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27 June 2008
Australia
The recent combination of increased fuel prices and interest rate hikes is taking its toll on in-store spending by consumers in the petrol and convenience trade, a report released today by The Nielsen Company has revealed.
Close to three quarters of Australian consumers (74%) say their lifestyle has been negatively affected by fuel price increases, with two of the top three responses to rising fuel prices being to stop buying non-essential items at the supermarket and at petrol stations. (Refer to Chart 1).
According to the 2008 Nielsen ShopperTrends Report, growth for packaged merchandise* sales in the convenience channel has plummeted to below two percent in February this year coinciding with the latest interest rate rise and when fuel prices peaked at an Australia metro average of $1.37 per litre. Just six months earlier, in August 2007, convenience sales were growing at a healthy nine percent when fuel prices averaged at around $1.23 per litre (Refer to Chart 2).
In addition, the Nielsen ShopperTrends Report reveals that the convenience channel has recorded declines in consumer patronage over the past year with only around two in five (42%) consumers claiming to have visited a convenience outlet in the past seven days in 2007, compared to over half (53%) in 2006. Convenience store patronage on a four-weekly and occasional basis had also recorded declines (Refer to Chart 3).
“While the outlook for the convenience channel currently looks a little grim, our research trends show that consumers initially react quite dramatically to external shocks, but they are usually quite buoyant and their spending habits bounce back pretty quickly,” says Kosta Conomos, Executive Director, Pacific Retailer Services, The Nielsen Company. “We saw this happen when fuel prices initially peaked in the second half of 2005 and convenience growth fell quite dramatically. Consumers proved to be fairly resilient, and after a couple of months, growth in packaged merchandise sales in the convenience trade recovered despite the fact that fuel prices continued to rise.”
Notes Conomos: “The difference with the recent fuel price hikes is how long it will take for consumers to recover from these external shocks given that it has been coupled with rising interest rates.”
When it comes to retail channels outside of the convenience trade, supermarkets continue to be the retail channel where consumers spend the most money and visit most often. However, the popularity of gourmet food stores continues to rise as consumers demand better quality fresh produce and increasingly support their local community retailers.
In 2007, around one-third (31%) of consumers claimed to have visited a gourmet specialty food outlet in the past four weeks – up from just 23 percent in 2006. Occasional use had also increased from 41 percent in 2006 to 52 percent in 2007 (Refer to Chart 4).
“The latest Nielsen report shows that in terms of overall consumer trends – freshness and quality of fresh produce, as well as products that are healthy and convenient continue to grow in importance. Consumers are willing to shop around and pay a premium for fresh produce that they perceive to be of superior quality. We have already seen the key supermarket chains start to take advantage of these trends with some of their recent campaigns e.g. Woolworths Fresh Food Kids, Aldi’s Just Organic range and IGA’s Food for Life. The focus on fresh will continue, particularly as manufacturers also start to make inroads in this area.”
“Certainly in the convenience trade retailers are also putting a huge focus on improving the quality of convenient, fresh and healthy snacks they offer. If manufacturers and retailers can work together to modify store layouts and products on offer to better engage and tempt the consumer and take advantage of these growing trends, this will ultimately help to drive a speedy recovery in the convenience channel,” says Conomos.
*Convenience growth is measured by Nielsen’s ScanTrack Convenience service which measures a fixed number of packaged merchandise/grocery categories. Sales for non-branded proprietary products e.g. fresh sandwiches, hot snacks and bakery are not included in this measure.
Chart 1: Consumers reducing spending on non-essential items in response to rising petrol prices and interest rates
Chart 2:
Fuel prices and interest rate rises versus convenience channel growth
Chart 3:
Trade sector leverage – supermarkets and convenience
Chart 4: Trade sector leverage – gourmet specialty stores
About Nielsen ShopperTrends
Conducted annually, ShopperTrends provides retailers with insights in consumer shopping behaviour, key retail trends and factors driving shopper satisfaction and loyalty. It allows key retailers to assess their performance relative to its competition and quantify the potential for areas of development. It also helps understand shoppers’ awareness and usage of Private Label products. For more information on the 2008 ShopperTrends Report, please contact your Nielsen representative or visit http://au.acnielsen.com/products/crs_shoppertrends.shtml
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions and recognised brands in marketing information (ACNielsen), media information (Nielsen Media Research), business publications (Billboard, The Hollywood Reporter, Adweek), trade shows and the newspaper sector (Scarborough Research). The privately held company is active in more than 100 countries, with headquarters in Haarlem, the Netherlands, and New York, USA. For more information, please visit, www.nielsen.com.
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