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Cutting prices alone won't cut it; try frozen food displays and ads.

Supermarket Merchandising

Cutting Prices Alone Won't Cut It; Try Frozen Food Displays and Ads

Frozen products generate more volume than other food categories when promoted. Part of the reason is that their typical 21% discount is deeper than the 18% store average, says Nielsen.

Special displays, especially supported by advertising, are the best means of increasing frozen food volume, according to a study prepared for the National Frozen Food Association by A.C. Nielsen Company's Atlanta office.

The study also showed that Frozen Food Month in March does have an impact on sales, but primarily through getting people to shop more often and increase purchases, rather than convincing more people to try frozen food in the first place.

Food retailers have to become more choosy about how they spend their promotional budgets, the Nielsen study warned, because while promotional expenditures have advanced at an average 11.5% a year rate since 1979, grocery sales have grown at only 6.2%.

One of the key findings was that temporary price reductions, "the most frequently employed promotional vehicle," are actually the "least effective for generating incremental weeks of business." Price cuts alone bring in only .4 incremental weeks of frozen food sales, vs. .98 weeks for any promotion, 1.54 for a feature ad, 1.83 for a display, and 6.17 for a display and feature ad combined. Yet retailers have been devoting 62.5% of their promotional efforts to temporary price reductions, vs. 29.5% to feature ads, only 5.5% to displays and a piddling 2.5% to display-ad combinations.

Another key finding is that frozen foods respond better to promotion than just about anything else in the store -- the average incremental weeks of business for all foods and non-foods were only .37 for temporary price reductions, .87 for any promotion, 1.27 for displays, 1.33 for feature ads and 4.8 for displays plus ads. Only non-foods responded better to price cuts and feature ads, while dairy and dry groceries tied; dairy also tied FF in response to feature ads alone. Frozen foods decisively beat all other categories in response to displays and displays plus ads.

Promotion of individual frozen food items also does more to boost category sales than item promotions in any other department -- six percent incremental weeks of business, vs. three percent for dry groceries and two percent for non-foods. But temporary price cuts add only three percent, vs. 13% for ads, 20% for displays and 34% for displays plus ads. Gross margins for frozen food promotions, indexed at 100, exceed those for dry grocery (78) and dairy (24), but fall short of those for health and beauty care and non-foods (118). Feature ads bring only 10% more profit, due to price cuts that go with them, but displays alone increase FF profits 115% above those for just any promotion (price cuts alone reduce them!).

Nielsen's study of the impact of Frozen Food Month actually seems a bit ambiguous -- true, the frozen food sales index for March turned out to be 108, but that was second to February at 109, while January was third at 107. April was the worst, at 83, as if there was a big letdown after Frozen Food Month. But May and June were tied at 104. For March 1991, the number of households buying FF rose only slightly, from 82.1 million to 83.4 million -- since 99% of all households shop regularly for groceries, the study noted, "patronage is at such a high level, it is unlikely that promotions will push it higher."

But reading between the lines, one can conclude that Frozen Food Month might do a lot better if more emphasis were put on displays and display plus feature ad combinations. The study also warned retailers of lost sales from out-of-stocks. When shoppers can't find the item they're looking for in the store, 52% will buy another size of the same brand and 30% will buy another brand, but 18% won't buy the product at all. For manufacturers, it's worse -- 30% and 18% add up to 48% of the shoppers who won't buy their brand if they can't find the size they want. Average daily sales are 2.41 units of each item per store, so out-of-stocks mean 1.16 lost unit sales a day for manufacturers and .43 units for retailers. Such losses amount to $4.8 million a year for a typical manufacturer, and $1.2 million for a 400-store supermarket chain. [Graphs Omitted]
COPYRIGHT 1992 E.W. Williams Publications, Inc.
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Title Annotation:Supermarket Merchandising
Publication:Quick Frozen Foods International
Article Type:Industry Overview
Date:Jan 1, 1992
Previous Article:Quality ice cream lines and freezer boom hold key to desserts growth, says report.
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