Coriolis Chart Watch
Q4 2002
Chart Watch is an online
publication featuring a brief view into our latest thinking on
the evolving food and fast moving consumer good industry. It is
sent to subscribers four times per year.
Top Line:
Eighty percent of households are experiencing flat to declining
real disposable incomes. Sixty percent of New Zealand households
are going backwards. They have less money in their pockets in
real terms than they did in the past. Twenty percent are standing
still. Twenty percent are slowly gaining.
So what? We often make the mistake of judging
the world by our own yardstick. "I've got a nice house
and a new company car" therefore "everyone is doing
well." We often forget how poor most New Zealand households
are today. Without igniting a class war or beginning a political
discussion, there are some clear implications here for retailers
and manufacturers.
For those households that are going backwards, every dollar
counts. Weekly spending is a zero sum game. If the kids need new
shoes, spend less on meat. No prizes for guessing where Pak'N
Save and The Warehouse get their shoppers from, or who's
buying Tier II store brands.
But take it a step further and ask "what percent of the new
products you launched last year made a value proposition?"
You may find that you're launching too many upmarket,
value-added lines targeting the top twenty percent.
Unfortunately, this group isn't shopping at the supermarket,
they're sitting in a restaurant.
So where does this leave you as a manufacturer? Being squeezed
between growing private label on one side and flat category
growth on the other. You have three options: Option
1 Manufacture private label; Option 2
Launch or revive your own value brand; or Option
3 Target the growing foodservice sector. Most
manufacturers we talk to want to choose option 3. Unfortunately,
targeting the foodservice market is hard. Distribution is
fragmented, cost-to-serve is high and market data is
non-existant. There's no SYSCO in
New Zealand, yet. But we'll leave that story for another
time.
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