U.S. retailers' focus on cutting prices and increasing store brand assortment is positively impacting unit sales,

U.S.-based store brands are benefiting big time from the current economic downturn. As consumers continue to turn to better prices and value, retailers have clearly stepped up their game by enhancing their brands overall product quality and by adding strong marketing muscle behind store brand initiatives. But a Nielsen review of U.S. department-level price gaps between store brands and manufacturer brands shows that retailers may be hurting themselves in the long run—and missing out on opportunities to collaborate with manufacturer partners to drive stronger category sales.

Retailers may be hurting themselves in the long run…

Within food, drug and mass-merchandisers (including Walmart), Nielsen reports that the price gap between store brands and manufacturer brands is considerable—especially for non-edible departments such as health & beauty and general merchandise where gaps ranged from 74% and 63% respectively. Food departments have a smaller percentage gap—store brand prices in the deli department were 22% lower than branded and up to 50% lower in the dairy department. Since the same period in 2006, price gaps have widened in four of seven departments (deli, frozen foods, dry grocery, dairy, non-food, general merchandise, health & beauty).

Within food, drug and mass-merchandisers (including Walmart), Nielsen reports that the price gap between store brands and manufacturer brands is considerable—especially for non-edible departments such as health & beauty and general merchandise where gaps ranged from 74% and 63% respectively. Food departments have a smaller percentage gap—store brand prices in the deli department were 22% lower than branded and up to 50% lower in the dairy department. Since the same period in 2006, price gaps have widened in four of seven departments (deli, frozen foods, dry grocery, dairy, non-food, general merchandise, health & beauty).

Closing the Gap
Are retailers losing category dollars because of aggressive store brand pricing or greater focus on store brand versus brands? While it is recognized that that department-level price gaps can be driven by differences in category mix, brand and/or size mix (an examination of gaps on an individual category-by-category and product-by-product basis is recommended), these differences are significant and suggest that retailers are not maximizing category sales.

Consider this: an increase of just one cent in store brand prices translates to roughly $400 million dollars in sales across all departments measured by Nielsen. In departments and categories with extreme price gaps, the potential to enhance category sales can be significant. With the ongoing price compression in the industry causing declining category and same-store-sales, retailers would be wise to think about shifting focus on raising prices on some of their own brands.

Prices Alone Not Enough
Prices alone are not the key to shopper’s hearts. Price is top of mind for all retailers right now, but Nielsen’s annual Shopper Trends study reports that strong shopper relationships are built on at least four other factors that are equally important to driving commitment. When the purse-strings relax as the economy improves, those other factors will separate the strongest grocery retailers even further from the pack. Shopper Trends is an annual survey of Shopper Equity for the top retailers in the grocery channel*, conducted across more than 55 countries globally. The U.S. shopper survey included feedback from over 29,000 American shoppers across all 48 contiguous states.

The survey found that the most successful retailers are the ones who are complementing current pricing strategies with a strong commitment to other shopper needs and building a stronger platform for long-term success. The five over-arching areas that the study identified contributing relatively equally to shoppers’ emotive equity in the U.S. are:

1. Store accessibility
2. Store format and wide selection
3. Pricing and value for money
4. Stocking quality products
5. Efficiency and loyalty program

The importance of these other factors also explains why every shopper is not doing their weekly grocery stock-up in a discount chain, despite the pressure of a recession. Consumers still want to have a pleasant experience and there is tremendous value in making that process convenient and easy for them.

Do’s and Don’ts
Manufacturers who think that store brand success will fade when the economy improves are likely in for a rude awakening. Best-in-class retailers and manufacturers are those who collaborate on category and total store assortment, pricing, promotion, and advertising decisions.

Retailers:

• Don’t let price gaps get too large or risk declining category sales.
• Don’t de-list high-penetration, high-frequency or strong niche brands or risk driving shoppers to retailers who do carry them.
• Do promote store brands with brands where there is limited shopper overlap to drive category sales.
• Do promote store brands along with non-competitive or complimentary branded offerings to build larger baskets.
• Do select credible suppliers and hold them to high standards.

Manufacturers:

• Do branded versus store brand pricing analytics and show retail partners which branded offerings make good promotional partners.
• Do proactive assortment analytics to demonstrate why your brands align well with store brand assortment.
• Do take a collaborative approach to how you assess branded versus store brand risks and opportunities – retailer focus has never been greater.
• Do explore options for using excess capacity for store brand production.

Bakers across the U.S. are experimenting with gourmet flavor combinations and unorthodox ingredients in doughnut

Pomegranate thyme and bing cherry balsamic may sound like salad dressings, and lemon chamomile creme custard may evoke thoughts of fancy teas, but they're actually cutting edge flavors in the latest fad to hit the baking scene — doughnuts.

So much for glazed and jelly.

Fresh off the nation's fascination with cupcakes, bakers across the country are experimenting with gourmet flavor combinations and unorthodox ingredients in doughnuts, everything from meats to Cocoa Puffs breakfast cereal.

At Glazed Donuts Chicago, for example, mint leaves spring from the holes of iced mint mojito doughnuts. Baker Kirsten Anderson also adds grape jelly to the dough of her peanut butter and jelly doughnuts.

"You're taking a relatively inexpensive item and you're turning it into a luxury item," says Anderson, whose seasonal offerings also have included butternut squash and white chocolate blueberry doughnuts.

"So maybe people can't afford the best house or the best car, but they can go out and buy a piece of indulgence at a price they can afford."

Paul Mullins, author of "Glazed America: A History of the Doughnut," calls them "designer doughnuts," and says the trend defies the stereotype of doughnut shops as smoke-filled of laborers lingering over burnt coffee and bad doughtnuts.

And fancy doughnuts are increasingly common. Designer doughnut shops, bakeries and related businesses have proved popular with young urbanites on both coasts, as well as large cities such as Chicago, Mullins says.

"The chefs, they're really skilled, they are really creative," he says. "These designer doughnuts by regular Krispy Kreme-standards are pricey, but by haute cuisine standards, $5 or $6, that's not that much."

The doughnut-makers are playing with consumers' notions of creativity and curiosity, Mullins says. "What in the world does a chamomile doughnut taste like? I don't know if I'd want it on an every-week basis, but I'd give it a shot."

Spending on information technology by food stores worldwide will increase by 3.1% to $15.6 billion

Spending on information technology by food stores worldwide will increase by 3.1% to $15.6 billion this year, according to a new report from IDC Global Retail Insights here.

“Grocers will need to continue to innovate to meet consumers’ needs,” said Leslie Hand, research director for IDC Retail Insights and a co-author of the report, “Worldwide Retail Industry 2010, Top 10 Predictions.”

Overall, the report predicts that despite the sluggish economy, “retailers will launch aggressive technology investment programs to support new business models while reducing traditional IT costs.”

Hand, who previously worked for Ahold in IT for eight years, told SN that food retailers “will be able to make tactical reductions in their IT infrastructure to become leaner in their technical capabilities while at the same time funding some projects to do better forecasting and analytics and provide better customer service.” To become leaner, retailers will look at their hardware investments and “perhaps do more virtualization and consolidation of multiple instances of applications while improving the way they manage item data,” she said.

Applications that retailers will emphasize include demand forecasting, replenishment, order management and price/promotion optimization—those that offer a one to one-and-a-half year ROI, she added.

Sugary Drinks Not Linked to Obesity

Beverage habits among adolescents include increased consumption of sugar-sweetened beverages and decreased consumption of milk; therefore, researchers from the University of Minnesota examined the association between beverage consumption and weight gain.

Researchers tracked increases in body mass index (BMI)among 2,294 teens a found drinking low-calorie soda, drinking little milk or no white milk, and poor eating habits led to increases in body size and weight. The researchers said there was no association between sugar-sweetened beverage consumption, juice consumption and adolescent weight gain over a 5-year period.

Sources:

• American Journal of Clinical Nutrition: Adolescent beverage habits and changes in weight over time: findings from Project EAT