Consumer Insight PDF

Winter 2001
In s i g h t s t o d a y f o r t o m o r rows d e c i s i o n s
Radio Frequency ID: A New Era for Marketers?
The Consumerization of Rx Products Meeting the Category Pricing Challenge: Finding a Simple Path A Look at Global Megabrands Category Masters of the Year Trend Watch: Biotechnology
Understanding
CONSUMER INSIGHT:
the Voice of the Consumer
For More Information
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Winter 2001, Volume 3, No. 4

Radio Frequency ID: A New Era for Marketers?
While many advances in technology have made the CPG industry more efficient, few have transformed the way we market to consumers. The new advances in Radio Frequency ID have the potential to change this.
The Consumerization of Rx Products

Before 1984, many of the top-selling OTC medications were available only by prescription. The switch from Rx to OTC has had a profound impact on how manufacturers market, how retailers merchandise, and how consumers purchase these products.
Meeting the Category Pricing Challenge

Pricing is one of the more risky elements of Marketing. Mistakes can cost your brand dearly. By using a strategic framework for category pricing, one can drive profitability for the brand and the category.
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A Look at Global Megabrands

What does it mean to be global? According to ACNielsens Global Services, there are 23 manufacturers responsible for the large global brands today.
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Category Masters of the Year

For the third year, the annual Category Master of the Year awards were presented at ACNielsens Category Masters conference. This years winners had something in common: a desire to collaborate.
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In every issue
28 Trend Watch Biotechnology
Business Tools
30 32 33 33 34 36 Consumer Behavior Merchandising Retailers KnowledgeWorks Retail Tracking Custom Research
Volume 3, No. 4 Publisher ACNielsen Editors Mark Chesney Art Massa Design & Layout Marina Quaranta Editorial Board Gary Binkoski Margaret James Kathy Mancini Elaine Noone Mark Puccetti ACNielsen Global Creative Services Laurel A. Kennedy Marketing/ Communications Slack Barshinger & Partners
Copyright 2002 ACNielsen. Printed in USA. All rights reserved. ACNielsen, the ACNielsen logo, ACNielsen Workstation InformationServer, Category Masters, Homescan, KnowledgeWorks, Priceman, Scantrack and Spaceman are trademarks or registered trademarks of A.C. Nielsen Company. Other brand, product or service names are trademarks or registered trademarks of their respective companies.
Tim Callahan President ACNielsen U.S.
Trying Times Present CPG Industry with Challenges & Opportunities
It is a time to continue the momentum of building your brand with existing consumers and key prospects.
n these unique and trying times, many of you have asked us about the impact of
whose growth rates increased in Q2 and Q3 included costeffective frozen unprepared foods and comfort foods such as frozen desserts, ice cream and pizza/snacks. The alcoholic beverages department ($15.7 billion) is another which has experienced a slowing growth rate. Beer, liquor and wine have all seen growth rate declines in Q2 and Q3. As for what happened as a result of the events of 9/11, we saw behavioral changes like stocking up on bottled water, canned goods, flashlights and batteries. Other categories that went up noticeably in the weeks following 9/11 included baby food, coffee, cookies, crackers, peanut butter, jelly, milk (fresh, powdered, shelf-stable and canned), and at least one product that had been in decline: prepared foods (both dry mixes and ready-to-serve). Among non-food products, those that spiked up included candles and food storage containers. The HBA department showed a decline, as people apparently took their attention off of personal care items and focused on essential food products. While some companies will continue to be hurt by the lingering effects of the terrorist attack
the weakening economy and the tragic events of September 11th. While some of the findings below are not surprising, I believe that such trends present the CPG industry with equal doses of challenges and opportunities. While the dollar sales growth rate in most departments went up during Q1, in seven of the 11 departments we monitor (representing 72% of total dollar sales), the growth rate declined in Q2 and Q3. Unit volume growth rates for nine of the 11 departments also declined in Q2 and Q3. Drilling down a bit further... The dry grocery department, ($145.6 billion across f/d/m combined), is one of the declining departments. Some of the categories that showed slower dollar volume growth rates in Q2 and Q3 included prepared foods, coffee, carbonated beverages, crackers, pet food, shortening/oil, soup and canned vegetables.
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| Consumer Insight | Winter 2001
The frozen department ($28.9 billion) is another of the seven decliners. Among the frozen categories that have declined were frozen prepared foods and frozen vegetables. Those
Continued on page 27
Cover Story
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Consumer Insight | Winter 2001 |
David Gould and Steven Hunt/Getty Images/The Image Bank.
Radio Frequency ID:

A New Era for Marketers?
by John Stermer Senior Vice President eBusiness Market Development ACNielsen Evolutionary theory holds that more adaptable species will prevail in the primordial jungle. Darwinian economic theory holds that adaptable methods of communication will prevail in the commercial jungle as well. The emergence of pervasive commerce, the latest development in the technology of convergent economics, serves as a case in point. Sometimes dubbed the quiet revolution, pervasive commerce is redefining the CPG landscape with technologies like smart labels embedded with transmitting sensors and intelligent readers built into key areas where consumers live and work. Wearable scanners convert painstaking inventory control exercises into a real-time action as simple as the nod of a head. Objects speak to objects in an unheard language, serving the interests of consumers and producers via always-on, always-aware, always-active pervasive c6ommerce initiatives.
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From Bar Codes to Loyalty Cards

Technology first made its mark on the CPG trade when bar codes debuted on June 26, 1974, at Marshs Supermarket in Troy, Ohio, ushering in a new era of high-speed checkout and data collection. Although bar codes yielded significant efficiency and accuracy benefits, they proved to be just a better way to capture and track product sales and volume information. The next big thing? Frequent shopper cards. While these did a better job of linking consumers and their purchases, loyalty cards were severely limited by the constraint of a single retailer view. This skewed perspective gave retailers a view of in-store loyalty trends, but it only let them see the fraction of consumer spending at that format. In addition to the constricting chain and channel blinders of scanner data and loyalty cards, consider the usage,
Cover Story
consumer demographic, psychographic and economic blind spots of tracking data. Consumer panel information was added to fill the gaps left by traditional tracking information, and has been a step in the right direction. As of this writing, a group of thought leaders in the CPG However, something more integrated and holistic was needed to provide a ubiquitous understanding of on- and off-line consumer purchase behavior, attitudes and product usage. The answer: RFID (radio frequency identification) technology. world are putting pervasive commerce to the test. In the business-to-business venue, ACNielsen, along with Accenture, Philip Morris, Procter & Gamble and Wal-Mart, are part of a 36-company consortium called Auto ID Center, currently wiring the city of Tulsa, Oklahoma, with RFID equipment for tracking microchip-equipped packages. The objective is to tag everything that moves, and trace goods from plant to pallet to store shelf, in real time, without human intervention. telecommunications company, reports that it has slashed the cost of even the smallest purchase transaction by as much as 70%.
RFID: A True Paradigm Shift

RFID represents the first true breakthrough in the CPG industry since the beginning of marketing time. Not just an efficiency enhancement, but a true paradigm shift
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one that offers the potential to connect consumer purchase to consumer usage across all classes of trade. RFID technology actually can enable tracking of a product through the entire life cycle, from the production line all the way to the recycling center. Each RFID tag is equipped with a digital memory chip bearing a unique electronic product code (EPC). As envisioned by the MIT Auto-ID Center, every smart label would contain up to 96 bits of information, including a 40 bit serial number. Conceptually, the RFID tag is an elegant combination of the UPC with an Internet IP address, allowing detailed information for each product. Products with RFID embedded in labels can continuously transmit information ranging from a unique EPC, to consumption status, to environmental conditions like temperature and moisture content that impact product freshness. In an industry first, RFID enables the linking of all this product information with a specific consumer identified by key demographic and psychographic markers.
Future Perfect
Fully implemented, a pervasive commerce network could work like this. Consumers armed with their personal digital assistant (e.g., Palm Pilot, Visor, Blackberry), electronically stroll the aisles of a virtual grocery store, downloading relevant pricing information, menu suggestions, product and ingredient specifics provided via wireless RFID transmissions. Ticking off desired items on an electronic shopping list, sell-downs are taken automatically, the order is placed via the Internet, along with payment authorization, delivery preference, address and driving directions. As each order moves out the door, a portal reader records purchased items, verifies accuracy, updates inventory at the retailer and manufacturer, and transmits replenishment data, all via satellite to Internet-resident databases. Once at the home, intelligent refrigerators and microwaves interpret smart labels to monitor storage requirements, maintain the appropriate temperature and humidity, determine cooking procedures and update the family shopping list based on actual consumption.
The Great Enabler

Three words best capture the major benefits of pervasive commerce: speed, accuracy and savings. The pace of commerce accelerates from rapid to immediate, at distances up to seven meters, despite the presence of dirt, wood, steam, ice, plastic, paint, water or even people. Accuracy improves from very good to near-perfect, at a scant one error in 100 million reads. Savings range with the application, but Swisscom, Switzerlands largest
The Missing Link

The intelligent microwave and refrigerator loom as first order RFID applicationsgood news for CPG marketers, since 75% of the consumer products ACNielsen tracks can be found in the bathroom or kitchen. Where once we collected purchase information, now we can correlate multiple points of consumer product purchase with consumption specifics such as the how, when and who of product use.
How It Works
The basic operating principles of pervasive commerce are pretty straightforward. In a typical RFID (radio frequency identification) system, each object is equipped with a small, inexpensive tag (the transponder) containing a digital memory chip that bears a unique electronic product code.The interrogator, an antenna packaged with a transceiver and decoder, emits a signal activating the RFID tag so it can read and write data to it, then transfer that information to the host computer for further processing. The market for RFID tags is growing explosively, projected to reach $10 billion annually within the decade, according to IDTechEx.
RFID tags boast some unusual properties:

1] Data can be changed as the product navigates the distribution system, from factory location and date of manufacture, to anti-counterfeiting, pricing, warranty or other product information. 2] When electronic display technologies such as electronic inks hit the market, manufacturers will be able to dynamically change text on the package, updating advertising, safety and quality statements. 3] Sensitive microprocessors will be able to monitor the product environment to ensure that foods arrive fresh, shipped under the correct temperature and moisture conditions.
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RFID products in home Siegfried Layda/Getty Images/Stone.
RFID in car
One key to pervasive commerce success is the guarantee of 100% compliance after installation. After securing a consumer agreement to participate, the self-monitoring infrastructure is put in place and operates unsupervised. Much like the current ACNielsen NetRatings product, pervasive commerce deploys non-intrusive, passive technology. Today, ACNielsen Homescan panelists use a handheld scanner. Tomorrow, theyll simply have to load the mini-van, walk in the door, or open the refrigerator for purchases to be recorded.
The elegant enabler known as pervasive commerce requires a reference architecture robust enough to recognize and categorize every product and every retailer at every venue in the U.S. including shopping malls, convenience stores, mass merchandisers, food and drug stores. To realize the full capability of pervasive commerce, ACNielsen has invested in a multi-year effort toward this goal, developing in-depth massive product reference databases, called Product Reference, as well as the store-specific geographic database called Trade Dimension (TD) Linx. TD Linx captures more than 40 individual attributes per product, including supply side characteristics such as case and pallet, product characteristics such as weight and category, digital images of each product, a standard industry postal code and geographic availability data. While there may be some debate about the intelligence of objects, there is no debate that pervasive commerce, intelligently deployed, will redefine the competitive landscape for the CPG industry.
Pervasive Commerce and Object IQs

One point of hot debate in the RFID arena involves the issue of object intelligence. While RFID is a very compelling and elegant technology enabler, ACNielsen believes that real value is derived only by linking the RFID to a source of intelligence. True intelligence still resides with the people who program these collection networks, interpreting and analyzing ever richer and more robust data.
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The Consumerization of Rx Products

by Bart Roselli VP, New Business Development ACNielsen
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New Health Care Decisions

Visit any drug store, supermarket or mass merchandiser and products such as Advil, Kaopectate, Afrin, Aleve, Gyne-Lotrimin, Pepcid AC, Zantac 75, Rogaine and Nicorette Gum are all readily available. For some, it is hard to consider life without their easy accessibility, but before 1984 all of these drugs required a doctors prescription. Rising health-care costs, HMO involvement, easy access to health care information and the explosion of direct-to-consumer advertising are just some of the reasons behind the expanding availability of over-the-counter (OTC) drugs reclassified from prescription status. Proponents believe this availability allows consumers to take a more active role in their own health care and serves to reduce overall health-care costs. Opponents argue that forcing patients to selfdiagnose and self-treat takes the doctor out of the equation and raises questions about the quality of the patients care. There is also concern about the increased cost to the consumer, since OTC drugs are generally not covered by healthcare insurance.
For perspective, according to Nielsen Media Research, these two products spent $225 million in direct-toconsumer advertising in the year 2000. Moreover, the industry spent $2.2 billion in direct-to-consumer advertising last year.
Does Success Translate

The success or leadership as a prescription product does not ensure leadership as an OTC product. Research shows that while prescription products do carry their brand equity as they move to OTC status, it does not necessarily translate into a similar OTC share.
Chart 1 Consumerization of Rx Products
Success or leadership as an Rx product does not ensure leadership as an OTC product. Recent Rx to OTC Switch As an Rx Brand Brand Position Brand A Brand B Brand C Brand D Pvt. Label As a Consumer Brand
(share to switch segment) ($)
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OTC Category Share 9.8 3.3 17.1 1.0 7.1
Brand Position Brand A Brand B Brand C Brand D
Share of Rxs 54 24 13 9
Segment Share 26.6 9.7 42.5 2.5 18.6
A Profound Impact
The switch from prescription (Rx) to OTC has a profound impact on the manufacturers that produce the drug, the manufacturers of competing drugs and the retailers that merchandise these products. Consider the introduction of non-prescription smoking cessation products. Their introduction in 1995 created a new over-the-counter category and caused a 41,000-percent dollar volume increase in 1996. Prior to their introduction, sales of OTC nicotine replacement generated just $300,000 in sales across all retail channels in 1995. In some cases, a prescription product may impact the sales of an existing OTC category. Consider the impact the new blockbuster prescription drugs Vioxx and Celebrex are having on the OTC analgesics category. Are the users switchers from existing analgesic products? Are they still purchasing OTC analgesics in addition to their prescription? These questions can be answered through additional research. What is known, however, is that the awareness of these prescription products is extraordinary. In Chart 1, Brand A maintained a 54 share of prescriptions as a prescription brand, but as a consumer brand, it now only delivers a 26.6 share of the OTC segment (prescription products) and a 9.8 share of the total category. Interestingly, Brand C went from a low 13 share of prescriptions to a whopping 42.5 share of the segment and 17.1 share of the total category. It is important to note that private label captured an 18.6 share of the previous prescription segment, nearly 2.5 times the private label share of the category.
Does First Switch Drive Success?

The first product to enter a new category or segment has advantages, but it does not guarantee success. For example, in Canada, the upset stomach remedy Pepcid was the first to enter the OTC market, but it ended up in second place after the number-one prescription brand Zantac switched over. Consumer recognition and doctor recommendation undoubtedly played a large part. The private label counterpart in this category also caused a tremendous impact as it took a large share of the market.
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into a high degree of switch success. When validating a forecast, ACNielsen BASES re-runs the model with the actual executed marketing plan and then compares the results against actual sales. For switches, ACNielsen BASES has completed 11 validations and has been within their quoted confidence range 10 of those 11 times.
The Importance of Awareness

How important is brand awareness for Rx-to-OTC switching to occur? In a word: very. Advertising, consumer sampling and physician marketing all play critical roles in the successful marketing of the Rx-to-OTC switch. ACNielsen BASES research shows that the average switch brand spends seven times as much on advertising as an average non-switch OTC brand. And three of the brands examined spent at least $50 million on media, far above the normal level for an OTC introduction. These ad spending levels are phenomenal for a new brand in year one [See Chart 2]. Other category switches proved disappointing. After the switch of anti-smoking products, sales never materialized to anticipated results. The fact that medical plans would no longer cover the product and the introduction of newer anti-smoking prescription products may have discouraged some consumers.
Chart 2 Advertising Spending in Year 1
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Case in Point
Prescription remedies are globalizing and growing. As the world moves toward one big market, the policy differences on prescription medications become more apparent. Many prescription brands in the U.S. may be OTC in Canada or Mexico. In some cases, the opposite is true. To understand the magnitude of the consumerization and implications of prescription to OTC switching, ACNielsen BASES, the world leader in the simulated test marketing field, has tested virtually every Rx-to-OTC switch in the last 15 years. The benefits of testing products with consumers prior to a launch are significant. Not only are OTC usage patterns studied, but efficacy and safety perceptions are also analyzed. In addition, label compliance, price sensitivity and cannibalization are dissected. This translates
Source: BASES Validations
In addition to the extraordinary focus on media spending, two of these launches were characterized by multiple executions for each brand, often targeted to different demographic segments. Given the huge media budgets, this is not surprising. These media levels resulted in
enormously high awareness, with three of the brands approaching 90%. While two of the three brands started out with substantial awareness levels, one product built to 90% from virtually nothing. Further increasing awareness, one of these brands dropped more than one sample for every household in the U.S.
Chart 4 Physician Recommendations (post switch)
The Doctor Is In
Physician endorsement is another key marketing variable crucial to the success of a brand switch. Not only is it important and quantifiable, but it translates to a high degree of consumer acceptance. In three separate cases, the consumers intent to purchase was considerably higher after a doctor recommendation was given [See Chart 3].
Chart 3 Concept Purchase Intent with Doctor Recommendation
A Powerful Force
The ripple effect of Rx-to-OTC switching has a powerful impact on the channel dynamics, the distribution of the product and the total category. While one might think that prescription switches would be most impactful in the drug channel, ACNielsen research shows differently. In the examples studied, prescription switches established the largest proportion of total category sales in the mass merchandiser channel (43% of the new segment), followed by drug (39%) and food (33%). It is evident that consumers take advantage of the deeper discounts found in the mass channel. The impact of prescription switches on product distribution is also evident. Backed by millions of dollars of consumer advertising, it is not surprising that switch brands, the secondary alternative to the initial launched brand, achieve quick distribution. When comparing a switch brand to a leading product launch in OTC, ACNielsen found that two of four switch brands far surpassed a benchmark product launch distribution in the first four weeks of the introduction. On a channel-bychannel basis, the same is true. In drug, the blockbuster OTC product achieved an 84% ACV distribution during the first four-week period, while two switch brands hit
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Source: BASES Tests
Take Brand A, for example, which focused heavily on professional marketing. It captured 71% of all details directed against physicians for the category, dropped 80% of physician samples and was competitive on journal ads. The result: Brand A was highly successful, gaining the majority of doctor recommendations [See Chart 4].
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91% and 93% during the first four weeks. The same held true in the mass channel (86% distribution for leading product vs. 95% and 96% for switch brands). With OTC switches representing over 30% of the total category, the share of base brands changes dramatically. Switch brands have a tremendous impact on existing brands that may compete for similar consumers or that may be impacted by the prescription switch. In the example below, Base Private Label becomes stronger (156 index), while the second-leading Base Brand B was negatively impacted [See Chart 5].
Chart 5 What Happened to Major Base Brands?
Industry Implications
The growing importance of understanding the consumerization of prescription brands and the implications are far-reaching. ACNielsen and BASES research shows general observed trends: Base brands do not react to higher-priced switch products with price reductions. Switch brands receive very high in-store support early on in the switch, and continue strong for the first year. Private label has a higher-than-average share in the prescription switch segment. Successful brands add SKUs (sizes) over time and provide additional consumer benefits. The trends that currently drive the consumerization of prescription medications will continue. Consumers will become even more involved in their medication decisions both for prescription items as well as OTC products. Manufacturers and retailers need to better understand who their consumers are and what else they are purchasing as part of their medicine cabinet.
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Base A Base B Base C Private Label Base D Base E
$ Share to Total Category Index 20.9 19.2 13.5 10.7 11.8 9.6 Pre Introduction 15.1 6.9 8.5 16.7 5.4 4.4 Post Introduction 72 35 63 156 46 46
When switches occur in a category, manufacturers and retailers of the base products need to understand their base product consumer differentiation from the switch products and think about how to target to the new prescription switch consumer.
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John Porter VP, KnowledgeWorks ACNielsen Jeff Ritchie Director, KnowledgeWorks ACNielsen
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ear is one of the great motivators. It pushes us to go where we have not gone before, to do things we may not otherwise have done. However, fear often causes the opposite reaction an inability to act. One of the biggest issues with regard to category pricing is this rule of fear. The underlying reason? Call it The Great Unknown. Better to not change pricing, goes the thinking, than to change it and negatively impact sales. And in our high-stakes marketplace, this thinking is not totally unfounded. However, by using a strategic framework for item-level price management, we can reduce the fear and drive profitability for the category.
The Key Questions

Within this framework, there are four key questions the category manager needs to answer. First, Which items are most important? This can be done by breaking the category into strategic groups of items, based on their pricing velocity and sensitivity. The next steps include: determining how the items respond to changing price; what the pricing environment is for key items; and finally, what the key price points are. These four questions help to define a common set of information to drive better pricing decisions. These questions are relevant to the key pricing audiences in retailer, broker and manufacturer organizations, and are adaptable to different pricing management environments and applications.
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Separate the Category
To address the first question, one needs to break the category into strategic groups of items. These groups can be used against any product category. Chart 1 shows that items with high velocity and price sensitivity should be given high pricing priority, since they will have the greatest tactical impact. Items such as snacks, cereals and carbonated beverages have high pricing priority and should be considered flagship in your pricing scheme with pricing that calls attention to the items. Likewise, those categories with more moderate velocity and sensitivity should be priced competitively, but not as loss leaders. Finally, items that have medium-to-low change at all, they have to be reduced (otherwise consumers will buy something else). And by reducing price, marketers are then faced with boosting volume to cover the differencea slippery slope if there ever was one.
Four key questions

1. Which items are most important? 2. How do items respond to changes in price? 3. What is the pricing environment for key items? 4. What are the key price points? The good news, however, is that by performing category pricing analyses, marketers can actually find the places where increasing price is a good thing, and in some cases can even increase volume as a result. The key is to understand price elasticity.
Chart 1 Start by Breaking the Category into Strategic Groups of Items
Sensitivity
High Response Medium Competitive Pricing Manage Margin Low Response Manage Margin Take Margin Build ROI
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velocity and sensitivity should use appropriate pricing strategies.
For any given category, the following variables must be considered when understanding and implementing pricing plans: Velocityhigh-velocity items move off the shelves more quickly. Typically, consumers are also more aware of pricing changes for these items Price Sensitivitythis metric refers to the
Marginthe revenue gained is different for different items based on purchase price, trade promotions, etc. It is generally accepted that revenue for high sensitivity items is strongly influenced by price, and that high-velocity items typically drive volume. These factors, combined with margin, can help determine pricing tactics to support category strategy
Velocity
responsiveness consumers have to changes in price for a given item
High Velocity (High Visibility) Middle Tier Slow Movers
Flagship Pricing Competitive Pricing
ElasticityHow Items Respond

Elasticity is simply a measure of how items respond to changes in price. The goal is to provide reliable reporting of the sensitivity of an item to a change in shelf price. In analytical terms, elasticity measures the impact of a one-percent change in shelf price (increase or decrease) on revenue. An elasticity of 1.0, for example, would indicate a one-percent decrease in revenue relative to the price change. An elasticity of 2.0 would show a two-percent
Fear Rules
Since price is the driver of revenue and profit, it is no wonder that marketers are hesitant to change a product price once it is establishedthe aforementioned rule of fear. The corollary is the impression that if prices are to
decrease in revenue for the price change, and so on. Clearly, as the elasticity numbers grow larger, the item is defined as being more price sensitive. The important thing is to start by looking at facts, which helps to focus on fast moving, price-sensitive items as well as identify margin improvement items.
Benchmarking Elasticity
ACNielsen has been studying the relationship between price elasticity and channel for more than a decade. During the late 1980s, mass merchandisers had the highest overall elasticity, and drug the lowest of all the channels. This means that changes in price more drastically affected volume in mass than they did in drug. Perhaps not an earth-shattering discovery, but when combined with the fact that mass merchandisers had the lowest overall prices while drug had the highest, one can begin to see that higher pricing does not always negatively impact volume. Our latest look at the findings considered three channels, 50 categories and roughly 35 items per category that were sold in all three channels. What we found was that there are distinct differences between channels [See Chart 2, page 17]. While the median elasticity was near 1, the variation ranged significantly among mass, food and drug. Within each channel, the price elasticity also varied widely by category. All channels had categories that were quite elastic, as well as relatively inelastic categories [See Chart 3, page 17]. A Test: Put the following products in order of elasticity, starting with the most elastic and finishing with the most inelastic. Crest 6.4 oz Tube Toothpaste Pert Plus 13.5 oz Shampoo with Conditioner Yoplait 6 oz Strawberry/Banana Yogurt Motrin 50 count Regular Strength Gelcap General Mills 20 oz Cheerios Kibbles & Bits 20 Pound Dry Dog Food Dawn 28 oz Liquid Dishwasher Detergent
Answers on page 18.
Elasticity measures the impact of a one-percent change in shelf price (increase or decrease) on revenue.
There are also differences in elasticities within categories. Most categories show a range of item sensitivitiesmost have a mix of elastic and inelastic items. For example, in the light duty detergent category, the elasticity ranges from -0.7 (low sensitivity) to -1.6 (high sensitivity). Perhaps the most enlightening insight from the research is that consumers seem to shop in context. For example, while food products are fairly inelastic when purchased in a food channel store (changes in price caused less drastic changes in sales), these Food products were typically 30% to 40% more elastic when purchased in drug and mass. The reason for this? One theory is that since shoppers visit channels based on destination products (healthcare remedies in drug, bread and milk in food channel, etc.) they are not as likely to buy the impulse (i.e., non-context items) unless the price is attractive. More study is definitely necessary for the underlying reasons. But it is definitely important to consider when developing channel pricing strategy. Aside from this finding, however, the variations make it difficult to generalize rules of elasticity relative to channels or categories diversity in categories and channels is the rule. And that is why shelf price management must be a category/channel specific activity, focusing on the categorys role in the store and the competitive environment in addition to price sensitivity. Continued on page 17.
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A Case Study From Canada*
The Premium Foods Company was contemplating a price increase on their olive oils. They had two products, Virgin Olive Oil and Extra Virgin Olive Oil (the higher end of the two brands). Profitability was critical for each brand, and the company also wanted to maintain the premium image of the higher priced Extra Virgin oil. Premium Foods needed to understand: a) how much of a price increase they could profitably take; b) whether they could raise prices on both brands to maintain a premium positioning; and c) how their products should be priced relative to Private Label. In addition to analyzing price points, gaps and sales levels, ACNielsen looked at elasticity across brands for the two Premium Foods brands and Private Label. This allowed determination of the effect of price changes on any of the three brands.
Brands Premium Virgin Premium Extra Virgin Private Label Premium VirginRate -0.66 -0.77 -0.90 Premium Extra Virgin Private Label
For Premiums Extra Virgin brand, there was a price relationship with Private Label. Premiums Extra Virgin Olive Oil impacted Private Labels volume when Premium raised its price, but Private Label did not impact Extra Virgin when Private Label increased in price [See Chart 2]. This supported the hypothesis that some consumers might switch to Private Label following a price increase.
Char t 2 Rela tionships Betw een Brands Premium Extra Virigin affects itself and Priv ate Label
Elasticity -0.66
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Private Label was most often parity priced with Extra Virgin and had a higher sales rate than Extra Virgins. The Premium Virgin brand was typically priced around $2.00 less than the other two and had the highest overall sales rate. All three brands examined were shown to be inelastic (less price sensitive). Therefore, Premium Foods could raise prices and increase profitability without putting much volume at risk. In addition, since both Premium Foods product prices could increase, Extra Virgin could maintain its high-end positioning in the marketplace [See Chart 1].
-0.77 -0.90
Across=brand s that affect yo u Down=brands you affect
So how was this good news for Premium? Using Price Simulator, Premium Foods simulated a 5% price increase on both their brands and Private Label. The modeled result showed Premium increasing
tic ands are inelas Char t 1: All br Average

Price Range Premium Virgin Premium Extra Virgin Private Label $9.99 $13.99 $10.99 $14.79 $5.99 $12.79 Sales Rate
Most Common Price $9.99 $11.99 $11.99
profitability by 4%, with the retailer increasing by 20%. Premium

Elasticity
used these results to develop their annual pricing plan, and they were able to present to retailers the feasibility of the 5% price increase, which was then accepted and subsequently implemented [See Chart 3].
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-0.66
10 14
-0.77 -0.90
Char t 3 A Pr ice Increase A cross the Broa d Increased Pr ofitability

Brand Premium Virgin % Change % Current Prop osed % Chan Change % Ch ange ge in in Dolla Price r Premium Price Unit Sales Retail Volume Profits Profits $9.99 $10.49 -3.20% 1.60% 3.30%
The company also needed to understand the interaction between the Premium brands and Private Label in the face of a price increase, to show retailers that a price increase by Premium would not negatively affect either Private Label or the category as a whole. What the company discovered was good news for everyone. Premium Virgin Olive Oil sales were entirely a function of that products own price and did not interact with the other two brands. A price increase by Premiums Virgin Olive Oil would not affect the sales volume of either Extra Virgin or Private Label. In addition, Premium Virgin was not affected by either of the other two brands changing their price.
Premium Extra Virgin $1 1.99 Private Label $1 1.99 Total
29.10%
$12.59 $12.59
-3.70% 0 -2.30%
1.10% 5.00% 2.60
5.80%
14% 19.20%
4.20
20.54%
*Key information for this case study has been masked
Chart 2 Channel Elasticity Findings

The channels are quite different in their price sensitivities
The Pricing Environment

Pricing is decided in a very competitive environment. Marketers need detailed, reliable reporting of how an item is priced, relative to the market and channel, to understand how best to set and/or adjust price. By understanding the pricing environment, we can provide a richer view of the way a consumer sees pricing in a channelwhether by most common price, lowest price, average price, highest price or by key price points. One current method is to look at average price for a particular retailer compared to the overall trading area. By using a pricing environment template, one can try to summarize pricing and positioning across channels. These price management tools provide the ability to systematically capture and present more pricing detail.
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Consumers seem to shop in context.

Chart 3 Category Elasticity Findings
Each channel had a wide range of elasticities, depending on the individual category All channels had categories that were quite elastic All channels had relatively inelastic categories
How does this look in the real world? Usually one needs to build pricing environment rules. These can be defined in different ways, according to the particular need. Sometimes, rules are set relative to competition. Typically, pricing rules are summarized in ways that support managers in making tactical pricing decisions: I will be within 5% of the lowest price in my trading area or Price Zone 1 will be priced above 75% of the other retailers in the area. [See Chart 4].
Chart 4 Building Price Environment Rules

DESCRIPTION: BRAND B QUARTER: Q1 2001 Market Retailer A Total Drug Average Most Common Low Price 15% $9.28 $9.11 $9.29 $8.99 $9.99 75% $9.19 $7.99 $7.99 Highest $9.39 $9.29 $9.99 $9.39 $9.99 $9.69 $10.49 $8.99 $8.99 $8.99 $9.29 $8.69 $8.99 $9.99 $9.99 25% 35% 50%
Total Food $9.33 Market Retailer A Total Drug Total Food 50%
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Chart 5 Price Threshold Checks For Key Items
45 40
35 30
25 20
15 10
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5 0 $6.40 to $6.49 $7.40 to $7.49 $8.40 to $8.49 $5.90 to $5.99 $6.00 to $6.09 $6.10 to $6.19 $6.20 to $6.29 $6.30 to $6.39 $6.50 to $6.59 $6.60 to $6.69 $6.70 to $6.79 $6.80 to $6.89 $6.90 to $6.99 $7.00 to $7.09 $7.10 to $7.19 $7.20 to $7.29 $7.30 to $7.39 $7.50 to $7.59 $7.60 to $7.69 $7.70 to $7.79 $7.80 to $7.89 $7.90 to $7.99 $8.00 to $8.09 $8.10 to $8.19 $8.20 to $8.29 $8.30 to $8.39 $8.50 to $8.59 $8.60 to $8.69 $8.70 to $8.79 $8.80 to $8.89
Elasticity -1.68 -1.53 -1.33 -0.98 -0.93 -0.86 -0.48
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By using good environment summaries, one can provide a fact-based approach to setting competitive pricing metrics.
Key Price Points

So now we know the items role and margin, the price sensitivity (elasticity), and the pricing environment. Can we set any price? Usually, we can, but a final element in developing a pricing strategy is to determine the key price points. All items come with price thresholds: prices that are accompanied by a marked change in consumer behavior [See Chart 5].
It is very important to determine the thresholds for key items. It should also be noted, however, that determining thresholds can be a very time-intensive analysis, and should therefore be used for key items only.
Meeting The Challenge

There are four questions related to pricing management: Which items are most important? What is the pricing environment for key items? How do those items respond to price? Are there key price points? Answering these four questions is the first step in defining a common set of information to drive better pricing decisions. It is also a helpful tool in driving away the fear of implementing strategic pricing at the store shelf.
Answer to sidebar on page 15. Product Description Kibbles & Bits 20 Pound Dry Dog Food Yoplait 6 oz Strawberry/Banana Yogurt Dawn 28 oz Liquid Dishwasher Detergent General Mills 20 oz Cheerios Pert Plus 13.5 oz Shampoo with Conditioner Crest 6.4 oz Tube Toothpaste Motrin 50 count Regular Strength Gelcap
Price threshold: price that is accompanied by a marked change in consumer behavior
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Jane Perrin Managing Director ACNielsen Global Services Clare Nishikawa Manager, Global Reports and Communication ACNielsen Global Services
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hat does it mean to be global? Despite a proliferation of brands in the marketplace and a focus by major manufacturers on expanding into new territories, there are relatively few global megabrands in the consumer goods world today. ACNielsens Global Services group recently completed a study of top global CPG brands. Rather than providing a simple tally of shipment sales from a companys annual report, ACNielsen has measured actual retail sales from 30 countries that account for 90% of global GDP. The following is a rationale behind the choosing of the brands and a brief summary of the study.
Note: Due to the fact that no one measure can include all channels of consumer purchasing, this study is heavily weighted towards purchases from retail stores. The data in this study was sourced from local ACNielsen information. Products most often purchased within a retail store benefit from ACNielsens retail coverage. Purchases from kiosks, bars, restaurants and vending machines were not for the most part included. Although the list of brands may not be all-inclusive due to coverage limitations, it does provide a significant look into the globalization of our consumer brands.
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There were three main criteria that a brand had to meet to be included in the study. First, the cumulative sales for the 12 months ending with the first quarter of 2001 had to be equal to or exceed US$1 billion. Second, the brand had to have a measurable presence in each of the four major geographic regionsLatin America; Asia Pacific; North America; and Europe, Middle East and Africa. Finally, sales outside of the home market had to represent at least 5% of the global sales value. To define and determine a brand, we looked for consistency in terms of product packaging, marketing and consumer views of the brand. In addition, we segmented brands within their specific category. For example, Pampers wipes were not combined with Pampers diaChart 1 Billion Dollar Global Brands
Brand
Total Coke Coke (Regular)* Diet Coke/ Coke Light* Marlboro Marlboro (Regular)* Marlboro Lights* Total Pepsi Pepsi (Regular)* Diet Pepsi/ Pepsi Light* Budweiser Campbells Kelloggs Pampers Benson & Hedges Camel Danone Fanta Friskies Gillette Huggies Nescafe Sprite Tide Tropicana Wrigleys Colgate Duracell Heineken Kodak L&M Lays Pedigree Always Doritos Energizer Gatorade Guinness Kinder Kleenex LOreal Maxwell House Minute Maid Nivea Pantene Philadelphia Pringles Seven-Up/7-Up ) Tylenol Whiskas * Beer Soup Cereal Diapers Tabacco Tabacco Yogurt Carbonated Beverages Pet Food Blades & Razors Diapers Coffee Carbonated Beverages Laundry Detergent Still Beverages Chewing Gum Toothpaste Batteries Beer Consumer Films Tobacco Chips & Snacks Pet Food Sanitary Protection Chips & Snacks Batteries Sports Beverages Beer Chocolate Facial Tissue Colorants Coffee Still Beverages Moisturizers/Cleansers Shampoo/Conditioners Cheese Chips & Snacks Carbonated Beverages OTC Pain Remedies Cat Food 25 21 27 27 21 24 25 29 24 29 25 29 30 11 17 27 29 28 26 13 18 22 25 22 20 28 22 23 28 26 27 19 16 29 30 25 30 30 9 24
Segment
Carbonated Beverages
# of countries included, 30 maximum

30
Tabacco
25
Carbonated Beverages
30
20
pers. Brands also had to use a consistent name worldwide. For example, Lays and Walkers (Europe) were not combined as a single chips & snacks brand, nor were Always and Whisper (Asia) combined as a single sanitary protection brand. We looked at well over 200 brands in this study and although more than half had a global presence, they did not have more than $1 billion in sales. Of the total, only 43 actually met the criteria of having a global presence in each region and having over $1 billion in sales. The 43 brands on the list represent 23 global manufacturers and more than $125 billion in sales. Among the 43 brands, most had the largest concentration of sales in their region of origin. Additionally, most of the brands had a high concentration of sales in either North America or Europe (62% on average). For three brands (Gillette, Pedigree and Always), both North America and Europe had equal predominance [See Chart 1].
Beverages Are Number One

Not surprising to any global traveler, the category with the most billion-dollar global brands was the beverage category. Nearly one-third of the brands included in the final list (13 of the 43) were a beverage, including carbonated beverages, juice, sports drinks, coffee and beer. Although local taste preferences may be accommodated
*Denote sub-brands which independently meet the global billion dollar mark but are included in the total for the brand
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by different product formulations distributed under the same brand name, essentially consumers around the world are all drinking variations of these same brands. The total Coke brand was number one among beverages at well over $15 billion in sales, with its two sub-brands, Coke and Diet Coke, having more than one billion dollars in sales in their own right. Pepsi, with its associated sub-brands, Pepsi and Diet Pepsi (including Pepsi Light, Pepsi Max and Pepsi One) ranked as the number-two beverage brand.
The Remaining Mix

Of the remaining fourteen brands, no one category emerged as dominant, with 12 categories each having representation: battery, diaper, shampoo & conditioners, colorants, moisturizers & cleansers, toothpaste, facial tissues, OTC pain remedies, film, blades & razors, and sanitary protection. Interestingly enough, there was only one household product on the list: Tide Laundry Detergent. Although manufacturers market similar household and cleaning products around the world, they are often marketed under different brand names.
Snack, Pet and Tobacco Also Strong

Although no other single food group had as significant a number of brands included as the beverage category, there were three snack foods that stood out with over one billion dollars in global sales (Pringles, Lays and Doritos). Soup, cereal, yogurt, cheese, chewing gum, and chocolate all had one brand each on the list. Pet foods were represented by a dog-food brand (Pedigree), a catfood brand (Whiskas) and one that caters to both cats and dogs (Friskies). Four tobacco brands had a significant global presence and met the billion-dollar criteria: Marlboro, Benson & Hedges, Camel and L&M. Like the beverage category, local formulations may differ, but consumers in every region are smoking these common brands.
The Mega-Manufacturers
Of the 23 manufacturers that are responsible for marketing these billion-dollar global brands, eight had more than one brand on the list. PepsiCo had the most brands with six (when including 7-Up, which is distributed by Cadbury Schweppes in the U.S.). Procter & Gamble and Philip Morris (Kraft included) each had five, with the Coca-Cola Company having four brands. Kimberly-Clark, Gillette, Mars and Nestl each had two brands included. In the tobacco category, although Marlboro and L&M are definitely Philip Morris brands, the other two brands both have some type of multi-company relationship. British American Tobacco, Philip Morris and Gallaher, for example, all have an interest in Benson & Hedges,
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and both RJReynolds and Japan Tobacco distribute Camel (depending on the country). As mentioned earlier, the 43 brands reported in the study accounted for over $125 billion in sales. Nearly three-quarters of these sales were attributable to the eight manufacturers with multiple brands on the list. Eight of these brands have at least 70% of their sales within the region: Benson & Hedges, Guinness, Heineken, Kinder, L&M, Nivea, Whiskas and Camel. Guinness Beer (country of origin: Ireland) and Kinder Chocolate (country of origin: Italy), each had over 90% of their sales within Europe. On the opposite end of the spectrum, Tylenol is in only a handful of countries in Europe and plays a relatively minor role in the region.
Asia Pacific (Five countries)
Global Growth Echoes Consumer Trends

The growth across the 43 brands over the last two years shows little consistency. However, two trends could be identified: Perceived healthy products, such as juice, sports drinks and yogurt, have experienced double digit growth over the last two years; and products with a convenience image, such as snack food entries Lays and Doritos, as well as Wrigleys gum, also showed significant growth.
Of the 43 brands that made the list, none originated in this region. As mentioned above, Nescaf had a strong presence in Asia Pacific as one the top five brands in the region. Over thirty percent of its sales are in this region. P&Gs Always product plays a fairly insignificant role in Asia Pacific as another similar P&G product is marketed under the brand name Whisper. L&M also has a fairly small presence in this region. In addition, as with Europe, Tylenol has a fairly insignificant presence in Asia Pacific.
Latin America (Three countries)
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Sales in Regions Closely Follow Global Findings

Within each of the four regions (North America; Latin America; Asia Pacific; and Europe, Middle East & Africa), the regional sales of the global brands closely follow the global findings. For example, in each of the four regions, Coke and Marlboro were consistently the top two brands of the 43 brands studied.
North America & Europe Are the Largest Markets

One key finding mentioned in the Global Summary is that all of the brands included in the global list had their largest markets in North America or Europe, Middle East & Africa. Three of the 43 brands were equally strong in the two regions (Gillette, Pedigree, and Always). This is not surprising considering that based on the countries included in the report, North America accounts for 32% of the worlds GDP and Europe 33%. Asia and Latin America represent 20% and 5%, respectively.
Gillettes Razors and Blades brand has a strong presence in Latin America, and in fact, is one of the top five global brands in the region. Carbonated beverages rated high in this region. This is not surprising, since Mexico has one of the highest per capita consumption of carbonated beverages around the world. One of the most significant findings regarding Latin America is that a number of global brands (Maxwell House, Minute Maid and Tide) although present, were significantly under-developed. Although globally Benson & Hedges is larger than L&M tobacco products, in Latin America, L&M has a larger presence.
Regional Differences
Although the global findings are fairly consistent across the regions, there are a few regional variations:
Europe, Middle East & Africa (Twenty countries)
Of the brands on the list, Europe, Middle East and Africa is the dominant region for 16 of the global brands.
The study includes 30 of the worlds top markets divided into four geographical regions. These markets account for approximately 90% of the worlds consumer goods ACV:
Europe, Middle East and Africa Asia Pacific
Three brands had over 90% of their sales in North America: Campbells Soup, Tide Laundry Detergent, and Tylenol Pain Remedies. Within categories, there are some strong regional preferences. For example, Maxwell House ranks higher than Nescaf in North America. In Europe, Asia Pacific and Latin America, the picture is reversed. As detailed in the report, an element of the criteria to be included in the global report was that in addition to having a presence in each region, more than 5% of a brands value sales had to be outside of the home market. If this 5% criteria had not been included, several other strong North American brands would have made the list (e.g., Enfamil Infant Formula and Mountain Dew Carbonated Beverage). Kinder Chocolate and L&M are strongly European, and although they have a presence in North America, they do not play any major role in the market. Fanta Carbonated Beverage is somewhat unique. Although in three of the four regions the carbonated beverage has a strong presence (within the top five global brands), the brand does not have a significant presence in North America.
Germany United Kingdom France Italy Spain Russian Federation Netherlands Switzerland Belgium Sweden Austria Turkey Denmark Poland Norway Saudi Arabia South Africa Greece Portugal Ireland
Japan China Korea, Rep. (South Korea) Australia Hong Kong, China
Latin America
Brazil Mexico Argentina

North America
23
United States Canada
A Sign of Things to Come

Overall, the beverage companies appear to be the farthest ahead on the globalization curve, both in the number of global products and in the magnitude of sales. Tobacco companies also have a significant number of global brands on the list (four out of 43). Although growth across the 43 brands is on average less than 10%, eight of the 43 brands have experienced double-digit growth in the most recent year.
North America (Two countries)
North America is the dominant region for 24 of the global brands on the list. Eleven of these brands have at least 70% of their sales within the region: Budweiser, Campbells, Gatorade, Kodak, Kleenex, Lays, Maxwell House, Minute Maid, Tide, Tropicana, Tylenol.
Although there is a proliferation of brands on the market, this study illustrates that there are a relatively few brands that one can truly call global. Over the next few years, we expect the picture of global brands to change significantly. The number of brands considered truly global should increase as businesses work to develop and grow new markets.
The complete text of Reaching the Billion Dollar MarkA Review of Todays Global Brands is available online at http://acnielsen.com/billion or by contacting Matt Bell at 847-605-5686.
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The Coca-Cola Company, Publix Super Markets and Acosta Sales and Marketing Company are winners of the third annual Category Master of the Year awards, co-sponsored, with ACNielsen, by Brand Marketing magazine and its sister publication, Supermarket News. Presented at ACNielsens Category Masters conference, held in August in Boca Raton, Florida, the awards honor one manufacturer, one retailer and one sales agency (the last being a new category this year) in the consumer packaged goods industry that have achieved excellence in the field of category management. Winners were selected by polling a portion of the readership of Brand Marketing and Supermarket News. Retailers were asked to choose the manufacturer winner and manufacturers the retailer. Both manufacturers and retailers selected the sales agency. The common element to all the winners was a total management commitment to category management that included reorganizations of departments to address category management issues. Here are the profiles of this years winners and some examples of their category management expertise.
training. Including field-based managers, more than 600 associates are involved in the category-management team. The system has been successful for Coke. For example, at one retailer, the number of stock-keeping units was reduced 30%, while sales stayed the same in the category. But its not just about sales and efficiencies, Campbell added. Its about excitement. Consumers tastes are constantly changing, he said. Having the ability to create excitement in the category is a lot of why were in this.
Publix: The Team Approach

Publix Super Markets, Lakeland, Florida, has been utilizing category-management initiatives since 1991, when the company restructured its buying department. Since then, Publix has evolved from pilot efforts in selected categories to the creation of a purchasing department and a system consisting of 12 category managers and their category teams. These teams report to four business development directors, who handle nearly all of the grocery purchasing for the 670-store chain, according to Dave Bornmann, vice president of grocery purchasing at Publix. Publix attributes its category-management success to its team approach. Category managers are continually asked to improve our sales and shares and profits, and theyre also responsible for understanding the changing trends and wants of our customers. Without that, it would just be traditional buying, Bornmann said. When asked why he thinks manufacturers view Publixs category-management initiative so favorably, Bornmann points to the retailers strong working relationship with its suppliers. Publixs willingness to share more openly its data and future plans, where it is mutually beneficial for Publix and our suppliers to reduce waste, has gotten our suppliers attention, Bornmann said. Publix works best with suppliers who view a category as a whole. Publixs best planning partners are suppliers who help drive total category sales. Such suppliers know that, in turn, their sales will increase, said Bornmann. Publix also looks for suppliers with new merchandising ideas and knowledge of trends and product attributes.
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Coke: An Open Ear

Although category management as a business term was coined in the early 1990s, Coca-Cola North America has been aiding retailers in the quest to expand the beverage category and increase sales for over a century. CocaCola sees category management as a retailers business process, meaning it listens to what retailers want to accomplish in a category and helps them build their businesses accordingly, said Dave Campbell, director of category-management services at Coca-Cola North America, who accepted the award at the event. We see category management as a means to increasing the size of the category, while leading sales growth, Campbell said. To facilitate category growth among all its customers, Coke assembled a two-part team consisting of headquarters staff and field managers. At headquarters, Campbell leads teams specializing in technology and applications support, consumer insights, retail plan development and
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Acosta
From the early days of category management, Acosta Sales and Marketing has been at the forefront, helping retailers and manufacturers increase sales and cut costs. The company provides category management expertise to major retailers like Kroger, Albertsons and Safeway, while also working closely with major brands, including Clorox and Dannon. Paul Price, vice president of marketing at Acosta, heads up an extensive category-management team that includes 400 associates across the country. Each division is geographically focused on a major retailer to ensure that customer demands are met. Acostas category management and merchandising skills were demonstrated with their recent introduction of the new line of Disney juice and drink items. Their first step was to execute a complete analysis of the aseptic and multi-serve juice and drink categories. For each retailer, Acosta business managers reviewed shares and trends by manufacturer, brand and package within the two categories. They also reviewed pre-schematic share of shelf and space-to-sales for all items. The next step was to execute an efficient product assortment analysis to help retailers optimize their product lines for the aseptic and multi-serve juice and drink categories and to justify the new Disney items. With the results of the analysis, Acosta made objective recommendations on
items to be discontinued, items that should be retained and items to be added. The recommendation to add items often included items that Acosta was not representing. Sales meetings were set up with all major accounts and the results of the category analyses were presented along with a strong sales pitch for the new Disney items. The Acosta business managers recommended the placement of the Disney line in a Disney Zone between the aseptic and multi-serve categories. The sales presentations leveraged not just the strength of the Disney juice and drink items and the strong merchandising program for the line, but also the strength of the entire Disney franchise. Apart from its vast experience with category management, Price noted that what sets Acosta apart from its competition is the fact that it continues to invest in its category-management resources. We have constantly invested in the best people and systems, and in training to get the job done, he said. Acosta utilizes all existing category management software, so that it is compatible with any retailers system. In addition, we take such a broad focus on so many categories, that we provide more coverage than anyone else in the business. One of our best assets is that we place precious knowledge at the business managers fingertips. It is not just dataits knowledge, Price added.
Trying Times Present CPG Industry with Challenges & Opportunities

Continued from page 3
Chart 1 All Departments, All Outlets Combined
Percentage Growth Rate vs. Same Period Year Ago
Chart 3 HBA Department Dollar Volume Percentage Growth Rate

vs. Same Period Year Ago
Source: ACNielsen Strategic Planner Source: ACNielsen Strategic Planner
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Chart 2 Impact of 9/11

Dollar Volume Percentage Growth Rate vs. Same Period Year Ago
Chart 4 All Departments, All Outlets Combined Percentage Growth Rate

vs. Same Period Year Ago
Source: ACNielsen Strategic Planner Source: ACNielsen Strategic Planner
film and camera companies are hurt when people vacation lessin most other categories purchasing levels seem to be getting back to pre-attack levels. Question marks still remain, however, about both the war on terrorism and the economy. Consumers are also eating out less often, a trend that could benefit food retailers. However, some retailers are noticing consumers trading downswitching from lunchmeats to peanut butter and jelly, for example, as they tighten their belts. This would be a good time to focus on helping consumers find easy and affordable meal solutions. But it is also a crucial time
to use the vast amount of consumer insights to build loyalty among your most valuable shoppers. Bottomline, its all about the consumer. To that end, I am excited to announce that we have just completed some groundbreaking work that aligns with the University of Michigan Consumer Sentiment Index in linking total consumer purchasing behavior with those all-important consumer attitudes. Shortly, we will be offering a new service that will track key attitudinal and economic driving forces effecting changes in the American consumers purchasing habits.
Trend Watch
Biotechnology
I
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Consumer Insight | Winter 2001 | n these times, anything with the prefix bio may cause great uncertainty, and even fear. Biowarfare. Bioterrorism. Biotechnology? What is it about Jurassic Park bear this message out. But what many consumers probably dont realize is that since ancient times, people have been combining different organisms to develop hybrids that serve human needs more beneficially. The difference is that today, much of this is being done on the molecular level. The FMI defines biotechnology as the use of genetic science to create new products from plants or animals. Now, everyone knows that it is not nice to fool with Mother Nature, and classic fables from Frankenstein to It would probably be surprising to many consumers how much biotechnology is already a part of our everyday lives. Currently, biotech is used in the area of agriculture biotechnology that raises concern among consumers, and what exactly is it?
to reduce reliance on pesticides and produce higher volumes of food in less space. Many vegetables and fruits, including corn, soybeans and tomatoes, are being developed to contain lower fat levels while tasting better. The GMA estimates that as much as 70% of all processed foods may contain biotech corn or soy. In the future, biotech foods could offer enhanced nutrition, higher vitamin levels, reduced fat and increased fiber. According to the Biotechnology Industry Organization (BIO), biotech even makes possible something called the edible vaccine, which are enhanced fruits and vegetables containing vaccines against deadly diseases such as hepatitis, cholera and malaria. Fruits and vegetables are also being modified to offer higher levels of anti-oxidant vitamins that help ward off cancer and heart disease, and Vitamin A to prevent blindness. While not a new concept, biotechnology has been a focus point in the consumer news media, and the focus is typically on the sensational. After all, the Starlink incident the modified corn that was FDA-approved for animal consumption but mistakenly found its way into human food productswas some consumers first introduction to biotech. More recently, gourmet chain Trader Joes announced it would be eliminating all genetically engineered foods from its private-label collection as a result of consumer pressure. Even with the hype, however, consumer awareness about biotechnology and genetically modified foods is relatively low. According to the International Food Information Council (IFIC), which recently conducted their fifth annual food biotechnology survey of American consumers, only 36% of consumers are aware of the presence of biotech food in grocery stores, a decrease from last years IFIC survey. What do consumers worry about in their foods? Not surprisingly, top concerns included things like fats, cholesterol, sugar and carbohydrates. Even when specifically asked about their concerns of food safety, consumers named packaging, food handling and disease/contamination before mentioning genetically engineered food (which only garnered a 2% response). A New York Times article that referenced the Trader Joes incident also interviewed specialty grocer Stew Leonard, who stated that although his stores carry foods that are certified organic (currently the only certification that ensures that food isn't genetically altered), they have sold poorly, because the organic crops lacked visual appeal and because customers expressed concern about a link between E. coli bacteria and organic produce. This enormous information gap among most consumers is an opportunity for both CPG manufacturers and retailers to educate the consumer in advance of negative or sensationalistic media reports. Providing consumers with accurate information about biotech food can create loyalty and trust, key to any long-term relationship. If the benefits and perceived issues are communicated honestly to consumers, they may see the advantages of biotech foods greatly outweighing any potential downsides. And there exists the potential to lead with positive news. For example, when asked in the IFIC survey how likely they would be to buy produce that was genetically modified to protect from insect damage (requiring fewer pesticides), 90% of consumers indicated totally or very likely. Over the next few years, biotech foods will most likely become a larger consumer issue. The current lack of information has given consumers a one-sided (and primarily negative) message. This presents a larger potential opportunity for retailers and manufacturers to become a trusted advisor to their constituents, since an informed consumer will be more confident in making sound decisions in choosing what to buy and eat.
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Understand Combined U.S. and Canada Consumer Behavior

The ACNielsen Homescan North America service provides three detailed summary reports for executives to make strategic decisions based on consumer purchases in the U.S. and Canada. Through the Market Summary Reports, you can develop more effective marketing, promotion and merchandising strategies by leveraging powerful consumer insights for the U.S., Canada and a combined North American region. Also, Demographic Profiles help you to understand what type of household is currently shopping your category and brands as well as the various retailers. The Trial & Repeat Evaluations can assess introductory performance of your latest product launch or line extension by measuring initial product attraction (trial) and ongoing product acceptance or retention (repeat). Promotional impact (measured via deal purchasing) on trial and repeat purchase occasions is included to evaluate the success of introductory marketing efforts. ACNielsen Homescan North America captures all-outlet purchase information from over 67,000 demographically balanced and statistically reliable U.S. and Canadian households. Panelists use patented hand-held scanners to record every UPC-coded item purchased. The North American Homescan service helps you make sound strategic decisions based on a complete understanding of how consumers shop your categories and how consumers respond to brands differently.
Wal-Mart Private Label Brand Impact Analysis allows manufacturers and retailers to better understand the impact of Wal-Mart private label on consumer brand and retailer loyalty. Wal-Mart Custom Category Cross OutletFacts Report delivers new insights into outlet loyalty among Wal-Mart core and occasional shoppers. Wal-Mart Supercenter Source of Business Analysis provides an assessment of volume gains from other retail outlets and retailers. Wal-Mart Key Item Report identifies key items purchased in Wal-Mart, providing both manufacturers and retailers with a unique opportunity to manage assortment more effectively to better serve Wal-Mart consumers. Wal-Mart Demo-Fit Analysis correlates key consumer segments in Wal-Mart to their product-purchasing behavior. Mirroring the landscape of the entire U.S. population, the ACNielsen Homescan panel is the foundation for insights that are unmatched in the industry. Notable facts include: Homescan panelists have shopped in more than 90% of all Wal-Mart stores over the past year. ACNielsen can report at both Division One and Supercenter granularity because of the high number of static panelists who shop in Wal-Mart. ACNielsen has very strong C and D County coverage, providing an advantage in tracking Wal-Mart sales given the chains rural concentration. Homescan is the only source for price paid and dollar volume in Wal-Mart.
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Powerful New Insights into the Wal-Mart Consumer

ACNielsens Homescan Panel is the Gold Standard for understanding why consumers buy. Now, ACNielsen Homescan also provides you insights into the Wal-Mart consumer. Six new Homescan consumer solutions provide powerful insights into the Wal-Mart consumer: Wal-Mart Private Label Pricing Analysis defines price gaps and illustrates consumer purchasing sensitivity to these differences.
Understand Hispanic Consumer Shopping Habits

The ACNielsen Homescan Hispanic ConsumerFactsLos Angeles Report captures the shopping habits of Hispanic consumers, both acculturated and non-acculturated, from all retail outlets. Category and product group level information within almost 900 categories and more than 110 product groups reveals a wealth of consumer insight into the buying behavior of Hispanic households. Hispanic Consumer*Facts compares the purchase behavior of Hispanics across all language segments including Spanish-only/preferred, bilingual and Englishonly/preferred. The Mid-year 2001 release is now available and includes the following: Los Angeles market All categories Food only Non-food only Drug only Individual categories Custom category definitions available Easy-to-use and improved CD-ROM application Call Sharon Abish at ACNielsen at 516-682-6011 for more information.
Understand How Consumers Respond to Price and Promotions

ACNielsens Homescan Promo Focus Segmentation provides essential information about consumers attitudes and perceptions toward price and promotion. Promo Focus segments enable retailers to increase the effectiveness of their marketing efforts by acquiring an in-depth understanding of how consumers respond to price and promotion activity. For a manufacturer, understanding how consumer attitudes towards price and promotion differ by banner helps maximize the efficiency of trade spending. The Promo Focus household segmentation includes six distinct segments: Promotional Oblivious Store Loyal/Brand Disloyal Promotional Junkies Multi-Store Shoppers Branded Bargain Hunters Opportunistic Price Savers Promo Focus tells which banners shoppers are likely to hold certain views towards price and promotion. For example, which banners shoppers always look for coupons or other promotions will readily shop at different stores to get a deal are intrigued by offers of a free gift and will purchase a product to get one are brand loyal and very store loyal are not interested in store loyalty cards and programs are not enticed to switch from their favorite brand because of promotional offers For more information, please contact Simon Small at simon.small@acnielsen.ca.
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Available in Canada only
Available in USA only
Maximize Your Shelf Space

In todays competitive market, retailers and manufacturers spend valuable time analyzing the outcome of category changes or shelf resets that best maximize available space. With ACNielsens Spaceman, the space management process is streamlined and validated, giving way to increased category management and competitive advantages. Spaceman Suite v6.0 includes more than 172 enhancements, including improvements in Spacemans output capabilities, such as a completely new Page Setup dialog box that combines all layout capabilities in a single location. Spaceman Suite v6.0 gives you a host of new features, including:
Aggregate Financial Performance for the Entire Store

Spaceman Store Designer lets you accurately capture and aggregate financial performance by store, department, category and more. Spaceman Store Designer links the traditional merchandising function with those of store planning, operations and buying to properly evaluate Category Management performance. Using Spaceman Store Designer, information is now seamlessly passed between applications and stored in one common database. Proven store footprints are developed to maximize investments and space management. And Spaceman Store Designer is the only store-planning tool that utilizes an AutoCAD file, which returns information back to a merchandising environment.
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Shelves can have a positive slope and/or can be rotated at any angle between 0 and 359 degrees. Fixture assemblies can now be stored in and retrieved from the libraries for even more efficient replication of advanced merchandising situations. An easy-to-use Find Product/Fixture capability to locate a product or a fixture in any 2D planogram view and the Product List. The Renumber Fixture ID feature now supports flexible combinations of segment number, fixture number (total or by segment), user-selected separator, prefix and suffix to create unique Fixture IDs for all fixtures. The option to export only selected fields. You can import data for Fixtures and Positions. Direct import of ACNielsen data from ACNielsen Workstation InformationServer 2.x and Workstation Plus 4.1 and later.
Maximize Category and Pricing Management

Endorsed by the Professional Pricing Society, Priceman 3.3 strengthens the industrys leading strategic pricing tool with new features and functions, including: Increased performance Ease of use Rules integration Processing large data pulls Additional enhancement Defaults on standard fields Also available, PricingInsights delivers information on elasticity, promotion and average price. PricingInsights combined with Priceman offers compelling insights to maximize category and pricing management. Call your local ACNielsen Merchandising Services Representative for a product demonstration today.
Determine your Optimal Pricing Strategy

ACNielsens INSIGHT Pricing Solutions can help you determine the optimal pricing strategy needed to achieve your brand marketing goals and identify the tactical activities most critical to successful implementation. By determining your brands elasticity, INSIGHT Pricing Solutions assesses the volume risk associated with a price change. INSIGHT Pricing Solutions help you to: Determine if your pricing strategy supports your brand goals. Evaluate the sales and profit impact of price changes. Identify critical price points or price gaps that create tactical risks or opportunities. Analyze sensitivity to competitive price changes. Pinpoint which regions are more price sensitive than others. For more information, please contact Mike Ljubicic at Mike.Ljubicic@acnielsen.ca.
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Available in Canada
Available in USA
Additional Retailers Sign On for the New, Industry-Leading Category Business Planner
The list of retailers continues to grow for Category Business Planner, the revolutionary, web-based business solution for collaborative category management. Retailers such as SUPERVALU, Albertsons, Brunos, Meijer, HE Butt, Walgreens, Wakefern, Eckerd, CVS and Hannaford have chosen Category Business Planner as their preferred method for performing category reviews. The one-number method for delivering category information supports collaboration among retailers and manufacturers, improves efficiency and enables both client groups to focus on growth initiatives.
Convenience Store Measurement at the Local Level

ACNielsen Convenience Track measures retail sales performance and conditions in convenience stores and gives you two levels of measurement (market-level and account-level), which combine for incredibly powerful information. Convenience Track is the only source for: NACS Level II Category Management market level data Fastest growing list of retail account reports Year-over-year comparison for Total U.S., local markets, cross-market analysis, product-level analysis Celebrating three years of on-going service Multi-channel/cross-channel analysis Extensive market list that aligned with ACNielsen Scantrack definitions
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Category Business Planner provides the common ground for a true meeting of the minds between retailers and manufacturers. How? By delivering category information in the retailers customized view. Powerful web-enabled tools let your drill down and do in minutes what once took weeks. Imagine, the hours you once spent on data compilation and analysis can now be spent working together to create thoughtful, effective category plans. Your productivity will be improved and your business partnerships strengthened. Finally, you can realize the full potential of category management. Category Business Planner presents insights in a manner that is intuitive for you to understand, quick to learn, fast to use and comprehensive in its ability to create actionable strategies and tactics. Accessed through the ACNielsen Answers web portal, Category Business Planner uses patented modeling technology, delivering alerts and headlines for drilling down into the data to understand what is going on with a given category and why. Visit http://acnielsen.com/cbp for a complete overview.
Convenience Track ServiceTotal U.S. and 30 Markets

Market representation is paramount to your information needs. With scanning penetration at less than 35%, a hybrid service of scan and audit is necessary to continue to measure all convenience store sales. ACNielsen continues to provide clients with a service that focuses on the representation of the total convenience store environment and offers more than just a scanning view.
New Convenience Track Categories for 2002 Cookies Crackers Salty Snacks Nuts Current categories include: Beverage Beer Malternative Beverage Other Tobacco Bulk Ice Cream Frozen Novelties Energy Bars Meat Snacks Candy and Gum
Convenience Track ServiceAccount Level Services

ACNielsen Convenience Track retailer account-level data is available in all categories. The service offers over fiftyfive retailer-specific data to lead to a better understanding of any categorys sales, distribution and merchandising impact for both the retailer and their respective market. Without local market data, retailers and manufacturers cannot perform the NACS Level II category management process. ACNielsen is the only data provider in the industry with this unique capability. Full Level I fact sets are available, and with weekly information.
New Convenience Track Account Level Services in 2002 BP/Amoco Crown Petroleum Kum N Go
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Market-level data allows a retailer and manufacturer to benchmark key elements such as sales, pricing, and assortment to a local convenience market. This helps identify top-selling items carried in markets but not carried by the retailers. With Convenience Tracks extensive list of market-level data, manufacturers can measure their performance, search for category opportunities, and help the retailers uncover new opportunities for the entire category in selected markets, cross outlet.
Available in Canada
Available in USA
Maximize the Power and Potential of Brands

The Power of brands is immensestrong brands lead to customer loyalty and company profitability. ACNielsens Winning Bands helps you achieve sustainable competitive advantage with your brands. Winning Bands tracks the underlying strength of the relationship between the customer and the brand, and creates effective strategies to enhance that relationship. And Winning Bands provides monitoring to protect and improve your brands health. Using focus groups and quantitative interviews, category users are interviewed to gain their perspective on the brands in the category. Winning Bands uses a flexible technique that allows the collection of various measures, depending on individual client and category needs. Topics can include:
Integrate these findings to create better brand management strategies. For more information, please contact Tim Hoddap at Tim.Hodapp@acnielsen.ca.
How Satisfied are your Customers?

The only true judge of quality is the customer. A qualityfocused, customer-driven strategy creates industry leaders, which translates into profitability and success. All organizations must ask critical questions of their customers: Are they satisfied? What makes them satisfied or dissatisfied? What drives their behavior? What are their requirements? What do we need to do to keep them loyal? How do we perform against the competition? How can we deliver best-in-class customer service? ACNielsens Customer eQ gives you the answers to these questions. A total approach to the measurement and management of customer satisfaction, Customer eQ offers long-term strategic direction to optimize resources and build and maintain customer equity, beyond the limits of simple customer satisfaction measurement. The Customer eQ Profitability-Loyalty Matrix provides organizations with a focus for customer satisfaction improvement directly linked to profitability. It identifies Star customersthose who are loyal and highly profitable to the companyand those customers that are At Riskhighly profitable to the organization, but not particularly loyal. For more information, please contact Roxanne Menzies at Roxanne.Menzies@acnielsen.ca.
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Category usage and attitudes Brand relationship, awareness, consideration and preference Brand associations Willingness to pay a premium price Advertising awareness and diagnostics Other marketing program awareness and diagnostics Corporate image And Winning Bands can be part of an on-going tracking program. Interviews are repeated at regular quarterly, semi-annual or annual intervals to monitor any changes in brand equity over time.
Winning Bands helps you to:

Track your brand versus the competition in relation to consumer measures such as brand awareness, usage, consideration and image and monitor changes in brand performance over time. Assess the impact of your own marketing programs and competitive activity on your brands equity. Identify opportunities and threats to your brand not just from competitors but from the category as a whole. Determine the long-term potential of your brand and its competitors.
Target Canadians Online

ACNielsens Internet Planner 2002 is a strategic blueprint for understanding and trending Canadians online. The insights in this report will enable your business to identify and leverage opportunities by fine tuning target segments and integrating findings into: Profitable online marketing and advertising programs Relevant promotions
Building brand awareness Strengthening loyalty programs This annual study measures the attitudes and online behaviour of a representative sample of Canadians. Included is a comprehensive demographic section that profiles a wide range of target groups from adult females, youth, and seniors to home-based businesses. Core areas explored include: Effectiveness of web sitestailor your online advertising programs to suit the needs and preferences of your target market. E-commerce purchasing behaviour. Online Transactionsattitudes towards pricing and online security.
Usage and preferences with respect to advertising and permission marketing. Telecommunications, Portals and ISPsfocuses on emerging trends and opportunities. Financial Servicesexplores how online activity can be used to market greater use of services such as dayto-day banking, credit, investment and insurance. Government and Public Policyfocuses on trends and the potential for leveraging the Internet as a vehicle to enhance program delivery. Healthcareexamines the Internet as a source of health-related products, services and information. For more information, please contact Josie Cirasella at Josie.Cirasella@acnielsen.ca.
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January 1315 Food Marketing Institute Midwinter Executive Conference The Phoenician Scottsdale, Arizona January 1315 International Housewares Show McCormick Place Chicago, Illinois
February 35 Food Marketing Institute Marketechnics Convention ACNielsen Booth # 2033 Spectra Marketing Booth # 2133 San Diego Convention Center San Diego, CA February 1114 National Grocers Association 2002 Convention Paris Las Vegas Hotel Las Vegas, Nevada
Available in Canada only
Available in USA only
do I target
Who
you face every day.
across channels
Compete ?
Emphasize e-commerce
Consumer knowledge for the
HIGHEST QUALITY DATA | FASTEST DELIVERY SPEED | BEST CONSUMER COVERAGE | BEST RETAIL OUTLET COVERAGE
2002 ACNielsen. ACNielsen is a trademark of A.C. Nielsen Company.
real issues
Who can afford to waste time wading through information? You need consumer knowledge for action. ACNielsen Homescan gives you consumer share of mind, wallet, basket and stomach. Scantrack offers unparalleled insight into the retail marketplaceplus the tools you need to act. Contact your ACNielsen representative to learn more. Visit acnielsen.com. Or call 1.800.988.4ACN.

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Winter 2001

Radio Frequency ID: A New Era for Marketers?

the Voice of the Consumer

For More Information

Winter 2001, Volume 3, No. 4

The Consumerization of Rx Products

Meeting the Category Pricing Challenge

A Look at Global Megabrands

Category Masters of the Year

Tim Callahan President ACNielsen U.S.

Trying Times Present CPG Industry with Challenges & Opportunities

David Gould and Steven Hunt/Getty Images/The Image Bank.

Radio Frequency ID:

From Bar Codes to Loyalty Cards

RFID: A True Paradigm Shift

The Great Enabler

The Missing Link

RFID tags boast some unusual properties:

RFID products in home Siegfried Layda/Getty Images/Stone.

Pervasive Commerce and Object IQs

The Consumerization of Rx Products

New Health Care Decisions

Does Success Translate

Brand Position Brand A Brand B Brand C Brand D

Segment Share 26.6 9.7 42.5 2.5 18.6

Does First Switch Drive Success?

The Importance of Awareness

Chart 4 Physician Recommendations (post switch)

Source: BASES Tests

The Key Questions

Four key questions

velocity and sensitivity should use appropriate pricing strategies.

responsiveness consumers have to changes in price for a given item

High Velocity (High Visibility) Middle Tier Slow Movers

Flagship Pricing Competitive Pricing

ElasticityHow Items Respond

Across=brand s that affect yo u Down=brands you affect

tic ands are inelas Char t 1: All br Average

Most Common Price $9.99 $11.99 $11.99

profitability by 4%, with the retailer increasing by 20%. Premium

Char t 3 A Pr ice Increase A cross the Broa d Increased Pr ofitability

Premium Extra Virgin $1 1.99 Private Label $1 1.99 Total

1.10% 5.00% 2.60

*Key information for this case study has been masked

Chart 2 Channel Elasticity Findings

The Pricing Environment

Consumers seem to shop in context.

Chart 4 Building Price Environment Rules

Key Price Points

Meeting The Challenge

Price threshold: price that is accompanied by a marked change in consumer behavior

# of countries included, 30 maximum

Beverages Are Number One

The Remaining Mix

Snack, Pet and Tobacco Also Strong

Global Growth Echoes Consumer Trends

Sales in Regions Closely Follow Global Findings

North America & Europe Are the Largest Markets

Brazil Mexico Argentina

United States Canada

A Sign of Things to Come

Consumer Insight | Winter 2001 |

Publix: The Team Approach