Convenience Makes a Comeback

Many consumers are opting to save time in lieu of money these days, according to new research from marketing firms The Integer Group and M/A/R/C.

"The Checkout" report found that 28 percent of June 2009 shoppers describe themselves as "preferring to spend more if it saves them time." This was up from 23 percent in May. Additionally, the number of customers (28 percent) who responded that "saving money by shopping around" was their top preference fell from 33 percent the month prior.

This shift in consumer shopping habits may be good news for convenience stores, said Randy Wahl, executive vice president of M/A/R/C. "Convenience stores have an opportunity to draw a larger number of shoppers if they focus on a few of the fundamental factors." These include providing a clean store and improving the overall shopping experience.

The monthly report, which surveyed 1,200 adults, also found that consumers are now more comfortable with using credit cards than in recent months. Twenty-six percent preferred to buy on credit instead of waiting to purchase later, up from 23 percent in May. When asked about their top criteria for selecting a store, "accepts my credit or bank cards" increased 4 percent compared to the previous month.

Other criteria related to convenience, such as "is easy for me to find the things I need" and "checkout is quick" saw notable increases when compared to earlier results. High price remains the top reason for shoppers not to make purchases at 60 percent, but shopper concerns about finding exactly what they are looking for has almost matched it, at 59 percent.

"The majority of shoppers surveyed want to get in and out of the store as quickly as possible," said Craig Elston, svp of Integer, in a statement. "Convenience stores often give time back to the consumer to do other things."

http://www.brandweek.com/bw/content_display/news-and-features/direct/e3id9eac057de820fdc073aa4c2de4ccba1

Unilever’s Polman May Pass Old P&G Bosses With Cheap Margarine

Aug. 20 (Bloomberg) -- Chief Executive Officer Paul Polman gave Unilever’s margarine managers 30 days to devise a plan to restore growth in Germany. They made Homa Gold a discount brand, following Polman’s strategy to overtake rivals whose premium products are stumbling.

Unilever slashed Homa Gold’s price by almost half and changed the packaging to woo penny-pinching shoppers. Since July 1, the company has sold more of the spread, according to Alexander Pess, who develops Unilever margarines globally.

“We thought about how we could turn the threat of losing a brand into an opportunity in this crisis,” Pess said in an interview. The aim is “to keep volume in the portfolio, even if this means making less money on it.”

The Homa Gold program is one of 15 fix-it plans Polman, 53, is running to win back shoppers seeking cheaper goods since he took over in January. Unilever this month unexpectedly posted volume growth in western Europe in the second quarter and is now set to outpace sales at Polman’s former employers, Nestle SA and Procter & Gamble Co.

Unilever may pass Nestle for the first time since at least 2001, and may sell more items annually than P&G for the first time in at least five years as the Dutch-born Polman brings some prices in line with store brands. Homa Gold now sells for 75 cents a tub at a Metro AG Real hypermarket in Dusseldorf, the same price as the chain’s private label.

“It’s really impressive how Polman turned around a huge vessel like Unilever in such a short time,” said Christian Vondenbusch, a fund manager at Robeco Asset Management in Rotterdam, which oversees 115 billion euros ($163 billion), including Unilever shares. “This man achieved what others couldn’t.”

Maintaining Profitability

Unilever’s stock has outperformed P&G and Nestle since June 30, rising more than 12 percent in London and Amsterdam. Nestle and P&G have gained about 4 percent in that time.

The executive’s next task will be to maintain profitability at the London- and Rotterdam-based company as he slashes prices and lifts spending on new products. Polman scrapped Unilever’s operating margin target of at least 15 percent by 2010 in February, one month into his new job, and said giving an outlook would be inappropriate amid declining economic growth.

“Margins will fall this year,” said Richard Withagen, an analyst at SNS Securities in Amsterdam. Unilever’s “growth comes at a greater expense to margins than at rivals like Nestle,” he says.

Withagen recommends investors reduce their holdings of Unilever, where he expects profitability excluding one-time items, acquisitions and disposals to be 14.3 percent of sales this year, down from 14.5 percent in 2008.

Raw Materials

Polman plans to boost operating profit as a percentage of sales in the second half amid cheaper prices for raw materials like palm oil, which is used in margarine, sauces and ice cream.

Withagen says falling commodity costs are no panacea, with any benefit likely eaten up by increased marketing costs to propel the volume growth Polman seeks.

Polman was unavailable to comment for this story because he’s traveling outside Europe, a spokeswoman said.

Unilever is taking “quicker actions where we’re feeling that our brands are out-positioned or at a disadvantage, where we’re losing share,” Polman said in May. He said he’s fighting an “inherited assumption that the company will not grow.”

Stubble-Free

Polman, who worked at P&G for 25 years, may find himself a tough act to follow after increasing expectations in the second quarter, analysts said. He headed western Europe for P&G from 2001 to 2005, cutting prices and lifting sales while economic growth in the region stagnated. P&G was then led by Alan Lafley, who relinquished his role as CEO this year, remaining chairman.

“Polman’s biggest challenge is to live up to those expectations while the market is still deteriorating,” said Fernand de Boer, an analyst at Petercam in Amsterdam who recommends investors hold the shares. “Innovation is important. He’s got to introduce new products, supported by spending on advertising and promotions.”

So far this year, Unilever has introduced Dove HairMinimising deodorant, which pledges to leave users feeling “stubble-free” for longer, and Lipton Sparkling Green tea in a venture with PepsiCo Inc.

P&G spent $2 billion over the last year developing new products, including its Venus Embrace five-blade women’s razor. Polman in May said that Unilever is spending 1 billion euros on developing new products, without giving a time frame for that expenditure.

Marathon Runner

Polman worked at Nestle for two years as chief financial officer. After being passed over for the top job, Polman became the first outsider to lead Unilever. Outside the office, Polman is a long-distance runner, rising at 6 a.m. to hit the treadmill in his London office and completing this year’s Unilever- sponsored London Marathon in just over 4 hours and 12 minutes.

Vevey, Switzerland-based Nestle on Aug. 12 withdrew its revenue forecast and posted sales below analysts’ estimates, as consumers shunned premium products including bottled water and vitamin-enriched powdered milk. P&G predicted on Aug. 5 that sales excluding currency swings will slide as much as 3 percent in the current quarter as consumers switch to cheaper alternatives to Tide detergent and Olay face cream.

Under other 30-day plans, Unilever added more chocolate to Klondike ice-cream bars in the U.S. and made Indian packages of Rin Advanced detergent bigger while maintaining the price.

Nestle ‘Wake-Up Call’

Polman linked managers’ bonuses to volume growth and sent salesmen to stock shelves in supermarkets. He also boosted Unilever’s advertising and promotion spending and pledged more to develop new products and accelerate their introduction.

In the second quarter, Unilever sold 2 percent more goods by volume, and Nestle’s volume rose by 0.7 percent. P&G’s volume dropped 4 percent over the same three months, according to Bloomberg calculations. Unilever’s underlying sales growth of 4.4 percent in the first half also outpaced Nestle’s 3.5 percent gain in sales on that basis, while P&G’s sales on that basis in those months was flat, calculations show.

“It’s a wake-up call,” said Jon Cox, an analyst at Kepler Capital Markets in Zurich. “P&G and Nestle are, to a certain extent, caught with their pants down. It’s going to be hard for them to catch up in terms of volume.”

Cescau vs. Polman

Polman isn’t responsible for all the change. Since the fourth quarter of 2008, Unilever’s volume declines have been less steep than at Cincinnati-based P&G. Polman’s predecessor, Patrick Cescau cut jobs, sold assets and closed plants in his four years at the helm of Unilever. Cescau took over in 2005 after a plan to restore growth failed and investors criticized the company for being too slow to respond to consumer trends.

“Cescau looked at the organization and the production; Polman looks at how to sell the goods,” said Robeco’s Vondenbusch. “He will continue to look at the costs, but his focus will be on marketing.”

As a result of Unilever managers’ in-store experiences, Unilever is tweaking products to shoppers’ demands. In the Netherlands, the company is selling miniature versions of its Twister ice pops at the C1000 chain after noticing more families shopped there. By contrast, Unilever sells a multi-pack of its pricier Magnum Temptation bars only at Royal Ahold NV’s Albert Heijn stores, which cater more to double-income Dutch households.

“Polman basically fixed the imbalance between volume and pricing,” said James Amoroso, a food industry consultant based in Walchwil, Switzerland. “That’s nothing magical. The thing I’d say ‘wow’ to is the speed. This is a smart guy who thinks quickly and moves quickly.”

http://www.bloomberg.com/apps/news?pid=20601109&sid=aXqX_ov1dk98

U.S. Economy: Sales Unexpectedly Fall on Job Losses

Aug. 13 (Bloomberg) -- Sales at U.S. retailers unexpectedly fell in July, raising the risk that a lack of consumer spending will temper a recovery from the worst recession since the 1930s.

Purchases decreased 0.1 percent, the first drop in three months, as shrinking demand at department stores such as Macy’s Inc. and Wal-Mart Stores Inc. overshadowed a boost from the cash-for-clunkers automobile incentive program, Commerce Department figures showed today in Washington.

A separate government report today showed more Americans than forecast filed claims for unemployment insurance last week, underscoring the threat to spending from the continued deterioration in the job market. Treasury securities jumped and the dollar fell after the reports, and some economists lowered estimates for growth this quarter.

“Until we start seeing job growth, consumers are still going to be very cautious,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, which accurately forecast the drop in purchases excluding automobiles. “It’s premature to talk about the sustainability of a recovery,” he said, until there’s “follow-through on the demand side.”

The gain in Treasuries sent the yield on the benchmark 10- year note down to 3.60 percent at 5:15 p.m. in New York from 3.72 percent late yesterday. The dollar dropped against the Japanese currency to 95.48 yen from 96.07 yesterday. Stocks rose, with the Standard & Poor’s 500 Index increasing 0.7 percent to a 10-month high of 1,012.73.

More Claims

The Labor Department said today that 558,000 people filed first-time claims for jobless benefits last week, up from 554,000 the week before.

Retail sales were projected to rise 0.8 percent, according to the median estimate of 76 economists in a Bloomberg News survey. Forecasts ranged from a decline of 0.9 percent to a gain of 2 percent. Commerce revised June sales up to show a gain of 0.8 percent from the 0.6 percent increase previously reported.

Excluding automobiles, sales fell 0.6 percent, also worse than anticipated and the biggest drop since March. They were forecast to increase 0.1 percent, according to the survey.

Americans cut back on furniture, electronics, building materials, groceries and sporting goods in July, according to the report. The drop in sales at department stores, at 1.6 percent, was the biggest this year.

‘In the Tank’

“It’s hard to find anything encouraging in this report,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “For the most part, discretionary spending is in the tank.”

Walmart, the world’s largest retailer, today reported profit that exceeded some analysts’ estimates after managing inventory to lower costs. Comparable-store sales trailed the company’s forecast.

The drop in sales was attributable to consumers being “more selective” in buying discretionary items and to larger declines in grocery prices than anticipated, Eduardo Castro- Wright, Walmart’s U.S. stores chief, said on a recorded call.

Macy’s, the second-biggest U.S. department store chain, said yesterday it cut inventories 7.5 percent in the second quarter from a year ago as sales dropped.

Other reports today showed companies trimmed inventories in June for a 10th consecutive month, and prices of imported goods dropped in July for the first time in six months as the cost of commodities such as petroleum and chemicals decreased.

Cash for Clunkers

Figures from the retail sales report showed the government’s cash-for-clunkers plan did boost auto purchases, confirming industry data released earlier this month. Sales at dealerships and parts stores climbed 2.4 percent last month, the biggest gain since January.

The government is offering credits of up to $4,500 to trade in gas-guzzlers for more fuel-efficient vehicles. President Barack Obama last week signed into law an emergency measure giving an additional $2 billion to the program after the original $1 billion ran out three months earlier than projected. The infusion of funds was meant to extend the program through August.

Excluding autos, gasoline and building materials -- the retail group the government uses to calculate gross domestic product figures for consumer spending -- sales dropped 0.2 percent after no change in June. The government uses data from other sources to calculate the contribution from the three categories excluded.

Forecasts Trimmed

After the report, economists at Morgan Stanley in New York projected the economy will expand at a 3.7 percent annual pace this quarter, down from a prior estimate of 4.2 percent.

The economy has lost about 6.7 million jobs since the recession started in December 2007, the worst of any downturn since World War II. GDP contracted at a 1 percent annual rate in the second quarter, the fourth consecutive drop.

Federal Reserve policy makers yesterday said they will hold the benchmark interest rate “exceptionally low” for an “extended period” to help sustain a recovery. They also added “sluggish income growth” to the list of reasons why household spending is likely to be slow to rebound. Headwinds previously mentioned included job losses, tight credit and falling home values.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a03T3Kgw7klc

Unilever gets all the trans fat out of its margarines

Unilever, which sells more tubs of soft margarine spread than anyone, will unveil Monday plans to remove all partially hydrogenated oils — artificial trans fats — from its soft-spread brands, including I Can't Believe It's Not Butter and Shedd's Spread Country Crock.

The change, to begin next month and be done by the second quarter of 2010, signals how serious the marketing and technology battle about trans fats in foods has become. Shoppers have increasingly demanded that foods they buy — from baked goods to snacks to margarine — no longer carry artery-clogging trans fats that can lead to heart disease.

"I call this the death knell for trans fats," says Marion Nestle, professor of nutrition at New York University.

The elimination of trans fats from the U.S. diet "should be written up as a business school case and studied," says Michael Jacobson, director of advocacy group Center for Science in the Public Interest, which has pushed for it. Trans fats have been reduced more than 70% in three years, he says.

Unilever (UN)(UL), which makes half the spreads sold in the U.S., already can claim "zero grams" of trans fat in its spreads, which also include Brummel & Brown and Imperial.

FIND MORE STORIES IN: Unilever | Nestle | Shoppers Drug Mart | Michael F. Jacobson

Food and Drug Administration rules let foods with less than 0.5 grams of trans fat per serving be labeled "0 grams of trans fat."

But consumer demand and pointed marketing by Smart Balance, Unilever's closest rival in soft spreads, nudged Unilever to go lower. It will no longer mix in even tiny amounts, which added texture and shelf life. The new label, for the first time, will boast: No hydrogenated oils.

Unilever will replace the partially hydrogenated oils with a mixture of palm oil and interesterified fat (plant oil). All four of its spread brands will then have only 0.05 grams per serving of trans fat, the minute amount that occurs naturally in vegetable oils.

The change could kill a very effective ad campaign by Smart Balance that relentlessly needled Unilever's spreads, and others, for adding partially hydrogenated oil.

Macy's tailors stores, including new Fairview location, to match local tastes

Terry Lundgren is the guy who took away your local department store, turning it into another link in the Macy's chain. Now the company CEO wants to give it back with a program he calls My Macy's.

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Penney's, Macy's among stores to open in Village at Fairview

After a pilot program to match merchandise to local shoppers' preferences in 20 Northern markets, Macy's Inc. is introducing the strategy to the rest of its 69 markets, including those in Texas. This summer, all 808 Macy's stores received the local treatment.

A store that's opening next week in Fairview, north of Dallas, is one of three 120,000-square-foot stores built from the My Macy's perspective. There's no fine china department, but women's accessories, sportswear and cosmetics have been bumped up. Without a bridal registry department, more space is given to bed and bath and to kitchen utensils.

In San Tan, a suburb of Phoenix, another new Macy's doesn't have a dress department. The third store, opening next week in the Kansas City suburb of Lee's Summit, has a "brow bar" in cosmetics, where customers can get their eyebrows professionally shaped.

The Fairview Macy's also has a Starbucks with seating, Wi-Fi and three computers available for customers to check e-mail or place orders on macys.com. It also has dressing rooms with interior lounge areas so mothers and daughters can consult outside of a tiny room.

The new stores are the culmination of 18 months of research by 30 people in operations, design and merchandising to create "a store from the customer's point of view," said Karen A. Meskey, Macy's senior vice president for store planning and design. She said the building design, which the three stores share, is "prototypical instead of a prototype," because it allows the space to be allocated differently. Higher ceilings in center areas are intended to convey the grand hall feel of traditional department stores built in earlier eras. Macy's new box comes with a new corporate structure that looks to the past for answers, back before department stores began shedding shoppers, locations and familiar names in the 1980s.

The recession has been especially challenging, as shoppers look to discounters to stretch their dollars. But at some point, the recession will end, said Lundgren, who lived in Dallas in the early 1990s when he was CEO of Neiman Marcus.

"Companies like Macy's will emerge even stronger," he said. "This is the time it pays to take risk. There's no resistance to trying new things; everyone is anxious to stimulate sales and get the customer shopping again."

Lundgren took heat from local markets when he led the creation of a national department store chain of more than 800 stores with the Macy's brand in 2005 and 2006, assembled from romanticized regional names such as Marshall Field's in Chicago, Rich's in Atlanta, Burdine's in Florida, Foley's in Houston and Meier & Frank in Portland, Ore. Macy's acquired 11 regional brands in its 2005 merger with May Department Stores.

The result was a redundant mishmash. Thirteen divisions were consolidated first into seven, then into four huge divisions, with buyers in Atlanta, for example, deciding what to put in Pittsburgh. It wasn't working.

So Macy's management started with "a blank sheet of paper," Lundgren said. In February, Macy's began consolidating into one central organization. The Cincinnati- and New York-based company cut 7,000 jobs, or 4 percent of its workforce, and reassigned 1,600 merchants to live where customers shop.

Lundgren said the talent was all there; the merchants just had to be moved to be "national as well as locally responsive."

Macy's now has a team of 20 district merchants and planners in each of its 69 markets. Each team is responsible for 10 stores.

The people they report to are in eight new regions, based in Chicago, Houston, Miami, Los Angeles, New York, Pittsburgh, San Francisco and Washington, D.C. Lundgren told them to follow one general rule: "When in doubt, just say yes."

Local empowerment of the My Macy's teams creates a "sustainable competitive advantage," Lundgren said. "Having 10 stores per district, there's continuity, with merchants in the stores every day talking to the customer. The power behind that is unbelievable."

In the fourth quarter of 2008, sales in My Macy's pilot stores were 1.5 percentage points higher than those of the other stores, Lundgren has told Wall Street. In the first quarter of 2009, that gap widened to 2.1 percentage points.

Investors are reserving their opinions, as it's hard to judge much of anything while the recession handcuffs the consumer.

Citigroup analyst Deborah L. Weinswig has a "hold" rating on Macy's shares and said in a recent report that "an undertaking of this scale has significant execution risk."

But she said the effort could be a long-term positive, along with customer insights from dunnhumbyUSA, a consumer research firm that Macy's hired a year ago.

There's "no other logical reason" for My Macy's test stores in Chicago, Detroit, Pittsburgh and Columbus, Ohio, to perform better than the rest of the company, Lundgren said.

Gerry Frank is a Macy's convert. His family founded the Oregon stores that operated for almost 150 years as Meier & Frank, and he initially tried to fight off Macy's. But Lundgren won him over then and with the local strategy now.

"This is the proper thing to do at this time. The Dallas customer and the Portland customer are very different," Frank said. "They've come full circle."

Economy alters purchasing habits even for wealthy

Upscale U.S. Consumers Adjusting Food Demands During Recession
July 14, 2009
In the midst of an economic downturn, even more affluent U.S. shoppers are reconsidering grocery and foodservice purchases, according to “Premium Consumers in the New Economy: Food and Foodservice, a recent report from New York-based market research publisher Packaged Facts.A more adventurous taste in food, higher health and nutrition consciousness, firmer preferences for organic and natural foods, a heightened sense of ethical consumerism, and a greater propensity for Internet and coupon use are the attributes for an increasing number of premium U.S. consumers. Such psychographic responses to financial change have reshaped -- and will continue to alter -- consumer spending on food, the report found.“The economic turmoil that reached crisis level in fall 2008 has been a bull in the china shop of American consumer behavior, even for a market as fundamental as food,” noted report author David Sprinkle. “Consumers who have been set back or thrust forward financially are more likely to be rethinking what they need, what they want, and how and where best to find it.”The report found that the direction of financial change matters less than the fact of financial change in molding consumer mindsets. Therefore, upscale consumers who have taken a financial hit often align in attitudes and behavior with those on the financial upswing, as opposed to those whose finances have remained stable.Packaged Facts defines premium consumers as either single-person households with an income of at least $75,000, or multiple person households with an income of $100,000 or higher. The premium designation accounts for the top 28 percent of adults, or about 61 million out of 222 million adults. As of first quarter 2009, over twice as many adults in the premium group thought they were worse off (vs. the year before) than thought they were better off.Economic hardship is leveling the shopping playing field, according to the report. Upscale consumers, although still less likely than other consumers to shop at Walmart Supercenters, are, however, switching to Walmart at above-average rates. Specific segments of premium consumers (such as Gen Xers) are opting for less expensive fast food, particularly the better-for-you varieties. And premium consumers use coupons more, not less, than the rest of the population.“Premium Consumers in the New Economy: Food and Foodservice” is the latest installment in Packaged Facts’ ongoing examination of consumer responses to the shifting economy. For further information, visit http://www.packagedfacts.com/Premium-Consumers-Economy-2291282/.

Microsoft produces PepsiCo's biggest online campaign

LONDON - PepsiCo has appointed Microsoft for the first time to produce its biggest online campaign.

The deal, brokered by Claudia Lagunas, head of international marketing for PepsiCo, is Pepsi's largest online commercial partnership to date.
The campaign will run for nine months and will initially include a Pepsi Max microsite in the UK, Norway and Australia targeting 18 to 25-year-old men.
The Pepsi Max's "Club" microsite has been built and is being hosted using Microsoft technology.
Fronted by Australian soap Neighbours pin-up Holly Valance, it aims to engage users with the brand by allowing them to share comments, games and photo galleries with friends on social networking sites such as Facebook and Twitter, encouraging them to join Pepsi Max's Club.
Microsoft's portal MSN will host specially created editorial content, which Microsoft has guaranteed will drive at least one million people to the microsite.
Microsoft Advertising will also drive consumers to the microsite through ads around its MSN Messenger service.
Bruno Gruwez, marketing director UK Beverages at PepsiCo, said: "We wanted to make sure we were in the digital space as that's where our consumers are and we will continue to increase investment in the digital space.
"The deal with Microsoft is a way of adding value and we will continue to expand our partnership with them."