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Grocery Shopper Behavior Q3 2009 - Quarterly evaluation of shopper behavior today - Changing shopper in the face of economic stress November 2009

Grocery Shopper Presentation Wave Ii Q3 2009

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Results of Q3 2009 Grocery Shopper Study highlighting shopping behavior changes since the economic downturn

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Page 1: Grocery Shopper Presentation Wave Ii Q3 2009

Grocery Shopper Behavior

Q3 2009

- Quarterly evaluation of shopper behavior today- Changing shopper in the face of economic stress

November 2009

Page 2: Grocery Shopper Presentation Wave Ii Q3 2009

About Our Presenters

1

Jane Mount is the Executive Vice President of Digital Research, Inc. (DRI), a New England based

marketing research firm that focuses on new media research techniques for various Fortune 500

organizations.

Prior to joining DRI in 2000, Jane held research director positions with Nabisco Brands/The LifeSavers

Company, Philips Lighting Co., and Hannaford Bros. Co. Much of her work over the years has focused on

category management/sales research, advertising development and new product development.

Jane holds a B.S from Lehigh University and a MBA from Seton Hall University. She has been an active

member of the Marketing Research Association (MRA), serving on the professional certification review

committee. Jane was trained in focus group moderating at the RIVA Institute.

Debra Patek is Chief Economist & Cofounder of ThinkVine Corporation, a venture backed marketing

science solutions company based in Cincinnati, Ohio. Debra brings nearly 20 years of experience in the

areas of pricing research, economic analysis and consumer behavior modeling.

Prior to joining ThinkVine, Debra was a Director of Analytics at marchFIRST and a pricing strategist at the

L.M. Berry Company, a division of BellSouth. She has an M.A. in Economics from the University of

Cincinnati and taught undergraduate economics at the University of Cincinnati and Earlham College.

Debra has is a faculty member of the Professional Pricing Society and a member of the National

Association of Business Economists.

Page 3: Grocery Shopper Presentation Wave Ii Q3 2009

2

Recession Changing How Americans Spend

Page 4: Grocery Shopper Presentation Wave Ii Q3 2009

3

…And Retailers Are Reacting

Page 5: Grocery Shopper Presentation Wave Ii Q3 2009

4

What is Happening to Consumers’ Relationships with Brands?

Page 6: Grocery Shopper Presentation Wave Ii Q3 2009

5

What is the New Norm?

Page 7: Grocery Shopper Presentation Wave Ii Q3 2009

6

Objective

• The purpose of this study is continue to ascertain the current

economic mood of consumers and how the economy is affecting

grocery shopper behavior in the United States

– What behaviors have surfaced?

– What categories have been most affected?

– What is anticipated for the future?

– What are the expectations for holiday season?

• It also continues to track our new American grocery shopper

segmentation

• This is our second quarterly wave

Page 8: Grocery Shopper Presentation Wave Ii Q3 2009

METHODOLOGY

7

Page 9: Grocery Shopper Presentation Wave Ii Q3 2009

8

Methodology

• An online survey was conducted between October 20th and October 22nd,

2009 among 1,021 grocery shoppers.

– Nationally representative sample drawn from EMI Surveys Panel

– Questionnaire designed by Thinkvine and DRI

– Survey programmed and hosted by DRI

– Segmentation/advanced analytics by Thinkvine

• Seventeen grocery categories analyzed

– Milk, paper towels, bread, cookies, crackers, rte cereal, orange juice, salty snacks, juice beverages, pasta sauce, yogurt, laundry detergent, soft drinks, salad dressing, pet food, coffee, and OTC pharmaceuticals

• Cluster analysis identified six distinct segments of shoppers based on

economic impact, lifestyle changes and shopping behaviors

• Quarter 3 data weighted by age, income, and region for comparability with Q2

Page 10: Grocery Shopper Presentation Wave Ii Q3 2009

OVERALL FINDINGS

9

Page 11: Grocery Shopper Presentation Wave Ii Q3 2009

10

The Economic Climate is Viewed as Relatively Weak, but Perceptions are Improving

Q4. What is your perception of today’s economic climate? 100-pt scale

12%

2%

37%

48%

"Great"

"Good"

"Fair"

"Poor"

N=1021

% Poor Q2 Q3

18 – 34 42 23

35 – 49 50 36

50 – 64 53 47

Improvement driven by younger

consumers

“D-”49% Q2

43% Q2

6% Q2

Page 12: Grocery Shopper Presentation Wave Ii Q3 2009

11Q22. In the past six months, has anyone in your household been affected by any of the

following? Please check all that apply.

Affects of Economy

27%

3%

5%

6%

11%

12%

14%

17%

22%

27%

27%

35%

36%

None of these

Other financial issues

Difficulty selling a house

Home foreclosure/mtg issue

Serious illness

Difficult access to credit

Financial support to family or friends impacted by economy

Investment losses

Job loss/unemployment

Job uncertainty

Credit Card Debt

Difficulty in paying bills

Income reductions

¾ of Shoppers Claim to be Negatively Impacted by Today's Economy; Hardships Remain Largely the Same as in Q2

N=1021

Fewer experiencing

investment losses now

(17% vs. 23% Q2)

Age 50-64 Q2 Q3

Income

reductions31 40

Financial

support to

family

12 17

Older shoppers facing income

reductions while helping out others

Page 13: Grocery Shopper Presentation Wave Ii Q3 2009

12

30%39% 42%

12%

38%

44% 38%

40%

22%

12% 15%

15%

29%

34%

30%

13%5%5%

10%

26%

2 Years Ago 1 Year Ago 6 Months Ago Today 6 Months From

Now

Great

Good

Fair

Poor

N=1021

Q4a. If “100” represents your economic well-being during “normal times” (i.e. average for the

past few years), how would you rate your economic well-being for the following time periods?

Q4b. What do you expect your well-being to be six months from now?

Many Shoppers View Their Current Economic Situation Negatively; Yet Are More Optimistic for the Future

Page 14: Grocery Shopper Presentation Wave Ii Q3 2009

13

In This Downturn 91% Have Made Changes to Stretch Their Dollars

Q5. In recent months, have you changed your lifestyle at all to stretch your dollars more?

35%

41%

9%

15%

Yes, I've made

substantial changes

Yes, I've made some

changes

Yes, I've made minor

changes

No, I have not changed

my lifestyle

N=1021

91%

50+ have adapted most

(38% vs. 29% 18-34)

Page 15: Grocery Shopper Presentation Wave Ii Q3 2009

14

Shoppers Are Not Just Reducing Discretionary Spending, But Also Essentials

Q6. In what areas have you made changes?

36%

41%

65%

79%

81%

81%

55%

48%

Healthcare expenditures

Home maintenance

Charitable giving

Large expenditures

Vacations

Clothing

Small cutbacks to

everday expenditures

Entertainment

expenditures

But concentrated on entertainment, clothing, and the everyday

N = 932 Made Changes

Q2 Q3

Clothing 71% 79%

Vacations 60% 65%

Charitable Giving 42% 48%

Healthcare 29% 36%

More shoppers making cuts in

several traditional Holiday/Winter

categories:

Page 16: Grocery Shopper Presentation Wave Ii Q3 2009

1515

A Return to Higher Levels of Spending is Not Anticipated Through Q1 2010

Q7. Do you anticipate making additional cutbacks in the next six months?

45%

51%

4%

Yes, I expect to make

addit io nal cutbacks

N o , I expect to be spending

abo ut the same

N o , I expect to increase my

spending

N = 1021

Page 17: Grocery Shopper Presentation Wave Ii Q3 2009

16

Maybe a Little Loosening, but Shoppers Are Not Planning to Resume Their Old Spending Habits

Q8. Once the economy improves, do you anticipate that you will continue to use the saving

strategies you are implementing to weather this tough economy or will you return to your previous

spending habits?

49%46%

4%1%

I w ill continue to use my

saving strategies

I w ill spend a little more,

but try to be more

conservative than before

I w ill return to my

previous spending habits

Don’t know

N = 932 Made Changes

Willingness to spend a

little more has increased

(46% vs. 41% Q2)

Page 18: Grocery Shopper Presentation Wave Ii Q3 2009

17Q19. In what ways, if at all, have your grocery shopping habits changed during this economic

downturn? Please check all that apply.

As in Q2, Shoppers Buy Needed Essentials –On Sale/With Coupons or Thru Trading Down

N = 1021

57%

52%

50%

46%

44%

40%

37%

36%

36%

59%

Trade down to lower priced national brands

Take advantage of rewards cards/programs

Rely on weekly circulars to decide where to shop

Buying fewer convenience foods

Trade down to store brands

Make fewer trips to the grocery store

I reduced impulse purchases

I use more coupons/ promotions

I stock up on sale items

I reduced spending on non-essential items

More trading down to

lower priced national

brands now

(36% vs. 30% in Q2)

Page 19: Grocery Shopper Presentation Wave Ii Q3 2009

18Q19. In what ways, if at all, have your grocery shopping habits changed during this economic

downturn? Please check all that apply.

N = 1021

26%

26%

25%

24%

22%

22%

20%

16%

13%Shop at Whse clubs more

Buy less fruits/ vegetables

Switched to a lower priced store

Shop at a closer store to save gas

Shopping in more stores to get the best deals

Buy cheaper cuts of meat

Use the Internet to research products, prices, and find coupons

Buy bulk sizes to get more value for the money

Shop at Dollar Stores more often

In Q3, Fewer Warehouse Clubs or Shopping Around – More Cheap Meat

20% Q2

26% Q2

19% Q2

Page 20: Grocery Shopper Presentation Wave Ii Q3 2009

19

Similar to Q2, Nearly Half of Shoppers Report Spending Less on Groceries This Year

Same

42%

More

12%

Less

46%

Q10. Is this about the same, more or less than you spent at this time last year?

Avg. spending per week

$102 - a 6% decline

since Q2

Focused on lower income/lower spenders

Page 21: Grocery Shopper Presentation Wave Ii Q3 2009

20Q14. How important is it for you to get the absolute lowest prices when you are grocery shopping?

40%38%

1%2%

20%

5 - Extremely

Important

4 3 2 1 - Not at all important

Absolute Lowest Prices Continue to be a Requirement for Today’s Shopper

Importance of Absolute Lowest Prices

N = 1021

77%

Page 22: Grocery Shopper Presentation Wave Ii Q3 2009

21

Q15. Sometimes in order to get the lowest prices, you have to make some changes to how you shop. Please allocate 100 points across

these attributes based on how likely you would be to make these changes. Note: asked among those desiring absolute lowest prices.

N = 988

…Coupons/Specials and Trading Down Brands (to Store and Lower Cost National) Are Key to Getting The Absolute Lowest Prices

0.6

1.0

1.2

1.4

1.6

2.0

2.0

2.9

3.3

4.8

6.2

6.6

7.5

8.1

11.2

11.3

12.1

16.4

Store has poor reputation

Poor customer service

Shop at unclean store

General poor selection

Poor selection of natural/organic

Slow checkout

Shop at a crowded store

Choose avg quality meat/produce over highest

Drive to store that is not the closest

Drive to multiple stores to get best deals

Browse Internet coupons

Bag own groceries

Compare store flyers

Switch to lower cost brand

Shop at a store w/better weekly specials

Switch to store brand

Buy only sale items

Clip coupons

(8.7 in Q2)

(6.0 in Q2)

(0.6 in Q2)

In Q3, shoppers are less likely to

compare flyers and drive to multiple

stores to get deals. In fact, they are

more likely to shop at an unclean store

to get the lowest prices.

Page 23: Grocery Shopper Presentation Wave Ii Q3 2009

22

* Added to the survey in Q3 2009.

Q21. Now please think again about the specific categories that you purchase. In the past three months, how would you describe your purchasing of each of these categories? Response

options: I have made no changes, I only buy my preferred brand with a sale or coupon, I buy a different size of my preferred brand, I buy a lower priced national brand, I buy generics or store

brands, I buy my preferred brand in a lower cost store

64%

45%

49%

49%

50%

53%

54%

54%

55%

56%

56%

57%

57%

57%

58%

59%

61%

Pet Products

Coffee

Milk

Carbonated soft drinks/soda

Bread

Orange Juice

Pasta Sauce

Yogurt

Laundry Detergent

Ready to Eat Cereal

Salad Dressing

Juice Beverages

Crackers

Salty Snacks

Cookies

OTC Pharmaceuticals*

Paper Towels

All Categories Impacted by Changes in Purchasing Behavior with Household Staples Being Targeted Since Q2 (Milk, Bread, OJ, Laundry Detergent)

Percent Who Made Changes

12 pts

10 pts

6 pts

7 pts

5 pts

12 pts

9 pts

5 pts

6 pts

Page 24: Grocery Shopper Presentation Wave Ii Q3 2009

23

* Added to the survey in Q3 2009.

Q21. Now please think again about the specific categories that you purchase. In the past three months, how would you describe your purchasing of each of these categories? Response

options: I have made no changes, I only buy my preferred brand with a sale or coupon, I buy a different size of my preferred brand, I buy a lower priced national brand, I buy generics or store

brands, I buy my preferred brand in a lower cost store

12%

10%

33%

13%

29%

18%

16%

14%

15%

17%

19%

16%

24%

21%

21%

41%

32%

12%

21%

5%

20%

8%

18%

17%

25%

20%

24%

20%

19%

16%

17%

18%

8%

15%

10%

9%

6%

7%

8%

10%

15%

10%

13%

8%

12%

12%

9%

10%

11%

6%

9%

5%

4%

2%

5%

4%

4%

3%

4%

4%

3%

3%

5%

4%

5%

4%

3%

4%

6%

5%

3%

5%

4%

4%

3%

2%

4%

4%

3%

5%

4%

5%

5%

3%

4%

Pet Products

Coffee

Milk

Carbonated soft drinks/soda

Bread

Orange Juice

Pasta Sauce

Yogurt

Laundry Detergent

Ready to Eat Cereal

Salad Dressing

Juice Beverages

Crackers

Salty Snacks

Cookies

OTC Pharmaceuticals*

Paper Towels

Switch to store brand Preferred brand with sale/coupon Lower priced national brand

Different size of preferred brand Preferred brand from lower cost store

Purchasing Changes Focused on Switch to Store Brands and Purchasing Branded Items on Sale

Changes Made

Page 25: Grocery Shopper Presentation Wave Ii Q3 2009

24

* Added to the survey in Q3 2009.

Q21. Now please think again about the specific categories that you purchase. In the past three months, how would you describe your purchasing of each of these categories? Response

options: I have made no changes, I only buy my preferred brand with a sale or coupon, I buy a different size of my preferred brand, I buy a lower priced national brand, I buy generics or store

brands, I buy my preferred brand in a lower cost store

33%

32%

29%

24%

21%

21%

19%

18%

17%

16%

16%

15%

14%

13%

12%

10%

41%

Coffee

Pet Products

Carbonated soft drinks/soda

Yogurt

Laundry Detergent

Pasta Sauce

Juice Beverages

Ready to Eat Cereal

Orange Juice

Salad Dressing

Salty Snacks

Cookies

Crackers

Bread

Paper Towels

Milk

OTC Pharmaceuticals*

National Brand Abandonment Has Increased Significantly in Most Categories Since Q2 as a Solution to Budgetary Crunches

Percent Who Purchase Generic or Store Brands

14 pts

15 pts

17 pts

12 pts

11 pts

7 pts

6 pts

10 pts

7 pts

7 pts

6 pts

5 pts

5 pts

5 pts

Page 26: Grocery Shopper Presentation Wave Ii Q3 2009

25

* Added to the survey in Q3 2009.

Q21. Now please think again about the specific categories that you purchase. In the past three months, how would you describe your purchasing of

each of these categories?

In Q2, Changes Focused on Buying Preferred Brands With Promotions; In Q3, Fewer Are Holding Out for a Good Price on a Favorite Brand

Percent Who Only Buy Preferred Brand with a

Sale/Coupon

25%

5%

8%

8%

12%

15%

16%

17%

17%

18%

18%

19%

20%

20%

20%

21%

24%

Milk

OTC Pharmaceuticals*

Bread

Pet Products

Paper Towels

Crackers

Salty Snacks

Pasta Sauce

Orange Juice

Cookies

Juice Beverages

Salad Dressing

Laundry Detergent

Carbonated soft drinks/soda

Coffee

Ready to Eat Cereal

Yogurt

9 pts

8 pts

10 pts

7 pts

7 pts

4 pts

4 pts

3 pts

Page 27: Grocery Shopper Presentation Wave Ii Q3 2009

26

Comment per Waggle Market Research Online Community. Q2 respondents participated as members of the

community following Q2 field.

Value, Availability and Improved Quality Driving National Brand Abandonment

“I buy more store brands now than I ever did since the recession

started, and I prefer them more now as they are comparable or better than the national brands...I think the quality and price are good, so I will continue to purchase store brands after the recession as well. This I won't change - my philosophy is ‘Why spend more if you don't have to?’”

Page 28: Grocery Shopper Presentation Wave Ii Q3 2009

27

29%

17% 17%

10%7%

5%2% 2% 1%

17%

31%

36%

47%

38%

33%

12% 12%

33%

11%12%

27%

22%

9%

30%

Dolla

r st

ores

Mas

s mer

chand

isers

Onlin

e Ret

aile

rs

Farm

er's m

arke

ts

Flea

mark

ets

Ware

house c

lubs

Super

mark

ets

Dru

g sto

res

Conven

ience

sto

res

Depar

tmen

t sto

res

Boutiq

ue st

ores

Upsca

le d

epar

tmen

t sto

res

Shop More Shop Less

N=1021

Q8a. Comparing your shopping habits to before the start of this economic downturn, would you say you are shopping

more, less, or about the same at each of the following types of stores?

30% Shopping Supermarkets Less; Dollar Stores and Mass Merchandisers Seeing More Activity

Page 29: Grocery Shopper Presentation Wave Ii Q3 2009

28

25%

13%

6% 6%

28%27%

6%

32%

13%

21%

Cash Debit cards Credit cards Prepaid credit cards Checks

More Frequently Less Frequently

N=1021

Q8b. Think about the payment methods you use for your general purchases – such as cash, credit cards, or debit

cards. Would you say you are using each of these methods more frequently, less frequently, or about the same as

before the economic downturn?

Shoppers Relying on Cash/Debit; Utilizing Credit Less

Page 30: Grocery Shopper Presentation Wave Ii Q3 2009

29

59%

38%

19%13%

3%

67%

Cash Debit cards Credit cards Check Food

stamps/WIC

Prepaid credit

cards

* Small sample size. Interpret with caution.

Q20a. What methods have you used over the past year to pay for grocery purchases?

Q20b. Are you using this method more frequently, less frequently, or about the same amount as you did a year ago?

Groceries Most Often Paid for in Cash/Debit; No Change in Credit Card Use Since Last Year

Grocery Payment Methods in Past Year

37%

26%

19%21%

11%

26%

34%

11%14%

56% 54%

29%

Cash Debit cards Credit cards Check Food stamps/WIC Prepaid credit

cards*

More Frequently Less Frequently

Grocery Payment Method: Change in Use(Among Users of each payment method)

Page 31: Grocery Shopper Presentation Wave Ii Q3 2009

30

N=1021

Q21b. Now please think about your total purchases for the upcoming holiday season, and how much you anticipate

spending in each of the following categories. For each category, please indicate how much you will likely spend

compared to last year’s holiday season on a scale of 1 to 5 where 1 = “Spend much less” and 5 = “Spend much more.”

16%

23%

29%

29%

31%

32%

32%

34%

34%

35%

37%

39%

40%

41%

45%

Groceries for holiday celebrations

Gift cards/gift certificates

Books

Toys

Video games

Sporting goods

Event tickets

Music

Computer hardware/software

Comsumer electronics

DVDs/videos

Jewelry

Apparel and accessories

Flowers/cards

Eating out/dining

For the Holiday Season, Shoppers Plan to Spend Less in All Categories, Particularly Eating out, Apparel, and Flowers/Cards

Net Decline in Purchasing (% less minus % more)

Page 32: Grocery Shopper Presentation Wave Ii Q3 2009

31

Shoppers This Year Plan to Either Maintain or Decrease their Online Spending

Q21c. Now please think specifically about your online holiday purchases. Compared with the

total amount you spent online during the holiday season last year, how much do you estimate the

total amount you spend this year online will change?

7%

13%

22%

16%

41%

Will spend much

more online this

season

Will spend a little

more online this

season

Will spend about the

same this season

Will spend a little

less online this

season

Will spend much

less online this

season

N=1021

20%

39%

Page 33: Grocery Shopper Presentation Wave Ii Q3 2009

NEW SHOPPER SEGMENTS

32

Page 34: Grocery Shopper Presentation Wave Ii Q3 2009

33

Who is the “New Shopper?”

Economic Impact: the economic downturn has impacted different

people in different ways.

Some people are only mildly impacted

Others experience substantial hardship

Shopping Response: different shoppers have reacted in different

ways to current economic conditions.

Some shoppers are more active or aggressive in the response

to economic conditions

Yet, others show a more passive or restrained response

The first wave of the Grocery Study introduced a New Shopper

Segmentation, which categorized shoppers by economic impact and

shopper response

Page 35: Grocery Shopper Presentation Wave Ii Q3 2009

34

Reintroducing the Six Segments

Segment Economic Impact Shopping Response

Unfazed Mild Nonplussed

Cautious Comfort * Mild Cautious

Optimizer Moderate Strategic

Modest Means Moderate Restrained (or Resigned)

Hard Times Severe Hardship Struggling

Nouveau Poor Dramatic Reversal Floundering

Along these two dimensions, cluster analysis uncovered six key

segments

* known as Cautious Success in wave I

Page 36: Grocery Shopper Presentation Wave Ii Q3 2009

35

The % of Unfazed remains largely unchanged, with modest shifts observed in other segments

Segment Composition

Q2 Q3

Unfazed8.3% 8.7%

Cautious Comfort 25.6% 23.3%

Optimizer12.2% 14.3%

Modest Means28.2% 30.5%

Hard Times21.1% 16.7%

Nouveau Poor **4.6% 6.5%

Segment Memberships

Modest

Means

30.5%

Optimizer

14.3%

Unfazed

8.7%NP 6.5%

Hard Times

16.7%

Cautious

Comfort

23.3%

** Although Nouveau Poor has a small sample size (n=67), its differences from other segments

are large enough to warrant its own segment. As the current economic “shock” begins to

subside, Nouveau Poor may fold back into other segments.

“Unfazed”

Passive response to economic conditions

“Cautious Comfort”

Doing well, but keeping an eye on

excessive spending

“Optimizer”

Strategically balances brand, convenience &

quality with affordability

“Modest Means”

Tightening of the belt for an already

beleaguered shopper

“Hard Times”

Struggling to make ends meet under

dire economic conditions

“Nouveau” Poor

Lifestyle upheaval after a dramatic

reversal of fortune

Passive

Le

ss

Dis

tre

ss

ed

Mo

re

Dis

tre

ss

ed

Lifestyle

Response

Inte

nsit

y o

f

Hard

sh

ip

Active

Page 37: Grocery Shopper Presentation Wave Ii Q3 2009

36

% households Impacted

(last six months)Unfazed

Cautious

ComfortOptimizer

Modest

Means

Hard

Times

Nouveau

Poor

Income reduction 4.8% 24.4% 29.7% 42.7% 51.0% 61.0%

Job loss / unemployment 4.2% 14.8% 19.3% 28.7% 27.5% 39.4%

Job uncertainty 2.7% 21.5% 21.0% 28.3% 44.3% 39.2%

Difficulty in paying bills 8.4% 15.0% 17.6% 49.1% 55.2% 69.6%

Investment losses (e.g. stocks) 10.6% 15.2% 21.0% 17.9% 14.7% 31.7%

Serious illness 1.9% 4.5% 10.4% 15.3% 13.4% 16.7%

Credit card debt 6.9% 14.9% 14.7% 34.2% 44.6% 48.7%

Access to credit 0.9% 5.7% 2.5% 16.1% 15.9% 34.4%

Financial support to family or friends 3.4% 3.3% 10.3% 19.8% 17.1% 32.7%

Home foreclosure/mortgage issues 0.0% 1.4% 0.0% 6.3% 0.0% 60.3%

Difficulty in selling a house 1.2% 4.4% 0.0% 0.0% 0.0% 62.1%

One quarter later, the economic numbers still paint a grim picture

Q22. In the past six months, has anyone in your household been

affected by any of the following? Please check all that apply.

Green font – significant improvement in condition since Q2

Red font – significant deterioration in condition since Q2

Page 38: Grocery Shopper Presentation Wave Ii Q3 2009

Nouveau Poor has experienced the steepest perceived drop in economic well-being…and few segments expect a full return

20

25

30

35

40

45

50

55

60

65

70

2 Years Ago Year Ago 6 Mos. Ago Today Six Mos from Now

Unfazed Cautious Comfort Optimizer

Modest Means Hard Times Nouveau Poor37

Economic well-being rating (50 = “normal” times)

Page 39: Grocery Shopper Presentation Wave Ii Q3 2009

38

14.3% 15.1%

43.3%

72.3%

57.1%

48.7%

64.7%

47.1%

23.2%

39.8%37.0%

20.2%9.6% 3.1%4.5%

100.0%

Unfazed Cautious

Comfort

Optimizers Modest Means Hard Times Nouveau Poor

Substantial Changes in Lifestyle Some Changes in Lifestyle

Minor Changes in Lifestyle No Changes in Lifestyle

Q5. In recent months, have you changed your lifestyle at all to stretch your dollars more?

The Economy Prompting Degrees of Lifestyle Adjustment Across Segments. Hard Times and Nouveau Poor Report the Most Change

Lifestyle Changes in Past Six Months

10 pt 13 pt

12 pt

9 pt

Page 40: Grocery Shopper Presentation Wave Ii Q3 2009

39

Healthcare and Charitable donations have taken a hit, especially among the “less impacted” segments

17%26%

53%59%

42%

Cautious Comfort Optimizer Modest Means Hard Times Nouveau Poor

35%41%

52%59%

67%

Cautious Comfort Optimizer Modest Means Hard Times Nouveau Poor

% Reporting cutbacks in healthcare spending

% Reporting cutbacks in charitable donations

10 pt 7 pt 5 pt

10 pt 12 pt 6 pt

Green font – significant improvement in condition since Q2

Red font – significant deterioration in condition since Q2

Page 41: Grocery Shopper Presentation Wave Ii Q3 2009

40

30%

16%

65%

49%

32%

48%

Unfazed Cautious

Comfort

Optimizer Modest Means Hard Times Nouveau Poor

Q14. How important is it for you to get the absolute lowest prices when

you are grocery shopping?

Absolute Lowest Prices are an Imperative for Modest Means, Hard Times and Nouveau Poor. Yet, Nouveau Poor Appears Less Resolved in Q3

Absolute Lowest Prices% Rating Extremely Important

20 pt

Green font – significant improvement in condition since Q2

Red font – significant deterioration in condition since Q2

Page 42: Grocery Shopper Presentation Wave Ii Q3 2009

41

For Grocery Categories, Brand Abandonment has Accelerated Across all Segments, with Private Label Gaining Ground

80%

60%

36%

20%26%

45%

Unfazed Cautious

Comfort

Optimizer Modest Means Hard Times Nouveau Poor

6.6%12.3%

31.9%26.7%

1.8%8.4% 8.2% 10.6% 13.0% 10.7%

25.9%

16.9%

Unfazed Cautious

Comfort

Optimizer Modest Means Hard Times Nouveau Poor

Store Brands / Generics % Categories

Lesser National Brands % Categories

% of categories where “usual” brand still purchased

% of categories where alternative brand purchased

Page 43: Grocery Shopper Presentation Wave Ii Q3 2009

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Although Less Reliant on Promotions Than Other segments, Cautious Comfort Shows Signs of Increased Vigilance Compared to Q2

16.0%

38.0% 38.0%

18.0%26.0% 23.0%

40.0% 40.0%

52.0%

24.0%

Cautious Comfort Optimizer Modest Means Hard Times Nouveau Poor

Doing more research and comparison shopping

Using the Internet more frequently to research products...

6 pt 24 pt

During the same time, Modest Means and Nouveau Poor have eased up

8 pt

23.2%

49.5% 51.4%51.0%

64.0%58.0%

74.0% 72.0%67.4%

30.2%

Cautious Comfort Optimizer Modest Means Hard Times Nouveau Poor

Rely more on weekly circulars to decide where to shop

Stock up on sale items

8 pt 6 pt 21 pt 21 pt

Page 44: Grocery Shopper Presentation Wave Ii Q3 2009

43

46% 54%48%

47% 45% 46% 46% 50%

48% 49%

Cautious Comfort Optimizer Modest Means Hard Times Nouveau Poor

I will return to my previous spending habits

I will spend a little more, but try to be more conservative than before

I will continue to use my saving strategies

I don't know

Hard Times and Nouveau Poor Show Less Resolve in Q3 to Return to Old Spending

Q8. Once the economy improves, do you anticipate that you will continue to use the saving

strategies you are implementing to weather this tough economy or will you return to your previous

spending habits?

13 pt 12 pt 9 pt

Page 45: Grocery Shopper Presentation Wave Ii Q3 2009

44

In Conclusion…

• While news reports may have reported the end of the recession, this

economic downturn is far from over in the minds and behaviors of our

average American grocery shopper.

– Times are still hard for the average American

– And we're not out of the water

- while some leveling has occurred among those most devastated by this downturn, others are newly entering this space

– Current perceptions of the economic climate is weak, but most see a more optimistic future

– But . . . purchase behavior is changing

- Those who initially took a brand search strategy are seeking convenience by abandoning brands and shopping cheaper stores

- Those new to cost cutting are adopting a brand search strategy (at least initially)

– And, we don’t see an intention to go back to previous behaviors

Page 46: Grocery Shopper Presentation Wave Ii Q3 2009

45

Recommendations

• Intervention is required by both grocery retailers and manufacturers to reinvigorate

their relationship with their customers

– Relevant product/service differentials

– Quality

– Focus on health/environmental sustainability

– Improved overall value proposition – based on good pricing

Page 47: Grocery Shopper Presentation Wave Ii Q3 2009

46

Key Demographics

Q3 2009

(N=1,021)

Gender

Male 21%

Female 79%

Age

18 – 34 years of age 22%

35 – 49 years of age 43%

50 – 64 years of age 35%

Mean 44.2 years of age

Region

Northeast 22%

South 33%

Midwest 26%

West 16%

Not specified 2%

Q3 2009

(N=1,021)

Education

High School graduate or less 23%

Some College 29%

Associate’s Degree 12%

Bachelor’s Degree 25%

Graduate or Professional Degree 11%

Employment Status

Employed full time 45%

Employed part time 14%

Unemployed/Looking for work 14%

Unemployed by choice 17%

Retired 10%

Annual Pre-Tax Household Income

Under $75,000 65%

$75,000 and higher 30%

Prefer not to say 5%

Mean (estimated) $63,850

Page 48: Grocery Shopper Presentation Wave Ii Q3 2009

THANK YOU

Debra Patek

Chief Economist & Cofounder

ThinkVine Corporation

513-235-3823 Office

[email protected]

47

Jane Mount

Executive Vice President

Digital Research, Inc.

207-985-7660 x121

[email protected]

Media Inquiries

Jeff Mills

VP Marketing & Client Engagement

ThinkVine Corporation

513-477-1729 Office

[email protected]