Cheek to Jowl with Pets

U.S. retail sales of pet supplies totaled $11.1 billion in 2011, up 2.0% over 2010.  From a high of 5% in 2007, annual sales gains slowed year to year during the economic recession of 2008-2009 and its aftermath.

Nonetheless, a number of market factors point to a return to healthier growth.  These include the industry’s success in playing up the human-animal bond to drive higher-ticket, sales of premium products, the strong market presence of upper-income households willing and able to spend heavily on pet supplies, and the growing population of pets with specialized health needs, especially senior and overweight dogs and cats.  Another good sign is the ongoing expansion of the pet specialty channel, which indicates increasing interest in all things pet, including at the ever-important superpremium end of the spending spectru

Many of the trendsetting items entering the pet supplies product stream are markedly parallel with human goods, appealing to pet owner as much as pet.  With more Americans treating their pets like members of the family, there’s no question that consumers are receptive to pet products that are “human-style,” whether by virtue of their brand names, benefits claims, or packaging presentations. 

In this vein, pet owners show a high degree of interest in human cross-over brands, which can bring instant confidence and familiarity into pet categories in which there is relatively little pet brand equity, including pet beds (Simmons Beautyrest, Orvis), cleaning products (Arm & Hammer, Bionaire, Febreze), grooming products (Conair, Wahl), supplements (GNC, Standard Process, Bach), travel/containment products (Jeep, Coleman), and apparel (Burberry, L.L. Bean).  A concomitant trend is the increased market involvement of makers of human products, a trend Packaged Facts expects to continue to gain momentum in the years ahead—with brands including Bissell, Conair, Febreze (Procter & Gamble), and Wahl making strong showings at the 2012 Global Pet Expo.

The humanization trend is always apparent in the new products featured at the Global Pet Expo. But particularly evident this year were human-style items that looked exactly like products for toddlers, from car seats and strollers, to safety gates and “cribs,” to rubber and plastic toys, with examples including Pet Gear strollers, Carlson pet containment devices, and Simply Fido pet toys.  Such products give pet owners plenty of human-style design options in the products they choose to integrate into their lifestyles and home décor—or rather, these human-style options make sense because pets are so thoroughly integrated into our lives and our homes.

And what are lifestyles without some celebrity cachet?  The pet market continues to register increased celebrity involvement, with names such as Martha Stewart and Ellen DeGeneres now cheek-to-jowl with brands such as Purina or Petmate.   Will it be long before Olympic champions vie to get their face on a box of Milk-Bone Trail Mix?

"Salonistas" Drive Up Sales in DIY Nail Care Market

Conventional wisdom might suppose an inverse correlation between the sales of do-it-yourself (DIY) nail care products and the use of nail salon services.  In fact, as the mass-market nail care category grew 25% between 2009 and 2010, the market for nail salon services did decline.  According to Nails Magazine Big Book 2011-2012, the nail salon services market fell nearly 5% in 2009, and was still below its 2008 level in 2010.

However, all signs now point to a return to popularity of nail salon services.  According to Experian Simmons National Consumer Study data cited in our recent report on The Nail Care Market in the U.S., an improving economic picture in 2011 resulted in a sharp uptick in the number of women who are frequently professional nail care services.  In 2011 the number of women having two or more manicures in a six-month period (defined as “salonistas” in our report) increased from 16.3 million to 18.1 million, or 11.3%. 

The question facing nail care product marketers in 2012 is whether DIY nail care sales will decline as women return to salons to get professional manicures and pedicures.

Paradoxically, the data strongly suggest that the reverse will be true: the more women go to salons for manicures, the more they buy and use DIY nail care products.

·         One in four (25%) salonistas used do-it-yourself (DIY) nail care products five times or more in the past 30 days, compared to only 15% of other women.  Salonistas are nearly twice as likely as other women to have used DIY nail care products two to four times during this period (39% vs. 22%).

·       Packaged Facts estimates that  the monthly number of DIY uses of nail care increased by 13.4 million in 2011.  Nearly half of this growth (46%) was due to the increase of 6.2 million DIY nail care product uses by salonistas.

Salonistas are at the core of the nailcentric fashion culture that is driving nail care market growth.  Rather than siphoning off dollar sales of DIY nail care products, the post-recession boom in professional manicure and pedicure services will serve to fan the flames of the mass-market nail care market.

Prepaid Cards as a Mutually Agreeable Separation

Big banks are not necessarily beloved institutions, and recessions have a way of  driving them near to the bottom of many consumers' lists. Throw on some questionably timed decisions to add a usage fee onto debit cards—a banking service consumers expect to receive at no cost—and you can kindle a bonfire of indignation. More than ever, consumers are apt “shop and drop” their consumer banking services.  And for consumers who don’t like banks—and who can do without some of the services banks traditionally provide—a prepaid card could fit the bill perfectly.

This may be just fine for many of our largest financial institutions, which are poised to conserve banking margins while continuing to generate revenue with industry-leading prepaid card products. As noted in Packaged Facts' July 2012 Prepaid and Gift Card report, JPMorgan Chase is moving to shed what it determines are lower-profit checking accountholders, many of whom newly fit that description thanks to regulation limiting debit interchange and overdraft fee revenue. In the wings, ready to take flight this summer, is the Chase Liquid prepaid card.   Chase Liquid is positioned to redirect at least a portion of these lower-profit consumer banking customers onto a game-changing consumer prepaid product: very well designed, simple to understand and  use, and yet one that promises solid profits.

With prepaid products like this promising debit interchange rates untouched by the Durbin Amendment, strong cost containment, solid margins on consumers major banks may deem unprofitable, and the means to earn income from the unbanked in the bargain, what’s not to like for a major bank? While we view increased prepaid regulation as a near certainty, we believe Chase Liquid will demonstrate that substantial headroom exists for consumer general-purpose reloadable (GPR) prepaid products providing transparency, a strong product feature mix, simplicity, and reasonable fee structures. We see Chase’s foray as an opening salvo among major banks: with American Express also pushing aggressively into the consumer GPR prepaid field, it’s only a matter of time before other major banks (such as Citi, Bank of America, Wells Fargo and US Bank—none of which have a consumer GPR prepaid presence) follow suit.

HBC Marketers Ramp Up for the New Majority

African-American? Hispanic? Asian? Other minority or multi race/ethnicity?  Today in the U.S., a “yes” to one of these is becoming more and more likely.  According to U.S. Census Bureau projections, the number of non-white U.S. residents reached 113 million in 2010, and these collective minorities are expected to eclipse  white non-Hispanics as early as 2042.  When this occurs, the minority population will collectively become a new majority.  The market  for "ethnic" health and beauty care has therefore never been more appealing, both in terms of product options for consumers and of marketers looking for sales spikes in tandem with the demographic tides.  (Albeit an outdated and offputting term,  "ethnic" remains the HBC industry descriptor for specialty products targeting white non-Hispanics).

Although the U.S. market for ethnic health and beauty care (EHBC) is already valued at close to $3 billion, significant growth potential remains.  As reported in Packaged Facts’ Ethnic Hair, Beauty and Cosmetics Products in the U.S. (July 2012), racial/ethnic minorities still use general-market products far more often than ethnic-specific ones—at a rate greater than ten-to-one.  At the same time, EHBC is expanding much faster than general HBC as minority consumers increasingly demand products specifically formulated to meet their needs.

Prompting the growth in demand for these products is the  burgeoning number of minority consumers in the U.S., a sharp and steady increase in their buying power, and a rapidly expanding array of product options.  In the past, minority consumers seeking specialized personal care products had little to choose from, and the distribution of products that were available was partially limited to alternative channels including barbers and beauty supply stores. Now, mass retailers such as Target and CVS are coming on strong in EHBC, stocking brands that just ten years ago they would not have considered carrying, and devoting entire shelving sections to EHBC.

Of particular interest are makeup products that identify and address the specific skin concerns of the different minority communities.  Another up and coming segment is grooming products for minority men beyond shaving lotions and dandruff shampoos, as it becomes socially acceptable and even a social imperative for men to adopt grooming habits and products previously viewed as somehow too attentive and less than masculine.  Regardless of gender, many minority consumers want products that work for them rather than having to make do with what is available.

A handful of highly successful EHBC marketers have already figured this out.  And while many mainstream HBC products are activly positioned on a cross-multicultural basis, marketers committing to targeted products that meet the skin, hair and cosmetic needs of African-Americans, Hispanics, Asians, and other racial/ethnic groups appear set to attract growing communities of Americans looking for brands and products that speak directly to them.

Tweaking the Score, if not Changing the Game: The Consumer Take on Food and Beverage Packaging

From purchase off the shelf through consumption, packaging for food and beverages evolves to intersect with consumer needs and desires.  Food and beverage categories and brands benefit significantly when manufacturers and retailers manage to fuse packaging innovation with emerging consumer trends.

To take advantage of the dynamic environment, as argued in our recent report on Food and Beverage Packaging Trends in the U.S., manufacturers and retailers must understand what matters most to consumers, and which packaging innovations deliver benefits that actually impact behavior. 

This understanding is critical because new product success is exceedingly tricky to achieve, even among the most veteran, category-dominant, and deep-pocketed manufacturers and marketers.  According to SymphonyIRI, just 3% of new products achieve blockbuster status, sales of more than $50 million in the first year.  The vast majority of new products don’t even reach $7.5 million first year out.  Yet innovation is essential.   Experian Simmons data show that even during difficult economic times—and corresponding during a boom time for comfort food—half of U.S. consumers like to try out new food products, with 32% agreeing “a little” that they like to do so, and 18% agreeing “a lot.”

What do consumers generally think about food and beverage packaging?  Overall, they are satisfied with packaging available to them.  Respondents to our Packaged Facts March-April 2012 Survey showed hardly any dissatisfaction with packaging across major food and beverage categories, findings that suggest that packaging is not likely to be a primary driver of purchase for most products.  Nonetheless, innovative packaging is a value-add that can determine product format or brand choice—especially given that consumer aren’t totally happy with packaging choices, either.  In fact, they don’t necessarily think very highly of manufacturers’ overall packaging efforts.  Packaged Facts survey data show that about 60% of consumers strongly or somewhat agree that manufacturers often make insignificant packaging changes.   And 45% think lighter weight or less bulky packaging is important.

More specifically, survey respondents have some common complaints across major food and beverage categories.  Most cluster around consumer frustrations with easy opening and closing, resealing, maintaining freshness, and food safety issues.    

Cash or debit?

While the winds of change have whipped through consumer banking industry, Packaged Facts sees role of debit cards being repositioned, not significantly reduced.

First, despite the hype surrounding debit interchange regulations, profit motivate is alive and well. The hype tends to obscure a very important fact: debit cards continue to generate huge sums for the banking industry. Our recent report on Debit Cards in the U.S. projects that debit interchange will bring in $14 billion in 2012. While this represents a 30% drop from 2011, it’s clearly not small change.  And over time, the industry will recoup revenue lost to debit interchange regulation, thanks to long-term electronic payments share growth.

Let’s not forget that debit cards remain far more profitable for their bank issuers than paper-based transactions. And with paper-based payments enjoying a recession-driven renaissance, debit remains the primary means of continuing to convert paper-based payments. And the silver lining of lower interchange rates is that debit may become a more palatable payment option for industries previously resistant to it.

But most importantly, consumers have not only grown accustomed to using debit, but they also see value and utility in using the cards. In banks’ continued quest to translate paper and check payments to electronic payments, the debit card remains their strongest ally: According to proprietary survey results contained in our report, almost two in three engaged debit card users (those who use their cards at least once a month) use their debit card so that they can avoid carrying cash, half use their debit cards so they can avoid paying with cash, and almost 6 in 10 use a debit card because it is more convenient than cash.

The downside? We expect credit cards to siphon away a small share of transactions made by affluent, credit-worthy debit card users, and we expect emerging prepaid card programs to siphon off a significant portion of major banks’ least profitable checking account holders. But given longer term electronic payment trends, this will only serve to moderate debit card payment volume and transaction growth—not kill it.

Bodybuilders beware: Grandma is eyeing your protein stash

Interest in protein has been heating up over the last few years, and not just for the serious athlete or weekend warrior.  Protein is increasingly seen as the closest thing to a secret weapon for fighting the war on obesity, especially at breakfast.  Protein also is becoming recognized as critical to maintaining muscle mass over the age of 40, with the need for protein ratcheting up with each passing decade.  While it has long been considered that American (and Western diets in general) are overabundant in dietary protein, recent research suggests that higher levels of protein intake may be beneficial both for appetite control to help with weight management and to fend off muscle loss among older consumers.   And yes, protein is still important for athletes and exercise enthusiasts to help rebuild muscle after workouts. 

More good news:  Protein is no longer relegated to bars and shakes.  Food and beverage manufacturers are starting to boost the protein content of “real” foods and beverages across numerous categories through ingredient additions for that specific purpose, as well as through deliberate formulation to achieve target protein levels, often associated with making content claims (e.g. “good source”).  Companies are also adding the word “protein” to their brand names to distinguish them from ho hum, me-too line extensions in otherwise crowded categories.

Protein alternatives to meat are not only addressing the needs of flexitarians, vegetarians and vegans, but also traditional carnivores who are embracing the notion of “Meatless Mondays” (or other meat-free episodes), whether on health, sustainability, economic or other grounds.    And many of these meat alternatives have appeal that goes well beyond their protein content.  Take the ancient grain quinoa, for example, which offers consumers a back to the future adventure in culinary history right along with its impressive protein content and quality. 

Protein also has the power to add real food value to reinvigorate declining categories and brands.  Think of those commoditized canned and packaged goods stuck in the center aisles of the supermarket.  Protein can also be leveraged to help create new or strengthen existing consumer targets, especially when products are specifically tailored specifically to sports performance, satiety and weight management, or maintaining muscle mass in older adults. 

As argued in Packaged Facts’ upcoming report on Protein Ingredients for Nutritional Enhancement of Food and Beverages, this last area offers one of the most compelling market opportunities for protein ingredients and products.  Packaged Facts predicts that the deliberate delivery of protein in real food and beverage products targeting Baby Boomers and senior citizens will become big business.  The protein needs of this group are significant, yet many are just beginning to discover this fact.  Food and beverage manufacturers can get in on the ground floor to educate and offer convenient and tasty foods and beverages for meal and snack occasions. 

So, bodybuilders and athletes out there, hang on tight to your protein bars and shakes until AARP members have plenty of protein choices of their own.  Then remember to thank them for sparking protein product innovation. 

Premium chocolate is increasingly populist

Packaged Facts' report on Chocolate Candy in the U.S. shows that chocolate dollar sales rose in 2011 while unit sales remained flat, meaning that even recession-battered consumers have proven willing to pay more for their chocolate. 

So chocolate makers need not worry as much as other food marketers about rising prices. Not much will deter consumers from indulging in this affordable luxury.   Moreover, despite boom times for store brands in the packaged food and beverage industry overall, not much will convince consumers to save money by switching from their favorite brands.  In mass-market outlets, store brands account for 21% of unit sales of microwave popcorn, but only 1% of sales of chocolate bars.

Consumers in fact are increasingly looking to chocolate to satisfy discriminating tastes and demands, reflecting in part the raising-the-bar influence of foodie culture.  For example, sales of organic chocolate in the natural food channel were up a whopping 20% in 2011, according to SPINSscan data cited in our report. 

Chocolate manufacturers have taken note that premium is increasingly populist.  Companies that traditionally kept to a narrow, “exclusive” retail footprint have expanded their product lines to mass-market channels, with the more upscale supermarket chains and outlets among the favored outposts.  And brands that were mostly known for gifting have partially re-positioned themselves as everyday treats, whether for self-indulgence or for sharing with others.  Nothing is more popular than sharing, and nothing is more democratic than chocolate decadence.

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.