Nielsen: New Year Will Redefine Growth

NEW YORK — With 2016 becoming a memory, the convenience store channel is looking forward to what 2017 may bring. Perhaps top on the list: growth.

According to Jordan Rost, vice president of consumer insights at Nielsen, 2016 was a difficult year in terms of growth — specifically calling growth "elusive."

"When you look back at 2016 it was a year of challenges and shifts," Rost said during Nielsen's webcast, "What's In Store: Top 5 Trends for 2017." 

The biggest shift was the way consumers shop, he added. For example, consumers are making less shopping trips per household. According to Rost, roughly 1.2 million trips have gone away over the past few years. 

Consumers also have more choices than ever before, he pointed out.

But a big challenge for retailers is the air of uncertainty when it comes to consumer confidence. In the first half of 2016, consumer confidence was strong. The level remained about the same in the third quarter; however, consumers "don't really know what America will look like next year," Rost said.

"Americans on the whole are still very confident, but we are operating in a climate of uncertainty," he added.

For consumer packaged goods (CPG) companies, growth has been flat across the top five categories in 2015 and 2016. Rost does see a return to growth, but "not what we hope."

His suggestion: The retail community approach the conversation of growth differently in 2017. And that conversation will center around five key areas:

The Promise of Growth Is Changing

Changing consumer behaviors are changing the picture, notably when it comes to health and wellness. Top of mind for all Americans are the aging population, rising healthcare costs, increase in chronic diseases, demand for transparency and technology access, according to Rost.

"Consumers are taking matters into their own hands and preparing more food," he said. "Homemade food is seen as a path toward healthy eating."

Related to the increased consumer awareness around health and wellness, retailers are becoming healthcare provider; one in five consumers said they visited a retail health clinic in the past year, Rost noted. 

"We see this with younger consumers, Hispanic consumers and households with children," he explained. "It is a big opportunity throughout 2017."

Retailers and CPG companies can also create opportunity by looking at health and wellness more holistically. They can do this, according to Rost, by taking a total store and total wallet view.

Multicultural

With the changing landscape of the U.S. demographics, Rost predicts a shift in balance of power, and of what it means to be a majority and a minority. And with the rise of ambicultural Hispanics — those consumers who are 100-percent American and 100-percent Latino — perspectives and influences are shifting, he added.

He advised retailers and CPG manufacturers to consider different demographics but also different mindsets — and the direct influence on others regardless of demographics.

"Multicultural is not an option anymore but you need to consider the behavior and mindset [effects] cross-culturalism has on all consumers," he explained.

Innovation

Where CPG companies are seeing growth, it is being driven by smaller manufacturers and innovation plays into that success, according to Rost. 

"Ultimately, innovation is creating the opportunity for new brands, and it's easier and quicker to reach scale than ever before," he said. 

What's hot across the store? Liquid tea (20-percent sales growth), liquid coffee (14.6-percent sales growth), vinegar and cooking wine (11.8-percent sales growth), and packaged meals (8.7-percent sales growth).

Notably, according to Rost, consumers can choose from 81 varieties of milk. "Milk innovation in substitutes and specialty is bucking the downward dairy trend," he added.

For inspiration, Rost advised CPG companies to look at what is driving growth outside their categories, and the potential of applying that to their categories.

"Innovation will look more like transformative and redefined categories," he said.

Brands

As consumers, especially younger consumers, gravitate toward experience, there has been an uptick in consumer spending in away-from-home offerings. According to Rost, 61 percent of consumers are purchasing prepared meals to go.

"Consumers are shifting to see if they can get an experience from a place they didn't expect," he explained, adding this is evident in the increase in the sales of meal kits. "Meal kits provide a convenient, curated experience."

As a result, he predicts that products will look more like experiences.

Retail

When it comes to brick and mortar, Rost pointed out that store counts are growing but the average store size is becoming streamlined — in line with urban and convenience formats. But the real story at retail is online. For example, 50 percent of consumers said they shopped on their mobile device on Cyber Monday, he said.

"Online has won the holiday story," Rost added. "Mobile commerce has truly arrived."

Further blurring the lines is the role digital plays inside the store. Consumers, he explained, want technology "to reduce the friction inside the store." This includes self-checkout, hand-held scanners, and in-store computers to view online assortment. 

Rost also noted that there has been an uptick of categories available through click and collect. "Consumers are more likely to consider click and collect for fresh, household and grocery," he said. 

"There is a blending of what it means to be in a store: it's online, it's offline. The future of retail is both," Rost explained.