Table of Contents
TORONTO — Canadian consumer confidence, at 92, is now just below the 94 level scored at the end of the second half of 2007 and again in the first quarter of this year. This was the encouraging figure reported by Carman Allison, director of industry insights at Nielsen Canada, to the delegates attending the Canadian Association of Chain Drug Stores (CACDS) 2012 conference.
The confidence level has recovered strongly from the low of 77 it hit in the first quarter of 2009.
Canadian consumers have also, fairly consistently, been feeling better than their U.S. counterparts over the five years of recession and slow recovery. Currently the Canadian figure is some 10 points ahead of that in the United States. Allison’s statistics were drawn from Nielsen’s Q3 2012 Global Confidence Survey.
In Canada males are more confident than females — the respective scores are 103 and 96. In descending order, the top concerns for Canadian consumers are debt, the economy, food prices, health, rising utility costs, job security and fuel prices.
Speaking at the late October event, Allison noted that while professional economists denoted June 2009 as the official end of the recession, 49% of Canadian consumers say that in their view the recession is still with us. Part of that feeling is likely connected to consumers’ take on the job market. The Canadian unemployment figure has held steady at 7.3% over the last year, and only 50% of respondents are feeling positive about job prospects.
Thirty-six percent of respondents had negative views about their personal finances. Not surprising, perhaps, when Canadian personal debt, vulnerable to rising interest rates, is at an all-time high of more than $100,000 per household. Of those responding to the Nielsen survey, 57% felt this was not a good time to buy; 39% would put any spare cash they had into savings; 38% would pay off debts; and 20% frankly state they have no spare cash. Some 59% are trying to reduce household expenses.
When buying consumer packaged goods (CPGs) in this state of mind Canadian consumers are adopting predictable tactics, as 75% are buying items only when on sale; 71% are using coupons; and majorities report stocking up on promotions, seeking out stores with lower prices and buying lower-price store brands. Significant minorities are buying lower-price name brands and shopping at discount retailers.
In the year to date, unit sales of CPGs have been flat; the 3% dollar increase is entirely attributed to inflation. Thirty-five percent of dollar sales and 48% of unit sales are made with price cuts. There has been 8% growth in temporary price reduction sales and a 6% increase in coupon activity, while discount retailers have shown 8% growth. Cross-border shopping, involving 7% of Canadian households, increased 29% year over year. Such spending by those households amounted to an average of $829 per year and involved seven trips. Buffalo and Seattle are the principal beneficiaries of this activity.
Canadian drug stores account for 11% of total CPG sales and, with 3% growth, are keeping pace with the total market. Grocery and mass merchants, in contrast, saw only 2% growth. The drug channel’s growth of CPG sales is fueled by food, up 5%, and health and beauty aids, showing 3% growth. Within drug stores, over-the-counter products account for the largest share of H&BA sales (41.5%) but had only 2% growth.
Cosmetics, accounting for 15.8% of sales, had the strongest growth (7%). Above average growth of 4% was shown by body care, baby care and oral hygiene.
In drug stores food shows an above average 5% growth rate, with rather remarkable growth in frozen food (21%), while refrigerated/dairy (9%), hot beverages (8%) and snack food also had good growth.
In the ranking of factors that influenced where consumers decided to shop, convenient location came in equal fifth, with only 53% of respondents rating that consideration as “highly influential.” Higher rankings were given to good value for money and great sales and promotions, both scoring 59%, products in stock, 56%, lowest price, 55%.
Predicting the future, Allison had some firm convictions, the most important of which was the continuing emphasis consumers will put on value. He saw the market share of discount chains going from 40.6% today to 50.9% by 2017. Retailers need to differentiate more than ever, he opined, to get beyond price.
Food is king and will help drive retail trips and baskets, but rising prices will result in declining units. Allison recommended focusing on the core H&BA and O-T-C where pharmacies had market strength.
While value resonates, it doesn’t differentiate. Retailers must stake a claim to at least one other point of differentiation to remain competitive.
