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Current and Breaking News for Professionals, Consumers and Media |
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| Current and Breaking News for Professionals, Consumers and Media |
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When you shop at a supermarket you may think you are making the purchasing decisions, but you’re wrong. Powerful marketing forces and the interplay between the supermarket and the food processor are dictating which foods appear on what shelf in stores across the country. Your local supermarket is a dominant gatekeeper for the selection, pricing, placement and advertising of packaged food. Food manufacturers put heavy pressure on supermarket chains to stock “category captains,” leading brands like Coke, Pepsi, Oreos, Cheerios, and Heinz. And both want to entice you into brand loyalty through availability and price promotion. The last 35 years has seen an enormous shift in how food is marketed and sold in America. Since the 1930s major food producers had dictated pricing and product placement policies. They were the movers and shakers of the industry. Supermarkets made money only when they sold groceries, but that was about to change. To place new or profitable brands in stores, food processors started to offer lucrative promotional discounts to supermarket chains. Supermarkets suddenly realized they could make money in two ways, both by buying and selling groceries. They purchased overstock amounts of promotional products and held the excess in inventory for future sales. Logically, it would have been prudent for the food producer to stop offering such lucrative incentives to stock their brands. But all the major players had entered the high-cost promotions game and no one wanted to be the first to stop and lose a critical marketing edge. Next supermarkets began to divert promotional products to other stores in different sections of the country, directly competing with food producers in the distribution chain. Traditionally promotions were offered regionally in areas where companies felt sales were lagging. With overstocking and diverting tactics the supermarkets took the marketing edge. As the supermarkets and food producers went back and forth trying to outsmart each other, they lost sight of the most important part of the marketing equation – you the customer. Extensive promotional campaigns made price the driving factor in purchasing decisions and shoppers became less brand loyal. If Prego spaghetti sauce was promotionally priced at 3 jars for $5, most shoppers were willing to give Prego a try even if Ragu has been their past favorite. Couponing further increased the shopper’s willingness to sample competitive brands. By the mid-90’s food companies were offering more than 300 billion grocery coupons a year with an average discount of 63 cents. To entice shoppers, many supermarket chains offered double coupons, doubling the savings on the face value of each coupon tendered. When price drove choice, customers realized that many brands where quite similar, and brand allegiance became less important than saving money. To pull the customer back to the big brands, food companies started to churn out an endless array of new products, hoping to find that break-out product, like instant coffee or ready-to-eat cereal, that would capture a market. For new products to gain support, they needed to get on the supermarket shelf. But, the market was being flooded with close to 18,000 new items each year making competition for shelf space fierce. The supermarket chains recognized another golden opportunity for revenue and started charging shelf slotting fees to put new products on their shelves. Companies were now forced to pay to display new products even though 95% of all new introductions failed within a few months and only 1% survived on the shelf after a year. Next came the era of the big box boys – wholesale clubs and warehouse stores. Though lacking amenities and selling in bulk, these stores could undercut supermarket prices by 26%. Shoppers noticed and again switched allegiance. Then the ultimate big box entered the picture when Wal-Mart started to sell groceries. In a single decade, Wal-Mart became a grocery powerhouse, selling 30% of all the groceries purchased in the US. This volume gave Wal-Mart greater buying and bargaining leverage with food companies further driving down food prices and squeezing profit margins. To compete supermarket chains opened superstores. Smaller chains that could not compete in size or prize began to falter. Winn-Dixie closed stores and restructured to get out of bankruptcy in 2005. Twenty-nine other supermarket chains have filed bankruptcy in the past 5 years. Can the traditional supermarket survive with Goliaths like Wal-Mart breathing down their necks? That chapter of the story is yet to be written. And, next time you go shopping, think carefully about why you are choosing a brand. Did you truly make that decision on your own? © NRH Nutrition Consultants, Inc. Jo-Ann Heslin, MA, RD, CDN is a registered dietitian and the author of the nutrition counter series for Pocket Books with 12 current titles and sales in excess of 5 million books. The books are widely available at your local or on-line bookseller. Current titles include: The Healthy Wholefoods Counter, 2008 The Cholesterol Counter, 7th Ed., 2008 The Diabetes Carbohydrate and Calorie Counter, 3rd Ed., 2007 The Calorie Counter, 4th Ed., 2007 The Compete Food Counter, 2nd Ed., 2006 For more information on Jo-Ann and her books, go to www.TheNutritionExperts.com. www.HealthNewsDigest.com Top of Page 
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