Retail, Redefined

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Retail, Redefined. November 2013. The recession was a wake-up call. 2010-2013. 2009. Zzzz. The Challenge for growth. Cpg STILL SPUTTERING FOR growth IN north America. Canada. United States. + 1.5. +1.6. + 0.2. +0.1. Dollars. Units. Dollars. Units. - PowerPoint PPT Presentation

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Retail,RedefinedNovember 2013

Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelGood afternoon everyone

Its a pleasure to join you today to give you an update an Canadas ever changing CPG industry and a view into the future. 1The recession was a wake-up call

2009

Zzzz 2010-2013Copyright 2013 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelThe Recession was a wake-up call for consumers BUT the consumer still hasnt woken-up and they have been hitting the snooze button for 4 years now.

2

The Challenge for growthCopyright 2013 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth level2 weeks ago I hosted a webinar and asked 250 attendees if they thought Canada is lagging or leading the U.S. in CPG dollar growth - 2/3rd of attendees thought Canada was leading the U.S.

Oh how times have changed

So what we generally here today from our clients is a challenge for growth - a message common on both sides of the borderCpg STILL SPUTTERING FOR growth IN north AmericaUnited StatesNielsen: MarketTrack - Total Tracked Sale52 wks ending October 19, 2013Canada+1.6 +0.2DollarsNielsen: ScanTrack - Total Tracked Sale52 wks ending October 26, 2013UnitsDollarsUnits +1.5 +0.1Copyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelSince the recession, Canada has been outpacing the US on both Dollar and Units but now the tides have turned with Canada now similar to the US in the recent 52 weeks.

In both countries, dollar growth of 1.5% is fueled by modest price increased while units remain flat basically consumers have a firm grip on their cash and not spending substantially more and have stopped putting more stuff in their shopping baskets

4Source: Nielsen MarketTrack, National All Channels YTD 44 weeks to October 19, 2013 - Total Tracked Sales excluding Fresh Random Weight Slow growth, driven only by inflationCPG Growth slowing over the past 5 yearsCopyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelNow this is not a new trend for Canada. In fact, we have seen relatively static growth for the past 3 years where historically we benefitted from +4-5% growth.

In the past, we always banked on inflation to drive dollar sales, but the game has changed, and despite very little inflation in the past 3 years, consumers are not motivated to buy more stuff due to static prices were still being very cautious.

So how is 2013 shaping up as we head towards the finish line?

52013 is shaping up to be a slow growth yearSource: Nielsen MarketTrack, National All Channels YTD 44 weeks to October 19, 2013 - Total Tracked Sales excluding Fresh Random Weight Slow growth, driven only by inflationCopyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelAt this time of year most of us are thinking about hitting our sales objectives and planning for 2014.

Well, the bad news is that 2013 is shaping up to be another slow growth year, and in fact, the monthly growth is slowing as we head towards some of the top selling weeks of the year.

Based on our Q3 Consumer Confidence survey ,which asks Canadians about their future spending habits, for a large majority of us, we are still focus on spend control trying to reduce our household expenses.

The top 2 concerns are debt and the economy which means caution ahead for future spending.

So if we continue on this path, 2013 will finish slightly lower than 2012s performance.

And whats the outlook for 2014 potentially more of the same as consumers are still putting that holster on their wallets.

6Not all regions are created equal52 week Regional CPG Performance

Source: Nielsen MarketTrack, National All Channels 52 weeks Ending October 19, 2013 - Total Tracked Sales excluding Fresh Random WeightThe Prairies lead regional growth twice the National averageCopyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelDespite the national figure being relatively static I think the Pet Shop Boys were onto something when they told us to go west

The Prairies are firing on all cylinders leading Canadas CPG growth which is currently twice the national average. Why?

The economy is benefitting for the global need for natural resources

Population Growth almost twice the rate of Canada. Benefitted from immigration and migration as Canadas move for work

Also they have more people working which means more people freely spending - Unemployment: less than 5% vs. 7% for Canada

Younger consumer and more likely to have children which increases CPG spending

7Trends impacting growth Economy still fragileCautious ConsumerCyclical ChangesValue MotivatorsRetail, RedefinedEvolving ConsumerStructural Changes

Copyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelSo what the major factors impacting growth?

Ive grouped into 2 areas Cyclical changes factors that are impacting us today BUT will improve over time.

For Example: The Economy is still fragile resulting in a cautious consumer the economy will eventually improve, and when it does, consumers attitudes will change and return to spending which will fuel growth.

Structural Changes are trends that we all have to pay close attention to since they will continue to gain momentum which will redefine the Canadian retail landscape as well define your future growth opportunities.

The need for value will remain we have seen a shift to Discount retailers and that will continue to grow for the next 2-3 years.

Retail? Its no longer about traditional CPG channels and bricks and motor many alternative retail formats are chipping away at sales most are small today but when you add them up, there are becoming more of an opportunity

And finally, who we are as Canadians is evolving. Canada is aging, downsizing and becoming more diverse.

Its important we evolve along with these trends to maintain sustainable growth today and for the future.

8Value remains a key driver of sales

$$$Copyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth level9Since before the recession, % of retail sales sold with a price cut has increase 10 points% Dollars Sold on TPR Quarterly PeriodsSource: Nielsen MarketTrack, National GB+MM+DG - 12 week periods ending June 29,, 2013An increase of $3.9 billionBut total sales only increased $3.5 billionCopyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelSince the recession we have seen a substantial shift in how consumers shop before the recession 27% of retail sales were sold with a price cut now 37% - a 10 point increase in 5 years.

That translates to an increase of +$3.9 billion while total sales only increased +$3.5 Billion at the moment, TPR sales are fueling growth. TPR sales +6% whereas non promoted sales are down -1%

We know this is not a sustainable growth strategy10Its important to really understand incremental Past ParadigmPurchase BehaviorsStore SwitchBrand Switch Non Promoted Volume Subsidized VolumeIncrementalVolume Non Promoted Volume Subsidized VolumeTime SwitchMarket ExpansionNielsen Innovation: Promotion Source of Volume Copyright 2012 The Nielsen Company. Confidential and proprietary.#Copyright 2012 The Nielsen Company. Confidential and proprietary.#Click to edit Master text stylesClick to edit Master text stylesSecond levelThird levelFourth levelFifth levelIts important we really understand incremental volume.

No this isnt Rob Fords approval rating trend however latest pulls have it going back up.

Traditionally we evaluated our promotions based in incremental and subsidized sales incremental was anything over and above we would normally sell. However, we know through measuring consumer behaviour that this overstates consumer response since volume typically declines post promotion.

11Its important to really understand incremental Past ParadigmPurchase BehaviorsStore SwitchBrand Switch Non Promoted Volume Subsidized VolumeIncrementalVolume