Peaches while Tomatoes decreased by over 24%. There were significant issues with supplies of Tomatoes in early 2011 due to cold weather in Florida, Texas and Mexico. Did this shortage impact national players more than regional or local merchants? Among Grocers, there were increases in Berries, Peaches and Tomatoes, while Watermelon, Corn, Grapes, Cherries and Cantaloupe decreased in SOV. Figure 16: July 4th promotions, front page share by category Produce 8 Market Track Dimensions TM

9 July 4 Beef was once again the top promoted Grilling Meat among Grocers, but when compared to 2010 during the 4th of July time period, Beef lost share to Pork and Chicken when it came to front page promotions. It would appear that commodity prices impacted beef more than pork or chicken, since feed price increases impact beef longer than chicken (see page 11). Figure 17: July 4th promotions, front page share by category Grilling Meats Albertsons heavily promoted items for grilling leading up to July 4th Meat was a focus of their front page in many markets across the country. Strategic Use of Social Media Promotions Retailers and manufacturers alike continue to leverage Facebook and Twitter as a way to engage their customers. Being able to communicate information practically in real time while shoppers are making purchase decisions is one of the main benefits of this medium. As this space gains traction as a way consumers receive offers, it is critical to take social media into account when evaluating promotional plans. When shoppers Like or Follow a retailer or manufacturer it allows them to receive a consistent stream of messaging and engage with brands in a space that they are frequently interacting with others. They become ambassadors of the brand through notification of their choice to follow being broadcast to their network of friends and followers. The strategies for the types of information impacting consumers range from notification of deals or offers, how to use certain products, recipes, polls and questionnaires, and general discussion that helps consumers associate a personality with a company. There is an increasing use of social media in promotions and the summer holiday season had a wide array of offer types that gave consumers the opportunity to cash in on choosing to receive information through Facebook and Twitter. The Power of Market Intelligence 9

10 Labor Day Often viewed as the end of the summer season, Labor Day is one of the biggest grilling holidays of the year. As with the other summer holidays, Meat/Seafood are the top promoted department for Grocery. Mass has increased SOV in this area as well, however, Drinks are still most heavily promoted in spite of a slight decrease compared to There was a significant shift to Dry Grocery items in Mass, as well as a drop in Frozen, Deli/Dairy and Produce. Figure 18: Front page share by department Evaluate inventory levels and pricing in key categories to avoid having to unload items at the end of the summer. There was a decrease in SOV dedicated to Soda in both Mass and Grocery when compared to The decrease in Grocery meant that Beer took over as the top promoted category during the Labor Day timeframe. Overall, Grocery has a more varied mix of drinks that are promoted during this time, leveraging the opportunity to capitalize on those shoppers who are looking for a one stop shop for all of their party needs. Figure 19: Front page share by category: Drinks 10 Market Track Dimensions TM

11 Commodity Pricing Conclusion/Key Takeaways Be sure your message speaks to your loyal shoppers to prevent trial and switching. These types of events have typically been excellent opportunities to incent switching as shoppers may be motivated to use Mass merchants for their size and price offers. Figure 20: Ice Cream / Frozen Novelties Weeks before Memorial Day On a YOY analysis of pricing for a selected set of Desserts, the average promotional prices for Ice Cream have risen at a greater rate than average pricing for Frozen Novelties. The average increase for Ice Cream is 11% while the average increase for Frozen Novelties is 1%. Milk, one of the main ingredients in Ice Cream, is a key factor, as Class III milk futures were up 13% across the year. Front page pricing for Ice Cream rose more than interior page pricing at 13% versus 9% respectively. Across the nationally branded ice creams, front page promotional prices were $0.23 cheaper in 2011 while they were $0.32 cheaper in These price increases were offset with more buy/get offers. In 2010 approximately 10% of the promotions were for free Ice Cream, in 2011, the percentage rose to 15%. Leading the way were Private Label Ice Cream which went from 6% Free Promotions in 2010 to 20% in 2011, and Ben & Jerry s which went from 9% in 2010 to 21% in Recognize the impact of commodity pricing and how it affects promotions early in the ad planning cycle. Rather than promoting more expensive brands on the front page, consider switching categories as price perception of the front page carries throughout the circular. Manufacturers need to look for ways to optimize their messaging through better placement as opposed to more ads. Be willing to strive for higher quality promotions through placement and size to maximize the impact of promotional your activity. As social media promotions become more prevalent, grocers and their manufacturer partners need to understand how social media is being used by competitors and across other trade classes in order to communicate with customers utilizing this space to receive messaging. Figure 21: Beef, Pork Weeks before July 4th Commodity prices for Grilling Meats increased by 14% in 2011, which is less than the 21% seen in Beef was up 9%, Pork was up 4% and Hotdogs were up 10%. Interestingly, price increases were inversely related to the cut the most expensive cuts such as filet mignon, t-bone, porterhouse & NY Strip saw smaller increases (between 4% and 6%) than some of the less expensive cuts like bottom round and petite sirloin (11% and 23% respectively). However, with the announcement last November that Walmart is adding premium cuts of beef to its shelves, the pressure on the supply chains will increase for more expensive cuts even without additional commodity pressure from grain and fuel costs. Like Ice Cream, front page prices for Beef showed larger increases than interior prices for Grilling Meats. There was an 11% increase in prices on front page for Beef compared to a 8% increase in interior pages. Unlike Beef, interior page prices for Pork showed greater increases than front page prices 5% versus 3%. About Market Track Market Track is a market intelligence firm dedicated to increasing our customers returns on their promotional investments. Through innovative technology and marketplace expertise, we monitor and analyze over 200 U.S. and Canadian markets for every channel of trade in order to provide retailers and manufacturers with superior tools to monitor promotional activity, support dynamic decision making and turn information into market intelligence. Learn More For find out how to gain full visibility into the entire promotional landscape, call Market Track at or perspectives@markettrack.com Market Track. All rights reserved.