This month’s Times&Trends Executive Summary addresses the present migration or shifting of U.S. consumer shoppers’ food & beverage spending from traditional CPG formats – particularly the conventional supermarket – to newer discount formats:  supercenters, club stores and dollar stores.

The impact of the U.S. recession and extended soft economy on consumer food & beverage spending patterns has been to stimulate increased multi-channel shopping particularly on shelf-stable items.  Drawing on a household panel of over 70,000 US households who scan all of their bar-coded purchases at home from every conceivable retail outlet where a CPG product is sold, this report traces what consumption areas shifting the most.  Next month’s issue will provide an in-depth review of Wal-Mart, the industry’s largest retail competitor.

This free summary is also accessible via the GMA Web site  at http://www.gmabrands.com/publications/gmairi.cfm

During the extended soft economy period and most likely beyond, consumers are multi-channel shopping – crossing over to supercenters and other discount formats – to find the best deals wherever they are.  This creates a fluid, “moving target” for CPG marketers and retailers.  More than ever before, we are challenged to better understand the consumer – where, when, how and why they shop.

Shoppers Shift Food & Beverage Spending to Discount Channels. The soft economy, which is driving shoppers’ search for greater value, has encouraged a significant shift of food & beverage CPG shopping and purchasing primarily from the grocery or food channel over to deep-discount supercenter, club and dollar store channels.  These newer outlets combined accounted for 16% of shopper dollars spent on food & beverage CPG categories in the year ending June 29, 2003, up from 13% in the year ending April 29, 2001.   The largest channel, food stores or supermarkets – at 74% of total shopper spending on food & beverages – was down over two share points and food & beverage spending at traditional mass merchandisers and drugstores was also soft.

Multi-channel shoppers are heavier food & beverage spenders. One-fourth of shoppers’ food & beverage spending was in three or more channels.  Three-plus channel shoppers account for a proportionately larger share of total spending across all food & beverage categories.  In the twenty largest categories, three-plus channel shoppers averaged 22% of category buyers, but 35% of category spending.  The most active cross-channel shoppers are comparing prices and looking for the best deals in a softer economic period.

Shoppers gaining discounts in many shelf stable categories.  Shopper spending or consumption in the latest year of 94 different shelf stable food & beverage categories grew only 0.8% while consumption of perishable categories grew 3.3% across all outlets.  Multiple-outlet buyers dominate shelf stable food & beverage shopping – two-channel buyers accounting for 31% and 3+ channel buyers accounting for 33% of spending in the latest year.  In contrast, single channel buyers dominate perishable food & beverage shopping – one-channel buyers account for 58% of spending in the latest year.  Supercenters accounted for 79% of total incremental consumption comparing current and base year spending across the 94 shelf-stable categories.

Shoppers rely on many channels to fill their food & beverage needs.  The largest 20 food & beverage categories (accounting for 48% of total spending) skew stronger to multi-channel shopping and related shifting from one core outlet.  Multi-channel shopping is most evident in shelf-stable dominated salty snack, sweet snack/dessert and beverage spending.  Only dinner solution and ingredient categories have profiles leaning toward a single channel – favoring the supermarket channel.  Supercenters accounted for 92% of total incremental consumption comparing current and base year spending across the 20 largest food & beverage categories.

Supercenters are nipping at Supermarket domination of dinner solution consumption. Dinner and ingredients shopper spending is concentrated at supermarkets – approximately 80% of all purchases are being made in the food channel.  However, as supercenters expand nationally this is changing – this newer channel grew 37% in dinner solution consumption accounting for 63% of total dinner item consumption growth.  Multi-channel shoppers consume almost two-thirds of all shelf-stable soup.  Although the variety of dinner options may be considerably less, multi-channel shoppers are finding items they like at discount channels.

Beverage shoppers are devoted to multi-channel shopping to find the best price.  It’s no surprise that over 8 of 10 shoppers purchasing a carbonated beverage relied on more than one channel to make a purchase in the latest year.  This behavior is becoming widespread across all beverages.  Two of every three beverages consumed across 27 categories involved multi-channel shopping in the current year.  Supercenters and Dollar stores accounted for 100% of total beverage consumption growth.  Spending at supercenters for carbonated beverages grew 26%, beer & ale +62% and bottled water +70%.

Sweet and salty snack consumers multi-channel shop to find the best price.  Shoppers purchased 75% of candy from 3+ channels.  Supercenters and dollar stores combined accounted for over 40% of snack/granola bar consumption growth.  And, these same two discount formats accounted for all of the salty snack spending growth in the latest year, both up double-digit.

Given consumers’ multi-channel shopping tendency, it is easy to understand the shopper shift or migration to the newer discount formats.  Shoppers have frequented multiple channels for some time – five to seven has become the norm – 75% of all shoppers frequented that many in the latest year.  But because of the economic crunch, there’s heightened interest in savings.  The discount store format is more and more available.  And even with time constraints, shoppers are persistent to find the best deals.  You need more for less – you shop for better prices.