IRI Study Uncovers New Turning Point in Consumer Shopping Patterns.

CHICAGO -- IRI Examines Historical and Emerging Channel Migration Trends

"One-stop-shopping" has clearly become an outdated term, since three-quarters of today's consumers shopped in five or more channels this past year to meet their consumer packaged goods (CPG) needs. During the past decade, consumer channel migration has resulted in sizable share shifts across channels. This trend, however, is showing signs of slowing. According to the latest Times & Trends report, "Channel Migration: A New Turning Point in Consumer Shopping Patterns," from Information Resources, Inc. (IRI), the leading global provider of enterprise market solutions, CPG channel migration has reached a crossroads as grocers are successfully maintaining market share, and supercenters are now gaining share predominantly from traditional mass merchandise stores.

"Consumer drive for convenience and value-based pricing, coupled with the increased number of shopping outlets carrying CPG products have fueled channel migration for the past decade," said IRI Global Chief Marketing Officer Andrew A. Salzman. "We are beginning to see a shift in consumer shopping patterns as supercenter markets become increasingly saturated and grocers reposition their efforts through new upscale formats that offer an expanded selection of fresh foods, prepared foods, and organic products. This IRI report is intended to help CPG manufacturers and retailers see new market opportunities and risks resulting from changes in channel migration trends, so that they can act on these insights with speed and confidence and win at the shelf."

Total CPG Market Share Shifts

During the past three years, supercenters have gained nearly three share points among CPG products at the expense of the grocery and traditional mass merchandise channels. The pace of change has slowed significantly, however. Supercenters gained only 0.7 share points this past year versus 1.2 in 2004, and grocery share loss this year was minimal versus a 1.1 point loss in 2004.

Consumers' shopping trip shifts have been less dramatic than market share changes, but they are following a similar pattern. During the past three years, supercenters earned a nearly two-point gain in trip share, while grocers have lost 1 percent of total shopping trips, and traditional mass merchandisers have lost 2 percent. The trend shifted this past year as grocers successfully kept consumers in their stores--a major win in the face of long-term, intense cross-channel competition.

Food & Beverage

Despite years of channel migration, grocers continue to capture the vast majority of consumer spending across food and beverage departments. Grocers are clearly in the defensive position versus other channels in these departments and experienced modest share losses in all but bakery and snacks this past year.

The report emphasizes that it is critical to track brand, category, and store-level channel shifts, which often deviate from total industry trends. According to the IRI report, a number of food and beverage categories, such as frozen appetizers/snack rolls, pasta and sugar are experiencing channel shifts that far outpace the total CPG average. The largest shifts cut across a broad range of departments, including refrigerated, frozen and shelf-stable and included both basics and more discretionary purchases. Clearly, category events, such as substantial price increases and increased merchandising activity, heavily influence channel selection.

High-ticket, stock-up and impulse purchases characterize the most "hotly-contested" cross-channel categories. For instance, snacks and beverages exhibit the highest degree of channel fragmentation. Within snacks, chocolate and non-chocolate candy--heavy impulse purchases--have the most widespread channel share mix. Higher-ticket wine and spirits have the least share concentration among beverages. According to the IRI report, these two departments should be considered important components of retailers' cross-channel competitive marketing and merchandising strategies.

Private label does not appear to be a major factor in successful cross-channel competitive strategies. Across most of the "hotly-contested" categories, private label share is well below average. Consumers are looking for deals on national brands.

Non-Foods Share Shifts

Within non-foods, the cross-channel battle for share is particularly intense. Consumer spending is much more widely dispersed across channels among non-foods versus food and beverages. As many non-food categories are well suited to stock-up and advance purchase, consumers appear more likely to purchase these products when they see a good deal.

Price and promotion are critical tools in the cross-channel battle for non-foods. Categories with strong cross-channel competition are typically high-ticket items for which consumers seek deals, such as beauty and personal care. With the exception of healthcare products, consumers are not turning to private label for these deals. As with food and beverages, name brands appear to be an important component of retailer initiatives to capture share within these categories.

Consumer Trends

Contrary to conventional wisdom, which suggests large families with large grocery bills are doing the most channel hopping, the heavy channel migrators are actually smaller households led by baby boomers. These consumers spend roughly 4 percent less per buyer on CPG products than "light" channel migrators, who skew toward larger households.

Given the massive growth of the age 55 and older segment that is expected during the next decade, the pace of channel shifting may accelerate as the 45-54 year-old consumers cross into the 55-plus life stage. However, the report cautions that the aging of the 55-64 year-old segment into seniors may counteract this effect.

About the Report

Findings presented in Times & Trends: "Channel Migration: A New Turning Point in Consumer Shopping Patterns," are based upon an extensive analysis of consumer data from IRI Consumer Network(R), and IRI InfoScan(R) Reviews. For an in-depth view of the report, click on http://us.infores.com/page/news/times_and_trends.

About Information Resources, Inc.

Information Resources, Inc. (IRI) is the world's leading provider of enterprise market information solutions and services, empowering its clients to grow their business profitably in a complex marketplace. Driving the transformation of the consumer packaged goods (CPG), retail, and healthcare industries, only IRI provides a unique combination of real-time market content, advanced analytics, enterprise performance management software, and professional services. The company's portfolio of services, solutions, and technology enable leading retailers and their suppliers around the globe to see what they are missing, act faster with greater confidence and win at the shelf. Ninety-five percent of the FORTUNE Global 500 in CPG and retail leverage IRI to power their business. For more information, visit http://us.infores.com.