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1/14/2009
Transforming Economy Enters Third Phase: “The Lasting Reality,” As Shoppers Seek "Affordable Solutions," According to New IRI Study
Prices Dropping Slightly and Consumers Cautiously Backing Off Most Extreme Belt-tightening Strategies, but Shoppers Remain Wary
CHICAGO, Jan. 14, 2009 - The U.S. economy has entered the third stage of its unprecedented transformation and will be characterized by shoppers permanently changing several of their most important rituals involved in the consumer packaged goods (CPG) products they select, purchase and use. With volatile and uncertain conditions ahead, consumers are spending with caution—continuing to define what is truly essential. Despite relief from record breaking fuel prices in late Q3, increases in food prices still have shoppers spending more on groceries and getting less. It remains a challenging time for manufacturers who must reinforce the value proposition of their brands without selling out their equity. For retailers, private label continues to be a survival strategy for many consumers, and private label brands continue to evolve in their sophistication, quality and availability.
This is one of the findings in the just released “Transforming Economy 3.0: The Search for Affordable Solutions,” created by Information Resources, Inc. (IRI). IRI is the leading global provider of consumer, shopper, and market insights for the CPG, retail, and healthcare industries.
“While the recession is far from over, our new research reveals that we are entering a third phase,” notes IRI Consulting and Innovation President Thom Blischok. “The first phase “Shocking the System,” was characterized by rapidly rising energy and food prices, and a dramatic weakening of the home mortgage market starting in late 2007.”
“This phase was followed by stage two, “A Refocus on Impact,” during which consumers reacted radically to their imperiled financial situation by extreme belt tightening, even while prices were beginning to stabilize. In the third phase of “The Lasting Reality,” prices are continuing to level off, financial markets have halted their downward spiral, and many shoppers are backing off their most extreme belt-tightening behaviors.”
Shoppers Continue to Struggle
Shoppers remain significantly concerned about how economic conditions are affecting their financial situation. For example, 84 percent of surveyed consumers with annual incomes of $35,000 or less point to rising food costs as affecting their financial condition in Q3 2008, although this figure is down slightly from 87 percent in Q2.
Concurrently, surveyed shoppers report they are spending more but purchasing less. In Q3, shoppers paid on average 3.7 percent more, but purchased 2.0 percent fewer units.
Many shoppers are settling into self-reliance strategies to save money. For example, 45 percent of shoppers earning $35,000 to $54,000 agree with the statement, “I go to hair salons or spas less often.” This is a slight decrease when compared to the previous quarter, reflecting a slight retreat from earlier, more extreme behavior.
“Lower-income consumers began savings strategies the earliest and practiced them most aggressively as compared to other income groups,” adds Blischok. “While other groups are beginning to retreat from aggressive savings strategies, lower-income consumers are either not pulling back at all or doing so more slowly.”
Private Label Popularity Based on More Than Price
Private label products continue to be popular with consumers, with dollar share increasing 1 percent and 0.9 percent in Q2 and Q3 2008, respectively. However, the attraction of private label results from a combination of quality, variety and convenience, not simply lower prices. Private label purchases grew most rapidly among shoppers earning more than $100,000 annually during Q3.
“The private label phenomenon will continue to be a bright spot for innovative retailers that invest in providing a high-quality, convenient, affordable alternative to shoppers,” Blischok continues. “It is also a call to manufacturers to rewire the value proposition they offer shoppers and ensure that all product development, merchandising, pricing and related strategies are closely tied to a well articulated, shopper-centric strategy.”
Comprehensive Insights Offered in Deep Dive Industry Report
A complete report is available that provides highly-detailed findings and analysis. The report also includes strategic recommendations for both CPG manufacturers and retailers to facilitate the creation of strategies that will enable them to more effectively compete in this transforming economy. IRI has developed the complete report and recommendations to help industry leaders:
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Recognize market trends early
- Create product, assortment, merchandising and other strategies that anticipate and react to these trends
- Facilitate collaboration among manufacturers and retailers
- Leverage new information to gain significant competitive advantage
About the Report
IRI’s “Competing in a Transforming Economy 3.0: The Search for Affordable Solutions” study is now available. The study includes research results from multiple IRI sources, including the company’s IRI Attitude Link™ survey of 1,000 consumers, the IRI Economic Purchase Longitudinal Database™, IRI Consumer Network™, IRI InfoScan® Reviews, IRI Economic Trend Database™ and select outside sources.
In addition to the Transforming Economy 3.0 report, IRI’s Consulting & Innovation Group offers in-depth customized presentation to specifically address the issues and strategic hypotheses that are of most relevance to individual clients.
To learn more about the study, visit http://us.infores.com/Insights/Reports/CompetinginaTransformingEconomy30/tabid/211/Default.aspx.
For pricing and additional information, please contact Kurt Orr at kurt.orr@infores.com.
About IRI
IRI is the world’s leading provider of consumer, shopper, and retail market intelligence and insights supporting 95 percent of the FORTUNE Global 500 consumer packaged goods (CPG), retail and healthcare companies. Only IRI offers the unique combination of integrated market information, automated and predictive analytics, innovative enabling technologies, and domain expertise. With IRI, leading retailers and manufacturers are able to quickly discover breakthrough insights driving smarter decisions and actions across the enterprise for breakthrough results. Companies around the world depend on IRI for improved productivity, stronger brands, and dramatic revenue growth. For more information, visit http://us.infores.com.
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IRI CONTACTS:
John McIndoe
E-mail: john.mcindoe@infores.com
Phone: (312) 474-3862
Fax: (312) 474-2512
Shelley Hughes
E-mail: shelley.hughes@infores.com
Phone: (312) 474-3675
Fax: (312) 474-2512
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