This presentation shares the results of a study commissioned by IDDBA from Nielsen Perishables Group. Before we get into the methodology, first we

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3 This presentation shares the results of a study commissioned by IDDBA from Nielsen Perishables Group. Before we get into the methodology, first we need to re-frame the way we think about our products. We need to think about the store as the consumer does; an ecosystem of products across the entire store that solve a purpose or fulfill a need. In fact, nearly two-thirds of all shopping trips include items from both the perimeter and center aisles. This means how we define our competition, and our opportunities, needs to radically shift. We call this total store connectivity. Now there are probably hundreds of reasons for a trip to the grocery store, but today we re going to focus on those occasions built around entertaining. Whether it s a Super Bowl party, baby shower, dinner with close friends or Thanksgiving with the whole family, over the course of the year, we all attend a number of gatherings. So why focus specifically on gatherings? Because shopper behavior varies widely depending on the occasion, and our goal is to help unlock some of the potential for you by understanding those differences. In order to do this, we partnered with IDDBA on a study that focused on the degree of connectivity between categories across the store. The point is to understand how to capitalize better on natural connections in the store to sell more products, making entertaining easier for the shopper and more fruitful for industry. We looked at shopping trips to understand how often categories were purchased on the same trip. We also evaluated sales correlations to understand the impact that sales trends of one category can have on another category. Neither of these metrics in isolation are revolutionary; however, the power comes from the combination to understand true competitors and opportunities. Trillions of combinations are generated from which we generate only the most relevant connections. Utilizing Nielsen s brand-new total view of the store with integrated UPC and random weight sales, this study also provides the most holistic view of the entire store as a consumer views it. For this specific study we re going to discuss today, we chose 20 categories most often purchased for an occasion to understand how connectivity could change depending on the occasion. Depending on the underlying theme of the connections be it convenience, indulgence, premium-focused we ll also highlight specific strategies both in and out of the store to execute against this new knowledge. Note that common entertaining categories such as ham and turkey were excluded because they surprisingly did not have many connections outside of the basic items like potatoes and gravy. 3

4 Total Store Connectivity provides the first comprehensive and integrated store connectivity solution. It utilizes individual store/week sales and consumer data inputs across 200+ categories, through which value is redefined, new partnerships realized, and a new competitive advantage can be built. The study has two main parts sales data and consumer data. The sales data looks at the correlation between sales of 200+ categories across the store at the store/week level. Sales correlation shows the relationship between two categories. For this project, we used Pearson correlation methodology at the store/week level to produce correlation coefficients between -1 and 1 that explain the relationship between categories. In our study, over 0.5 is considered to be a statistically significant strong positive correlation, while less than -0.5 is considered a statistically significant strong negative correlation. With a correlation of positive 1, we see hypothetical results such as when bananas grow in sales, apples grow the same amount in sales at the same times. A correlation of -1 would be the opposite such as when bananas grow in sales, apples decrease in sales the same amount at the same times. We overlay consumer information, specifically buyer overlap (% of buyers that are shared between the two categories) and trip overlap (% of trips that contain the two items) to understand whether this correlation is driven by buyers, trips or both. 4

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6 The type of connections that exist within each category of the study can be classified into three groups: category is mostly connected to center store categories; category has a mixture of fresh and center store connections; and category is mostly connected to fresh categories. On this slide we ve divided the 20 categories of focus into these three buckets. 6

7 It s important to think of the connections as a spectrum, though. Of the seven categories that are primarily connected to center store products, they still possess a degree of connectivity with fresh products. For example, frozen desserts has a higher percentage of connections to fresh categories than chips, but it s overall degree of connectivity to fresh is still relatively low compared to other categories in this study. 7

8 These are the top five category connections for each of these products. So using crackers as an example, it s mostly highly connected to dairy cheese, salad dressing, packaged bread, etc. 8

9 Similar to slide 7, we placed the categories with a combination of connectivity between fresh and center store on a spectrum. Here you can see that deli dips, for example, have a higher degree of connectivity to fresh products than bakery cakes, but even the lowest category on this list is still higher than all categories on slide 7. 9

10 Again these are the top five connections for each of the categories listed in their respective column headers. The colors represent the department, whether it s bakery, deli, seafood or meat 10

11 The final set of categories have the largest degree of connectivity to other fresh products. Deli specialty meat is 100% connected with other fresh products, meaning the shopper doesn t really move outside of the perimeter when purchasing specialty deli meat! 11

12 Finally, the top five connections across each of these categories. Featured on this list are primarily deli and produce categories plus some bakery 12

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14 We also found that many of these entertaining categories shared common connections to similar products, which allowed us to group these products together to create five entertaining occasions that you see here on this slide; Fresh and Fancy, Holidays are a Handful, No Work Entertaining, Casual Party and DIY Entertaining. As you can see from the list of products below each name, each one features a unique basket of products, which means different strategies can be implemented to maximize the shopping trip. While some occasions feature more premium items, such as shrimp, steak and pork roasts; others include more convenient products, so there are opportunities at the core of every occasion to make entertaining a little or a lot easier for the consumer. With each occasion that we ll highlight, we ll provide strategies for both in and out of store execution to drive further connectivity and sales. 14

15 The first occasion that we ll discuss we re calling Fresh and Fancy Entertaining. Let me take a moment to orient you to the slide layout as it will be repeated for each of the five types of occasions. In the middle left hand side are the various categories that were studied as part of the research. Below them are common shared connections. While each of these products has their own list of unique top connections as we saw on slide 12, there were many instances were connected categories appeared on multiple lists. On the right hand side are various recommendations on how to put these insights into action for each occasion. For the fresh and fancy entertaining occasion, these are often a more premium entertaining event, catering to a smaller gathering or more dinner party style event. Some of the key entertaining times for this type of gathering might include events like a small-scale Christmas gathering, weekend formal dinners, or upscale wedding showers. Of the 20 categories analyzed, this occasion features six of the more premium categories such as steak, shrimp and specialty deli meats and cheeses and shared similar connections with other more premium products. This isn t to say that each of the six categories shares the same degree of connectivity to all of the products on the right. For example, specialty deli meat is more highly connected to cooking vegetables such as broccoli than specialty deli cheese. These individual differences are highlighted in detail in the full report. However, there is often a high degree of overlap in the categories listed, and one of the most common themes that we found is that when shoppers are planning for these occasions they are most often focused on products exclusively within the perimeter departments, specifically deli and produce. As this occasion is meant to impress, you ll notice that these categories are all more expensive. Shoppers are making a more upscale meal, often from scratch, with fresh, premium ingredients. The key shared connections are listed below such as value-added vegetables and herbs/seasonings. There are many ways to embrace this occasion with different marketing, merchandising and product strategies. We ll focus on marketing and merchandising tactics specifically for this occasion because we can directly influence them today, but I briefly want to touch on product strategies also. While the shopper often cooks more from scratch for these meals, this doesn t mean that convenience isn t still important. It s possible that shopper is cooking more out of necessity because the items that he or she wants to serve aren t readily available. But in order to create these meal solutions/offerings, we first need to understand what shoppers are connecting with these key products before innovating and developing products that meet the shopper needs. For example, we see that mushrooms are often purchased during the fresh and fancy occasion, yet there aren t a lot of products in market such as marinated mushrooms that add the layer of convenience to the products that the shoppers want. Consider both in-store and out-of-store opportunities to capitalize on this occasion. There s a lot of planning that goes into fresh and fancy meals, so use this is an opportunity to inspire and engage the shopper during that planning process. These occasions can be more sporadic without set dates to host, engaging these shoppers outside of the store provides the most flexibility for consistent communication. Recipes that feature premium ingredients such as a steak dinner with vegetable medley can inspire the host as he or she is establishing the menu. Take it one step further and suggest a wine pairing or the perfect specialty cheese and cracker appetizer to make it a complete meal. Although the consumer isn t necessarily focused on price for this occasion, tying in promotions can help seal the deal. Of course, tailor the recipe or ingredient focus to the core demographics of your store. Certain cuts of steak index more highly with different demographics, or substitute the wine pairing with beer instead. Recipes work best in print media, but having a digital presence is critical, particularly when targeting Millennials. Consider running an ad on Facebook which has the highest average ROI of any digital media. Just remember that consumers on average spend just five seconds looking at digital ads, so keep the banner simple and clean with the more detailed recipe on your website. Once the shopper is in the store, continue drawing the connections for them. Since shoppers are willing to pay a more premium price, discounting for these to gain sales for these events isn t necessary, but having the right selection is and drawing connections can make it easier for the shopper. Some cross-merchandising makes sense no matter the week or occasion such as placing wine near your specialty cheese displays. Or utilize hand-made signs featuring different pairings each week which you can place near the wine section. Given the significant number of wine and cheese offerings, this can be an overwhelming decision for a consumer so offering recommendations or having consultants on hand to offer expert advice during the weekends when sales of the products peak can make it easier. For the non-planner, having recipes or recommendations directly on packages can inspire new meal plans as well. CPG companies have long used this tactic on their packages, but fresh products have the same opportunities to recommend that meal suggestion with cooking instructions directly on the products. 15

16 The next occasion we ve coined Holidays Are A Handful. This is all about quick and easy solutions and preparation, as these shoppers are getting ready to cater to large holiday gatherings. The easier the solution, the better for making a retailer a one-stop shop. Some of the key entertaining times for this type of gathering include larger-family or friend gatherings such as Christmas, Thanksgiving, Easter and 4 th of July. Of the 20 categories analyzed, four fell into this occasion and include bakery rolls and pies, nuts and fresh pork roasts. What sets this occasion apart from the others is that these categories have a high connection to categories across the entire store. This provides a significant opportunity to merchandise and promote in a manner that adds convenience for the shopper. Since the shopper is purchasing products from across the store, many different options exist to make it easier for them. Since holidays are key weeks for these occasions, it s easier to plan than some of the other entertaining occasions. Consider displays that merchandise all of the connected products together in one location. Think about it from a shopper s perspective: there s nothing worse than hunting up and down aisles for the marshmallows for the sweet potato casserole at Thanksgiving. Why leave the products scattered across the store and risk missing a sale? That would be like leaving each article of clothing for your outfit in a different room. You run the risk of forgetting something or giving up on tracking down that pair of earrings you had planned to wear. If cross-merchandising is out of the question or simply out of your control, we recommend at least structuring the circular ads with all of the connected items promoted in the same week and on the same page. You could even include a small call out of aisle locations or a fun infographic insert to get the shopper s attention. Use this an opportunity to also remind shoppers about some of the items they may have left off the shopping list. While no one forgets the turkey or potatoes when preparing for Thanksgiving, it s easier to overlook some of the other items that are often purchased for the occasion as well such as coffee. And for this occasion, disposable dishes are a must! 16

17 The final type of occasion we want to highlight is called No Work Entertaining. These events are typically a little more casual such as graduation, Super Bowl or birthday parties. The four key categories of focus on this occasion are bakery cookies and cakes, deli platters, and deli appetizers/sides. These products offer a no-time-needed solution, with more of a lift the lid and pretend you prepared it yourself (or not) approach! They are often purchased with other items focused on convenient, already prepared products primarily in the deli and produce departments. This entertaining style is all about letting the store do all the work. Your communication for these events should tout the time-savings or convenience solution for the shopper. Across the store and throughout the year, more convenient options are increasingly in demand from consumers across all demographics. It s imperative to fulfill this need year-round with the right assortment and marketing campaigns letting consumers know you re a convenient solution. These occasions would then tie naturally to your marketing. If you re running a Twitter campaigns then use slogans like convenient solution which reinforces the value to the consumer. Offer special party packages that include a variety of appetizers, desserts, beverages and disposable dishes. For maximum convenience, offer online ordering with curbside pick up. 17

18 The fourth entertaining occasion is Casual Party. This occasion centers on having a low maintenance, laid-back affair. This could be a spur of the moment drinks or appetizers before going out to dinner, simple weekday dinners with good friends or game day Saturdays. This occasion has very low total store connectivity as the categories of focus here are all centerstore categories (such as pickles, salty snacks and crackers) which share common connections with other center-store categories, ***such as salad dressings, condiments and dairy cheeses. The goal for this occasion is to get shoppers out of their routine. These shoppers have a tendency to only shop in the center aisles and like to keep things simple. While more can be done with this occasion-type in-store, there s definite opportunity to provide inspiration to your shoppers through circular or digital advertising, as well as retailer publications. We re seeing a lot of retailers create retail-specific magazines, highlighting recipes, events, even sample menus for specific occasions. It s all about putting the shopper in a relatable situation and focusing on how they could try new things or take it to the next level with as little or as much effort one wants to put in. Today, there s more interest than ever in partnerships across the store. In fact, it s a great time for fresh companies or companies with smaller marketing budgets to partner with larger companies who have the budget, the broad reach and the brand equity to drive mutual growth! And brands within the center aisles are looking to the perimeter, looking to growing fresh categories to latch onto around a meal or entertaining occasion. Offer coupons to complimentary fresh products that pair well with staple crackers or get shoppers trying new things by offering samples during peak traffic hours. The overarching goal keep it simple as this occasion doesn t make food the center stage, but instead the experience and conversation between guests. 18

19 The last entertaining occasion derived from this research is Do It Yourself entertaining. This shopper is all about getting their hands dirty and adding personal touches to events of all sizes, including birthday parties, potlucks and family get-togethers. These home preparation and baking categories such as refrigerated baked goods, baking ingredients and frozen fruit are most heavily connected to other parts of grocery and dairy, ***including spices and seasonings, butter and margarine and canned fruits/vegetables. And once again, as we saw with Casual Party, these center store categories rarely connect with the fresh perimeter since this shopper isn t necessarily looking for the short-cuts some substitutable perimeter categories offer. However, everyone is looking for ways to make their lives a little bit easier, even those who want to do everything themselves. Outside the store, use images in ads and circulars to provide inspiration and motivate shoppers to try something new! And don t just rely on retailer s websites or circulars. As we mentioned earlier social media provides great return on your advertising investment, so the more touchpoints you use the better! But it s all about making the food so mouth watering the consumer can t help but want to try it! And since these shoppers love getting in on the action, pull them into the perimeter departments by providing some level of do it yourself action. We re seeing so many creative ways retailers are making the full shopping trip an experience and these entertainers will be in heaven. Everything from watching a professional ice a cake, to enjoying an evening of wine and food pairings or feeling like you have a say in your cookie or brownie varieties with mix and match packaging these are just a few ways retailers can ensure consumers have the opportunity to add their own personal touches. 19

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