WAL-MART: HELPING CONSUMERS NAVIGATE A TRANSFORMING ECONOMY

EXECUTIVE OVERVIEW

June 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 edition of Times & Trends reveals shifts in shopping and purchase behavior at Wal-Mart over the past year as consumers struggle to make ends meet. A free summary is also accessible via the GMA website at www.gmaonline.org.

INTRODUCTION

The transformation underway in the U.S. economy has left consumers struggling to make ends meet. Roughly half of U.S. consumers in households with income under $55,000 per year -- 60% of the population -- are having difficulty buying the groceries they need.

This environment has driven unprecedented changes in what consumers buy, where they shop and even how they eat. For many consumers, these changes have included an increased reliance on supercenters. Low prices and one-stop shopping have proven to be an incredibly powerful combination at a time when consumers are forced to strategize to maximize gas and stretch budgets as far as they will go.

Wal-Mart is exceptionally well-positioned for growth. Not only has the company put measures in place to ensure that prices stay low, but Wal-Mart has also invested heavily to deliver a more positive shopping experience.

This report explores Wal-Mart’s role in helping consumers navigate this transforming economy and what this means for manufacturers and competing retailers

KEY FINDINGS

»Wal-Mart share of CPG spending increased as gas and CPG prices escalated. Throughout the past year, as consumers have encountered increases in CPG prices and gas prices, they have stepped up their share of spending within Wal-Mart. Wal-Mart share spiked in the second quarter of 2007 as both gas and CPG prices initially increased and rose again when gas prices skyrocketed in the fourth quarter of 2007. Manufacturers and competing retailers need to carefully track emerging shifts, as the economic transformation underway will continue.

»Wal-Mart secured share gains in 84 of the top 100 CPG categories. Consumers are increasingly turning to supercenters for one-stop pantry stocking trips in an effort to save money on product purchases as well as gas expenditures. As a result, Wal-Mart has gained in the vast majority of CPG categories. Manufacturers need to re-assess distribution strategies and work to ensure optimal shelf space and placement within supercenters.

»Consumers are increasingly turning to Wal-Mart for at-home meal solutions. As highlighted in the May issue of Times & Trends, consumers are preparing more meals at home to save money, and are getting back to basics -- cooking more from scratch and/or assembling meal components, rather than buying pricier, ultra-convenient prepared meals. Wal-Mart has increased share across a number of meal ingredient and meal component categories, signaling a greater role in delivering meal solutions to consumers.

»Private label has not played a prominent role in Wal-Mart’s rebound. While private label share increased at the all-outlet level throughout the past year as consumers look for opportunities to stretch dollars further, this trend has not held true at Wal-Mart. Wal-Mart private label unit share steadily improved over the past five quarters versus prior year, but it remains negative. Consumers appear to be focused on low-priced national brands at Wal-Mart more so than private label options.