The Post-Recession Consumer

September 23, 2010 07:00 AM

SaveMart Costco 11 07 039While the Great Recession of 2008 and 2009 is technically over, American consumers aren’t acting that way.

Through the first half of 2010, fluid milk sales were down 1.4%, with whole milk sales down a full 6%. USDA projects commercial use of all dairy products to decline 1% this year, with full recovery not coming until 2011.

With that backdrop, Dairy Today is featuring a panel of retail marketing experts at our 2010 Elite Producer Business Conference in Las Vegas, Nev., Nov. 8 to 10. Our purpose: to figure out what consumers want in this new, post-recession environment.


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2010 Elite Producer Business Conference

Two of our panelists agreed to provide a snapshot of what you’ll learn from the Nov. 9 panel. Paul Weitzel is managing partner of Willard Bishop LLC, a business intelligence consulting firm that works with wholesalers, distributors, retailers, consumer packaged goods companies and trade associations. Rich Snyder is vice president of consumer and trade marketing of the Global Dairy Products Group, Dairy Farmers of America (DFA).


Dairy Today: How did consumer buying behavior change during the recession?

Weitzel: Many retailers are experiencing same-store sales declines of 6% or more. Many households have a smaller weekly food budget, so consumers are trading down, looking to private label and lower-cost alternatives. They’re making fewer impulse purchases, shopping more outlets and looking for more deals.

Retailers are responding with more TPRs [temporary price reductions] and loyalty card promotions. Twenty years ago, the typical supermarket had 3,500 TPRs in an average week. Today, it is offering as many as 7,000.

Snyder: Recent surveys show that 43% of consumers are eating out less and 35% are packing their own lunches.

Sandwich consumption has increased nearly 5% in the last four years. More than half of people are cooking from scratch and using fewer convenience foods and preprepared meals.

While consumers are driven by value, they are also deciding to buy items that deliver something different. This is where we see an opportunity in the cheese aisle. We have a captive audience of shoppers looking for innovative flavors and new uses for the cheese category.

DT: What will drive consumer buying in 2011?

Weitzel: Price and value will continue to be top of mind for every retailer and most households. As long as the tough economy persists, we will see less experimentation among budget-conscious shoppers. Good private-label programs and strong brands will win out.

In time, we expect social issues, animal care issues and environmental issues to affect consumers more. How we source product, how we handle product and how we educate shoppers will all become more important in the years ahead.

Snyder: Consumers will continue to buy products they know and trust—until given a reason to change. Understanding consumers’ perceptions and identifying areas where there may be a reason to change is key.

A 2009 consumer survey suggested that consumers are increasingly turning to American farmers and farm cooperatives. Of those responding, 79% felt anxious about the economy. These consumers were purchasing products produced by American farmers; 86% believed it is important to have food proceeds go directly to U.S. farmers.

DFA’s “Friends of Elsie” campaign has been very effective in our target markets. The campaign is simple: On our Borden Cheese label, we tell consumers that “100% of our proceeds go back to American dairy farmers and their families because we are 100% farmer-owned.”

DT: What types of new food products resonate with consumers?

Weitzel: Consumers are looking for healthier products at every price level. We will continue to see more fortified, more enhanced and more natural food alternatives, as well as more portion-control products, products with better nutrients and products with fewer processed ingredients. We will also see more fresh products, which means more pressure to find space in an already tight dairy case.

I expect to see more health and wellness products integrated into traditional food aisles rather than being segregated in health-food sections. We’ll also see more effort by retailers to connect consumers with health and wellness information right in the store, where most purchase decisions are made. The trick will be determining the best way to serve up information without alienating shoppers who don’t care about health and wellness.

Snyder: In a time of eating out less often, moms are looking for affordable food items that provide new flavors for sandwiches and at-home meals. Borden Cheese Singles Sensations come in smaller than typical pack sizes, which keeps costs lower and makes it easy to buy varieties for different members of the family. We have Singles Sensations in five varieties, with more on the way.

DT: Are consumers worried about sustainability and carbon footprint issues?

Weitzel: Greenhouse gas and other environmental issues are ahead of shopping behavior and consumer demands. This isn’t unusual: The amount of talk about health and wellness products is greater than the actual purchase pattern of shoppers. Health and wellness sections in supermarkets [including natural and organic] are still significantly larger than demand for these items.

Supermarket operators are trying to figure out how far they need to get out in front of these movements so they are prepared to capitalize on the emerging trends.

I think you will see elevated interest in carbon footprint issues. Supermarkets see this area as one where they can create stronger store loyalty. When we move out of the recession, families will have more money to spend on earth-friendly products.


Learn more about how consumer behavior is changing—and what it means for dairy sales—at the 2010 Elite Producer Business Conference, Nov. 8 to 10 at the Bellagio in Las Vegas, Nev.

Once highly brand-conscious but now value- and price-driven, today’s consumers offer a whole new set of marketing challenges. John Larsen of Safeway Foods, Rich Snyder of Dairy Farmers of America and Paul Weitzel of the consulting firm Willard Bishop will discuss how to meet consumers’ needs and wants.

Their panel is just one of a dozen presentations that will bring you up to speed on the economic recovery, the 2012 farm bill debate and other issues key to dairy’s future. Among them:

Michael Swanson, chief ag economist for Wells Fargo Bank, will provide his usual insightful analysis of the economic recovery. Swanson has keynoted the Elite Producer Business Conference every year since it started back in 2002.

Jim Tillison of the National Milk Producers Federation (NMPF) and Jerry Slominski of the International Dairy Foods Association will debate the opportunities and challenges of NMPF’s Foundation for the Future program. This program would do away with dairy price supports and Milk Income Loss Contract payments and replace them with margin insurance with no milk production caps. It would also make dairy pricing more transparent, relying on what cheese processors actually pay for milk.

Tony Mendes, a California dairy producer, and Sue Taylor, vice president of dairy policy and procurement for Leprino Foods, will discuss California’s dairy future.

David White, senior director of issues management for the Ohio Farm Bureau, will discuss his state’s long battle with the Humane Society of the United States about animal care regulation and what it takes to defeat animal rights activists in your state.

Monte Hemenover, nationally known dairy consultant, will detail key aspects of keeping your region competitive not only within the country, but in the growing global dairy market as well.

Tom Fuhrmann, dairy management specialist with DairyWorks, Phoenix, Ariz., will discuss how to find, promote and develop middle managers from existing Hispanic work crews. A preview of his presentation, “Diamonds in the Rough,” can be found in our September issue, pages 38 and 40.

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