Ice cream as personal stimulus package

Despite the Great Recession, ice cream and frozen desserts are doing well for one simple reason:  they are comfort items that make people happy.  (Ditto for dogs.)  Edvard Munch's iconic "The Scream" recently sold for a record $120 million at auction in New York, but that's chopped peanuts compared with the $25.1 billion U.S. market for ice cream and frozen desserts, up 2.4% over the previous year despite the hard times.

This is nothing new.  Ice cream and frozen desserts have long provided “small indulgence” respites from economic woes, with some of today’s most popular brands and flavors having been introduced or popularized during the Great Depression.  Among these are Carvel, Friendly’s Ice Cream, Good Humor, and Rocky Road—a flavor created by Dreyer’s in 1929 and named “to give folks something to smile about." (Ditto for candy bars, which flourished in the Depression era—think Payday, introduced in 1932.)

Recession aside, ice cream and frozen desserts have long had a huge consumer following in the U.S., both at retail and on the foodservice side.  According to a March 2012 survey conducted by Packaged Facts, almost three out of four U.S. adults (73%) eat ice cream or frozen desserts.  Not surprisingly, consumers enjoy more of these treats in the summer, but the recent unusually warm winter boosted business during the first quarter.  Some 86% of adults who eat ice cream/frozen desserts have done so at home (or someone else’s home) within the last six months, two out of five have bought ice cream or frozen desserts at a scoop shop for take-out during this timeframe, and one out of four has enjoyed these products sitting down in a scoop shop and/or at a restaurant after a meal.

In the retail arena, recent launches making a big splash include frozen Greek yogurt, TCBY frozen yogurt,  Unilever’s Magnum ice cream bars, and Nestlé’s new Wonka Ice Cream brand.  That Mediterranean Diet to Willie Wonka arc tells the story: while households with children remain the heaviest consumers of ice cream, the industry continues to shift toward premium and superpremium formulations that target adult palates.  Store brands correspondingly have gotten more sophisticated—think Wegman's Food You Feel Good About Organic Dark Chocolate Ice Cream. The main reason, of course, is the aging of the U.S. population.  Older consumers might or might not count calories, but they are more likely to want their calories to count.   Another is that self-indulging adults are less sensitive to price changes.  Flavor is critical to product success, but witty product names and marketing campaigns don’t hurt, either.  And while comfort has been the name of the game during the recession,  consumers are likely to swing to celebratory splurges as the economy improves.

Anti-time in a bottle

Flawless skin. Silky hair. Lustrous lips. Anyone who has ever walked a drugstore beauty aisle is aware of the promises made by the array of lotions and potions populating store shelves. Cosmeceutical marketers are working hard to deliver on these promises, investing research and development dollars to create products that offer not only beautification of the outside, but actual treatment of skin and hair conditions from the outside in.

As reported in Packaged Facts’ Cosmeceuticals in the U.S. (April 2012), consumers are looking for skin care, hair care and color cosmetic products that will improve their appearance virtually overnight (in the spirit, if not at the cost, of the surge in quick-fix plastic surgery) while also demonstrably delivering long-term improvements to skin and hair health.  According to Packaged Facts’ March 2012 online consumer survey, 28% of respondents purchase anti-aging-specific skin care or cosmetic products, and 15% purchase skin care and cosmetic products due to their antioxidant content claims.

Prompting the growth in demand for these products is the “graying of America” and Boomers’ desire to keep the effects of aging at bay.  Also influencing growth in the cosmeceuticals market is the insistence of recession-battered consumers on getting more for the money—and indeed cosmeceuticals typically offer the performance of standard products plus extra health benefits, usually in the form of added marquee ingredients. 

Typically these marquee ingredients are "natural," and many hail from the food and beverage aisles, capitalizing on headline food and nutrient trends.  Marketers have long worked the overlap between the natural cosmetics market and cosmeceuticals, as consumer demand for natural but functional ingredients to replace undesirable chemicals in their products has risen to an all-time high. 

Particularly strong sellers are mass-market versions of high-end products at price points more palatable to middle-class shoppers.  Many consumers are willing to buy more expensive mass-market moisturizers and conditioners when they are presented or perceived as a relative bargain compared to department store and salon products (if not to old school, standard formula mass-market personal care).

So what do cosmeceutical consumers want?  Paradoxically, instant and long-term anti-aging that's natural--and affordable.  Convenience is taken for granted.

Millennials: More settled than you might think

Although popular culture often imagines 18- to 29-year-olds as living the life of freewheeling, unattached singles, many in this age group have already settled down.  When advertisers think about how to approach adult Millennials, they need to remember that there is a more than one in three chance that those in their target audience are absorbed in the mundane details of supporting a family, running a household and raising children.

Data cited in Packaged Facts' May 2012 report, Millennials in the U.S., show that more than a third of 18- to 29-year-olds are either married or are living as part of a couple.  About the same percentage are or will soon be parents.

Still, there are many generational ties that bind Millennials, regardless of their stage of life.  These include a deep comfort with technology, heavy involvement in social media, a multitasking mentality and non-stop immersion with screens on cell phones, digital tablets and PCs.  The challenge for marketers is to leverage this common ground while showing an appreciation for the diverse lives Millennials lead in fact rather than fiction.

Dog and cats as America’s four-legged therapists

You can’t pet a goldfish. You can’t take a hamster on a three mile run through the park. And you can’t teach an old (or young) hermit crab new tricks. Reptiles? Not the most ideal snuggle buddies on chilly evenings. Pet pigs? Those are speed bumps for the SoHo social networker on the go.

But dogs and cats, now there’s a pair that many Americans can get behind. And not just as animals worthy of all the doting our pet parenting instincts can muster, but because these animals provide a discernable psychological boost to those they interact with. True, dogs and cats have long been a staple of the practice of animal-assisted therapy for hospitalized individuals. In the 21st century, however, an increasing number of pet owners with all options open are boldly proclaiming that their cats and dogs are more than just family or companions—they are the therapy these individuals always knew they needed. It’s the reason why memoirs such as Bruce Goldstein’s Puppy Chow Is Better Than Prozac: The True Story of a Man and the Dog Who Saved His Life resonate with so many Americans.

According to Dog Population and Dog Owner Trends and Cat Population and Cat Owner Trends, twin reports just released by Packaged Facts, 75% of dog owners and 84% of cat owners agree that their pet positively impacts their mental health. Rather than footing costly therapist bills, many of these pet owners are opting to reward their four-footed therapists by purchasing higher-priced pet products and services—particularly those positioned squarely on health, as well as on other premium appeals including pampering, safety and convenience.

Bruce Goldstein describes himself as an edgy, twenty-something New Yorker, but there are many demographic varieties of pet parents. Baby Boomers recently dealing with the empty-nest stage of life, as well as other adults in households without children, are prominent among those turning to dogs and cats as mental health benefit providers. If the trend grows, as Packaged Facts believes it will, the pet industry will continue to be heavily influenced by the spending habits of Baby Boomers and other households with the discretionary income to ensure that their dogs and cats live as smartly and age as gracefully as they do, or at least have trendier meals and better toys as time takes its toll.

Targeted health and wellness foods: What's inside

Taste, convenience, and price are typically cited as the most influential factors when consumers are grocery shopping.  But when shoppers are making purchase decisions based on their own specific health concerns or those of other household members, the health benefit reputation of a food, beverage, or ingredient is by far the most compelling driver.

This is among the findings from a proprietary consumer surveys conducted by Packaged Facts for our report on Targeted Health and Wellness Foods and Beverages: The U.S. Market and Global Trends (March 2012).  Other Packaged Facts research surveys show similar results, as health benefit reputation is overwhelmingly the number-one reason shoppers buy high-antioxidant and high-omega food and beverage products.

According to a May-June 2011 survey conducted by Packaged Facts—with a sample of 2,000 U.S. adults who in aggregate were Census representative on the primary demographic measures of gender, age bracket, race/ethnicity, geographic region, and the presence of children in the household— nearly two-thirds (63%)  of U.S. grocery shoppers have purchased a food or beverage in the past year for the purpose of addressing one or more of 22 common health and wellness concerns.

 Notably, a larger percentage of adults consumers choose foods or beverages for the management of two specific health concerns—cholesterol (24%) and digestive health (23%)—than for key general functional or quality-of-life benefits such as energy levels (17%) or appearance/beauty (13%).

In seeking to address such health concerns, shoppers are proactive about doing research to educate themselves about dietary nutrients.  Just over half of targeted health and wellness product shoppers consider health, nutrition, and wellness websites to be among the most valuable sources of information — the type of information that contributes to the all-important health benefit reputation of a product.  In fact, these shoppers consider the Internet to be significantly more useful than other types of media, including journals, magazines, newspapers, TV programming, and radio.

Particularly through the Internet, therefore, it is critical that marketers of targeted health and wellness products convey the health benefits of their products clearly, consistently, and frequently, based on authentic cultural traditions and legitimate scientific research data.  Even when shopper purchasing of targeted health and wellness foods is only for a nice-to-have potential benefit, credibility is crucial to product success.

Don't drink and get downsized

In the wake of the bleakest economic period that the country has faced in nearly a century, the pressures of the job market are popping up in unlikely places.  As noted in Packaged Facts’ report on Antioxidant Products in the U.S., for example, Employee Vita Occupation-Specific Vitamins were not just targeted but "tailored" to specific occupational health needs.

According to the company's website (now offline) , this was “achieved by creating proprietary blends that addresses unique health needs such as immunity, stress, energy, joint care, skin care, focus, clarity, heart health, etc., eliminating the need for someone to figure out what they should take as well as eliminating the expense and inconvenience of taking multiple vitamins."

Farther afield in the novelty products arena are Health Essist Health-E-Strips Alcohol Defender hangover-prevention strips, which garnered 101 “likes” on facebook.  The mint-flavored, tape-like supplement contains milk thistle, Vitamin C, and other ingredients, and is designed to dissolve in the mouth before drinking.

Not to be outdone by mint tape, beverages claiming to prevent hangovers have dipped their toe into the antioxidant beverages market.  Resurrection Anti-Hangover brand, created by Mississippi's Magnolia Beverage Company, markets itself as the first ever "Pre-Tox" beverage. 

Resurrection ($4) works by drinking before, or while, consuming alcohol.  According to the marketer, the proprietary herbal blend helps prevent the formation of cytokines, which are free radical by-products, created by the body in response to excessive alcohol consumption.  Cytokines create flu-like effects on the body’s tissues, resulting in headaches and nausea.

In this same vein is the Mercy brand anti-hangover drink, debuting in 2011 from the New York City-based Neu Industries.  According to the company's promotional material, however, Mercy is "targeting a more mature crowd—that is, people with day jobs.”  It’s not just don’t drink and drive these days, but also don’t drink and get downsized.

The shrinking middle (pet market) class

Is the middle slipping out of the pet market?  In crunching the numbers for Pet Product Retail Channel and Consumer Shopping Trends in the U.S. 2012, Packaged Facts expected to see discount stores increase their pet product shopper base, given the ongoing economic sluggishness.  Instead, it’s the pet specialty channel that’s been advancing.  From 2007 to 2011, pet stores saw their customer base rise from 50% of dog or cat owners to 56%, a net add of 5.5 million shoppers.  Meanwhile the discount store pet product shopper base fell from 31% to 28%.

There’s no question pet owners, like virtually all Americans, tempered their spending during the recession.  But the steady shift into the higher-priced pet specialty channel makes it clear the upper end of the market is alive and well.  During the past decade, much of the value of the U.S. pet market has shifted into more recession-resistant higher-income demographics. The latest Census Bureau data confirm that this upmarket shift continues, both cause and effect of the product premiumization trend at play for several years now, increasingly concentrating pet market value among significantly higher-priced products.

Still, given the Great Recession, how to explain discount stores’ declining pet product shopper base?  Although Walmart, Target, and the like have been coming on strong in the pet market, they no longer have the price-focused consumer to themselves.  While the pet food recalls of 2007 took pet owners seeking safer foods out of discount stores and into the pet specialty channel, the recession has pushed discount store shoppers into even more bargain-priced channels.

Dollar stores and wholesale clubs have therefore been coming on strong, through a combination of EDLP and new store brand programs.  According to Gino Biondi, director of private-brand development for Family Dollar, pet “is one of FD’s fastest-growing categories, and our private-brand pet business is growing even faster” (Pet Business “Pet Aisle” special report, Fall 2011).  Also worth noting on this front is the new Simply Right store brand pet food line from Sam’s Club.

Where does all this upper and lower market action leave the middle?  Well, it’s clearly still there.  In Packaged Facts’ September 2011 Pet Owner Survey, 55% of pet product buyers characterize the pet food they buy as average priced.  However, unless you’re a Nestlé Purina or a PetSmart, your middle market prospects may be limited.  Why?  One of end of the spectrum are devoted pet parents—the dream consumers of the pet market—and these informed shoppers who know you get what you pay for.  At the opposite end of the spectrum are pet owners determined to buy on the cheap, without too many questions asked.

These days, the pet market line is increasingly drawn between those who view their pets as family members and buy the best foods they can afford for pet health and pet pampering, and those strongly focused on price.  As a result, pet shoppers are migrating in two directions—up or down, in either case siphoning shoppers out of the market middle.

Squeezing the coconuts

The “big three” dairy alternative beverages—soy milk, rice milk and almond milk—have become increasingly mainstream, such that “dairy alternatives” may eventually give way to a term such as plant milks, or even to a dairy-free descriptor that sheds reference to the king of the dairycase altogether.   Nonetheless, shelf-space competition and consumer substitutions will tend to keep these products in opposition, with battles won and lost based on relative advantages and disadvantages in price, flavor, food sourcing and processing, product nutrition and fortification, and food intolerances. 

But there’s also the role of novelty.  Generally speaking, consumers of plant milks are a more adventurous bunch than those who drink cow’s milk. Experian Simmons data show, for example, that 50% of whole milk fans like to try out new food products, compared with 60% of soy milk fans.  Similarly, 21% of whole milk fans describe themselves as quick to try out new nutritional products, compared with 34% of soy milk fans.  (Organic dairy milk consumers are an exception to this general pattern, falling in with the plant milks crowd.)

The need for the new among plant milk consumers has, in turn, helped almond milk steal thunder from soy milk.  According to a Packaged Facts survey conducted for our Dairy Alternative Beverages (January 2012) report, 40% of soy milk drinkers are drinking more of this product than they were five years ago, a stat worrisome to dairy milk producers.  At the same time, 62% of almond milk drinkers are downing more of this product than they were five years ago, a stat worrisome to soy milk producers.

But not to diversified producers such as Dean Foods, which is not only the leading U.S. processor and distributor of milk and related dairy products, but the owner of WhiteWave, Silk, and Horizon Organic, among other national dairy and dairy alternative brands.  Sales figures for WhiteWave refrigerated dairy alternatives, as tracked by SymphonyIRI, tell the story of ongoing churn in the plant milks market—and of successfully navigating these currents.  Soy milk still accounts for three-fourths of WhiteWave sales in this segment, but while sales are flat or down for the Silk soy milk product lines, they are booming for Silk Pure Almond (up 66% for the 52 weeks ending January 22, 2012), and surging for the debut year of Silk Pure Coconut, launched in March 2011. 

Simply being new or unexpected doesn’t equate to success in the plant milks market, of course, as is obvious from the modest sales of hazelnut milk or oat milk, which have been on the market for a number of years. A successful launch in the plant milks arena should have a unique and cleverly executed marketing message that emphasizes taste and a compelling nutritional story, while perhaps also rafting the white waters of novelty.  Here is where non-diversified dairy milk producers are at a disadvantage.  It’s not that milk producers can’t play the novelty card:  as observed in Freshness: Culinary Trend Mapping Report (February 2012), a joint publication of Packaged Facts and the San Francisco-based CCD Innovation, “regular milk remains a supremely fresh and popular product, now with all kinds of styles and forms bursting from the dairy case—organic milk, all levels of fat, new chuggable flavored milks, raw milk, goat milk, you name it.”   All of those new styles and forms, however, run the risk of eroding the primacy (in this country) and seeming inevitability of dairy milk—of downgrading dairy milk from king of the dairycase to merely first among equals.  The more that marketers create distinctive versions of dairy milk, the less original it becomes, even when those variations are beneficial; milk starts to shed the very naturalness and authenticity that is evoked (however fancifully) by product names such as soy milk or almond milk.  While plant milks can play the field, dairy milk can’t do new product cartwheels without giving up some high ground.

The venerable “Got Milk?” campaign from the California Milk Processor Board holds this high ground with a “real milk comes from real cows” slogan and a website that opens with retro milk bottle graphics and a “many imitations—still no equal” tossing down of the gauntlet.   WhiteWave, however, has no qualms about taking on what "Got Milk?" calls the real thing.   WhiteWave boasts that “Silk Pure Coconut  provides 50% more calcium than dairy milk—yet is completely lactose free,” and provides a nutritional table that shows 2% milk comparing unfavorably with Silk Pure Coconut in calories, calcium, cholesterol, and sugars.  With a stealing-a-page promise of “fresh, creamy taste,” Silk Pure Coconut recommends itself straight up, in your morning coffee, and for savory or dessert recipes, while Silk’s Facebook page shows plant milks being poured over breakfast cereal and paired up with chocolate chip cookies.   At least for its leading U.S. processor and distributor, milk is no sacred cow.

Despite economic headwinds, restaurant sales start their reignitions

While the U.S. economic recovery remains fragile, the restaurant industry is finding ways to spell relief. The FoodserviceLandscape in the U.S., our outlook report for the restaurant industry, projects that sales will grow 4.2% to $487 million in 2012, on the heels of 6.1% market growth in 2011.

Nonetheless, operators must continue to experiment aggressively with menu pricing strategies and focus on courting minority racial/ethnic groups—and prepare for profit margin compression.  The onus of food commodity price increases is sizeable enough to threaten the restaurant recovery unless restaurant operators are prepared to bite the bullet on profit margins.  Continuing a trend that gathered momentum in 2011, many operators will need to maintain menu prices at the expense of higher margins or risk losing customers.

In addition, demographic-specific employment trends will continue to have disproportionate consequences and create distinct opportunity micro-climates by restaurant industry segment and geographic zone.

Although the housing market remains in a trough, consumer spending is rising modestly. Household debt ratios have declined, which bodes well for the discretionary income growth needed to increase guest traffic and perk up guest check averages.  Food and accommodations spending is outpacing other personal consumption expenditures.  Moreover, restaurant companies will increasingly leverage the technological and marketing power inherent in the smartphone. Location-based services such as Foursquare are a relatively new aspect of social media, but we expect quick uptake to continue among consumers and foodservice operators.

By segment, full-service restaurants posted the highest growth rate, at 8.1%.  Fine dining had a moderate rebound in 2011, though the hill back to 2007 spending levels remains very steep. Growth in the restaurant breakfast (5%) and snack (8%) customers has outpaced population growth since 2008, and the overall percentage of consumers using restaurants for these occasions has increased—although the reverse trend holds among Generation X.  All natural and organic are not only the most prevalent health-related claims on restaurant menus, but their menu presence grew during 2007-2011.   In 2011 menus, 15.7% of restaurants featured a natural claim and 13.5% featured an organic claim.  Not surprisingly, the tendency to market these claims on menus rises with restaurant price points.

Consumers age 65 or over are spending significantly more (13%) on limited-service restaurants than they did in 2007. Millennial generation consumers, at the other end of the age spectrum, are spending significantly more on limited-service restaurants as well as full-service restaurants.

By household income level, those with an income of $100K or more generate over one-third of spending on meals at restaurants, even though they comprise only 17% of all households.  The number of higher-income households and of lower-income households has grown since 2007, while the number of middle-income households declined. Because restaurant spending correlates to household income, the crimping of the middle class is obviously and inevitably a major hurdle for the industry, as for the national economy overall.  

Packaged Facts estimates that the number of restaurant visits grew by 3% during 2008 to 2011, based entirely on population growth, not usage increase.  Even then, restaurant operators across restaurant segments contend with the increased numbers of lower-spending guests and decreased numbers of higher-income guests, which has translated to higher volume but lower guest check averages.

And food commodity price increases could set the restaurant industry back, threatening the modest sales recovery seen in 2010 and 2011. Such price increases have the potential to erode the pricing gains restaurants have made relative to grocery prices, creating increased incentive for consumers to eat at home, and throw into disarray the delicate balancing act so many restaurant operators now walk in planning their menu strategies, which rely more now than ever on hitting the appropriate pricing and food margin mix.  Facing reduced consumer discretionary income and higher rates of unemployment, some of the industry’s major chains are pursuing sales growth by creating sister brands or new brands that are cut from fast casual cloth. Enticements include expansion opportunities, reduced capital investment, and new customer bases.

Most importantly, further employment gains are needed to spur overall restaurant industry growth. Consumers age 18-24, those without high school diplomas, and African-American consumers in particular remain saddled with unemployment rates much higher than the average.

Poaching is in the cards in the consumer payments industry

With household incomes declining even as healthcare costs and student debt are rising, the overall consumer payments pie is shrinking, prompting payment providers to base profit growth strategies on taking market share from their competitors.  And with that strategy comes a renewed focus on marketing to specific demographics.  Through target marketing, competitors in the consumer payments industry can optimize the potency of each product-differentiating feature, mastering new payment and communication channels, and building loyalty programs based on cost sharing with merchants to maintain or grow market share.

Some consumer payment basics.  Mail remains the most commonly used bill pay channel regardless of household income, but higher-income households are the heaviest uses of online and automatic bill pay.  Among consumer credit cards, VISA has its slimmest lead over MasterCard in the case of the highest income earners ($150K or more).  Channel preferences similarly vary by levels of educational attainment. Non-high school graduates are the heaviest users of in-person bill pay, while those with graduate degrees are the heaviest users of online payment.  But everything is not that simple:  as household education levels increase, use of mail and automatic bill payments both increase.  Hispanics are the most likely to pay their bills in person, while Asians are the most likely to pay their bills online.

At the same time, as reported in our study on Consumer Payments in the U.S.:Trends Driving the Credit, Debit, and Prepaid Card Industries, generational cohorts use payment products and channels differently.  And within generational cohorts, many behaviors and preferences vary by factors such as income and education levels.

The accumulation (or lack thereof) of life experiences gives each generation its own voice, a unique receptivity to marketing messages and preferences for technology and channels. These differences create significant challenges but also creative opportunities for marketers who target cohorts with the style and substance to which they respond.

Millennials, for example, may well be the first generation in America that is truly downwardly mobile. On average, younger workers are earning less than previous generations when they were the same age. They are also facing high rates of unemployment.  Add to that $1 trillion in outstanding student loans—a 900% increase over 1997.

Not surprisingly, then, only 37% Millennials have or use credit cards, compared with 62% of adults overall.  Relatively speaking, nonetheless, on which credit card are Millennials disproportionately likely to charge it?  American Express, which doubles its market share among the highest earners.   Youth too has its privileges.