OUT-OF-STOCKS

Kroger has both Coke and Pepsi two-liter bottles on sale. Three times in less than a week there was an out-of-stock [OOS ] on the product I was seeking to buy.

Day one had and OOS on the floor.
This situation had me asking a customer service manager to check the back room. Product was found. Two units purchased.

Day two had an OOS on the floor.
This time I ask the manager on duty if he would kindly check the backroom This time there was a store OOS. Since this brand and type was what I wanted I went to another Kroger location less than a mile away. They had it in stock. One unit purchased.

Day three OOS after a partial selection.
Went to the second Kroger that had preferred product in purchase number two. This time my goal was to buy two units as today was the last day of a 4/$5 sale. This time there was only one unit left of the preferred product. Bought that one and also bought a similar product from the other guy.

Consumer Behavior: Sometimes the consumer will...

• Flavor Shift
• Store Shift
• Brand Shift
• Not Buy

The Bottom Line
Coca-Cola, CCE, and Pepsi, PBG, need to do a better job on in stock and availability for their products.



What has been you experience with out-of-stocks on food, beverages and consumer packaged goods products?

What did you do?

BLOOMBERG: "OPEC Defers Decision on Output Cut, Seeks $75 Oil "

OPEC has deferred a decision on reducing output quotas. Oil is in the low $50 range right now. This past summer it nearly hit $150 a barrel.

The United States, the largest economy in the world has entered a recession. Since the U.S. is such a large part of the world economy the rest of the world suffers as a result. The U.S. is a major consumer of other nations exports.

One of the best things to happen in the past four months has been the rapid decline in the price of gasoline. Oil is a major component in the price of gasoline. The reduction in gas prices has left more money in household budgets.

As oil falls, gasoline falls, consumers have more money to spend. As consumers resume spending the recession will slowly end and the economy will begin growing again.

Consumers need lower prices to restore their confidence in the economy and in their financial position. If OPEC were to cut output to increase prices in the short term, it is likely that the recession would linger for a longer period of time. At the same time many of the people calling for alternative energy sources will have the ears of more people. Investment in alternatives will likely increase thereby reducing demand for OPEC oil.

OPEC should hold output steady and allow prices to fall. This will get the world economy back up to speed faster. Output cuts only delay this recovery. Any production or quota reductions make OPEC look bad and gives those opposing them greater power, force and leverage. Taking action to increase prices is the wrong decision for OPEC to undertake.


What are your thoughts?



Sources for you to explore

Bloomberg: Energy Prices
Bloomberg: OPEC Defers Decision on Output Cut, Seeks $75 Oil

INCOMPLETE ANALYSIS: WHOLE FOODS

When you look at only a few metrics and make analysis from that, you have a higher risk of being wrong. It may well turn out that Whole Foods is really struggling, unfortunately the analysis in the article is incomplete.


Whole Foods in a Whole Lot of Trouble
November 13, 2008

Whole Foods (NASDAW: WFMI) is the worst performing supermarket chain in 2008, according to Geezeo’s Main Street Spending Index.

Whole Foods has had a cult like following amongst upscale urban professionals. Aspirational shoppers even mocked their own spending by nicknaming Whole Foods: “Whole Paycheck”. Given the economic instability though, customers are staying away from Whole Foods in droves.

The table below compares the drop in average consumer spending per visit at major retail grocery chains year-to-date. Whole Foods spending dropped 19% from January to October 2008. The winner was value-branded Stop & Shop (AHONY.PK) . Stop & Shop had a slim 1.54% decrease in customer spending. Not bad for an economically volatile year.

Statement: "Whole Foods spending dropped 19% from January to October 2008."

Did the total revenue of Whole Foods really fall that much? No, basket size fell.

The article also indicated that Whole Foods has a small basket size in relation to other grocery chains. Why might that be? Whole Foods shoppers may have smaller basket sizes [average transaction] because people buy fresh products more frequently. The more times a customer is in your store the more opportunities you have to gain incremental [unplanned] sales.

The real question is... What is happening to shopper frequency? The article did not address this metric. This is a critical measure in food retail. If visits increased, it is possible for basket size to shrink but for total sales to increase.

Traditional Grocery

The typical shopper at Safeway and Kroger is a once a week shopper who is hurried for time and shops there to get it all done at once. This means the visits are stable and basket sizes are typically larger. If a customer decreases frequency at these chains there is the possibility that sales will be pinched.

Increasing & Maintaining Store Visits

Typically you can only sell to customers that are actually in your store. The Internet is changing this to some degree, this is minuscule at present [for supermarkets, grocery]. Many food retailers have created email newsletters to spur visits thereby getting a customer into a store where they will make actual purchases.

PRIVATE LABEL POWER

The Wall Street Journal has an interesting story about store brands and consumers increasing acceptance of them. The United States has a relatively small percentage of private label market share. Many nations in Europe purchase private label [store brands] at double or triple the U.S. rate.

NOVEMBER 6, 2008

At the Supermarket Checkout, Frugality Trumps Brand Loyalty

By ELLEN BYRON

When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.

"I thought I'd be able to tell the difference, but I couldn't -- I looked at the ingredients and they seemed almost the same," says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, "I'm going to buy the store-brand moisturizer and cleanser -- it's less money."

A few things to think about

• Food prices have been inflated by rising grain prices as well as fuel transportation costs
• Consumers are feeling a pinch from higher fuel prices that have only recently pulled back
• People are cutting expenses where they can
• Unemployment was most recently reported as 6.1% in Sept.
• More firms have announced layoffs or initiated them since then
• People are tightening their financial belts

Benefits to Retailers of Private label brands

• Compare favorably with major competitors such as Walmart.
  
• They are hard to directly compare with Walmart bands and sizes
• Reduce comparison to prices in other stores as the items are different
  
• If a consumer falls in love with a particular item, it is not available at any other retailer, this increases store loyalty
• Loyalty increases store visits
• Loyal customers spend more because some quality outweighs potential costs savings from a less respected brand or a less expensive private label
  

Takeaway

If current economic conditions persist major branded goods producers will come under increasing pressure. This pressure will come from retailers and consumers. Even the stock market will make demands if performance of branded items slips.

It is critical for branded goods makers to create a compelling case to consumers why their product is worth a premium price. If U.S. unemployment hits 8.5% or higher branded goods firms will be under major strains.

Consumers are becoming more comfortable with private label. The longer consumers are under strain and purchasing them, the stronger their loyalty will be when things get better. It may be tougher to get up sell people in the future. The case will have to be stronger and more compelling.


What are your thoughts?