May 2005 Times & Trends Executive Summary:
Value Channels: Redefining the Retail Landscape

IRI's Times & Trends highlights new developments and critical events across all major CPG categories and channels, providing powerful benchmarking data to help guide your strategic decisions. This month’s Times & Trends features sales trends, heavy shopper profiles and category development opportunities across value channels.

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

INTRODUCTION

With growth fueled by an uncertain economy, increased availability and a unique shopping experience, value channels -- supercenters, club stores and dollar stores -- have reached a combined dollar share of nearly 20%* of total CPG spending and have become an integral component of consumers’ shopping experience.

Given the size, growth, and future potential of value channel shopping, manufacturers are evaluating optimal distribution, marketing and merchandising strategies to fully capitalize on these channels, while traditional retailers are searching for sources of sustainable competitive advantage. This report provides an extensive analysis of consumer purchase behavior to help retailers and manufacturers develop fact-based strategies vis-à-vis value channels.

VALUE CHANNEL GROWTH

Supercenters Gain Share Through Increased CPG Shopping Trips Over Past Two Years. Supercenters were the only channel of the three to gain a significant increase in dollar share over the past two years. The two-point share gain came at the expense of grocery and mass merchandise channels, as well as fellow value channel club. Store expansion created greater convenience for supercenter shoppers, who increased their trip frequency for CPG products over the two-year period; however, it did not increase household penetration. New supercenter formats that are more conducive to urban areas, such as Wal-Mart’s Urban 99 concept will be required to achieve major incremental penetration gains.

Club Share Declines Slightly. Lower spending per trip without a corresponding increase in number of trips resulted in a slight dollar share reduction (0.4 points) for club stores over the past two years, as they increasingly compete with supercenters.

Dollar Stores Reach More Consumers. While dollar stores’ share of total CPG spending remains low (1.3%), rapid store expansion has driven major gains in household penetration: 58% of households now shop dollar stores, and further penetration increases are likely as geographic expansion continues.

*Across IRI Reviews Categories
Source: IRI Consumer Network®

 

CORE VALUE CHANNEL SHOPPERS

Heavy Shoppers Have Unique Demographic Profile By Value Channel. While each value channel has achieved fairly strong reach (50%+ household penetration), their heaviest shoppers represent more targeted and unique consumer segments: versus the other value channels, supercenters skew younger and middle income; club stores skew middle-aged and upper-income, while dollar stores skew older and lower income.
 

*Heavy channel shoppers defined as top 1/3 of shoppers ranked by total channel dollars spent across IRI Reviews categories.
Source: IRI Consumer Network®

 

CATEGORY OPPORTUNITY

Non-Food Categories a Major Draw for Value Channel Shoppers. Nearly all of the non-food categories analyzed, including OTC remedies; household products such as cleaning supplies, paper products and laundry detergent; and dog food, among others, have exceptionally high dollar share indices among heavy shoppers in at least two of the value channels. Traditional retailers should explore targeted pricing and promotion strategies within these categories to attract heavy value channel shoppers, and manufacturers within these categories should ensure adequate value channel distribution and shelf space.

Several Leading Food and Beverage Categories Under-Developed Within Value Channels. Across value channels, a number of leading food & beverage categories are under-developed among heavy shoppers. These categories represent advantages that can be leveraged by traditional retailers and potential category development opportunities for value retailers and manufacturers. Examples include:

Supercenters – Carbonated Beverages, Beer, Wine, Spirits (opportunity impacted by regulations); Frozen Seafood; Ice Cream/Sherbet

Club: Carbonated Beverages, Fresh Bread & Rolls, Milk, Cold Cereal, Cookies, Soup, Frozen Dinners/Entrees, Ice Cream/Sherbet

Dollar Stores: Carbonated Beverages, Fresh Bread & Rolls, Bottled Water, Coffee, Cold Cereal and Soup, in addition to Deli, Dairy and Frozen Food categories, which were not previously offered in most dollar stores but will be increasingly available

Supercenter and Dollar Store Shoppers Purchase Private Label Across Channels. Private label dollar share among heavy supercenter and dollar store shoppers is near or above average across all channels – both traditional and value, indicating that among these consumers, the search for value goes beyond channel selection; heavy club store shoppers, however, allocate lower than average spending to private label across all channels except club.


 

Source: IRI's Times & Trends Reports
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