Times & Trends

CHANNEL MIGRATION 2008

EXECUTIVE OVERVIEW

July 2008

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 special edition of Times & Trends reveals an acceleration in channel migration trends as consumers battle challenging economic conditions. A free summary is also accessible via the GMA website at www.gmaonline.org.

INTRODUCTION

Last year’s channel migration update revealed a moderating channel migration trend, with nominal supercenter gains. How times have changed.

Over the past year, channel migration has accelerated as consumers face skyrocketing gas, energy and CPG costs – all at the same time. Supercenters secured sizable share gains over the past year, across every major CPG department. Further, gains occurred across income segments, as channel penetration extends beyond core lower-income consumers to middle and upper-income groups.

With the economy not expected to rebound until at least the second quarter of 2009, there is ample time for consumers to become comfortable with their new shopping patterns, suggesting that these changes and the competitive ramifications could have some staying power.

This report explores shifting shopping behavior across departments, categories and consumer segments to provide both retailers and manufacturers with a foundation for competitive and distribution strategy development and a baseline for ongoing tracking.

KEY FINDINGS

»Consumers have shifted dollars to supercenters. After several years of relatively modest share gains, the supercenter significantly stepped up share this year. Share gains were sourced primarily from the traditional mass channel, as consumers opt for one-stop shopping to conserve gas, but across categories, the supercenter channel also secured sizable gains from grocery, club and drug stores.

The grocery channel is losing ground across high-demand meal ingredients and components. As consumers struggle to make ends meet, they are eating out less and preparing food at home more, creating high demand for meal ingredients and components. While this increased demand should be a boon to grocery retailers, the channel is losing substantial share across these categories to supercenters, highlighting the need for availability and promotion of affordable meal solutions.

An intense cross-channel battle has ensued across self-care categories. The “self-care” movement has gained steam over the past year, as consumers avoid expenses, including doctor visits. As a result, demand is on the rise for over-the-counter remedies and vitamins, and channels are battling it out for greater share of this growing market. While drug stores and supercenters have earned the largest gains overall, both the grocery and club channels have also made big strides in select categories. Expect continued focus on establishing stores as self-care centers.

Retailers are successfully growing share among top channel shoppers. Despite intensified cross-channel competition over the past year, retailers have successfully maintained or grown total share of CPG spending among top channel shoppers – a testament to the value of investing to understand and cater to the evolving needs of top customers.