04.30.2008

Hartman Commentary

The Hartman Group In the News

When major media outlets are looking for up-to-date information to round out a story on current events and consumer behavior they know they can turn to The Hartman Group. Here is a scan of recent headlines from national publications featuring Hartman Group insights on timely issues facing consumers at the grocery store, at the gas pump and at the voting booth.

"The high price of going organic"
CNNMoney.com

"Sticker Shock in the Organic Aisles
The New York Times

"Modern milks increasingly cater to health concerns"
The Seattle Times

"Study the Intersection of Politics and Pantry"
The New York Times

"Good reasons to support local farmers"
Seattle Post-Intelligencer

"Starbucks going back to grinding beans"
USA TODAY

"Greed In the Name of Green"
Washington Post

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Rising Food Prices Timely for Prepared Foods Departments

Concern for the rising cost of food (and most everything else) is very much top-of-mind today.

As food prices rise at the local grocery store, most analysts are spending an awful amount of energy commenting on the obvious consequences on the consumer front: eating more at home, buying more on deal and shopping discount food retailers more than usual.

While CPG food manufacturers are scrambling in an economic environment when private label will only capture more near-term market share, we marvel at the unique opportunity staring today’s food retailers right in the eyes: prepared foods.

Evidence is starting to appear that consumers are and will be reducing the amount of restaurant visits they make each month as one of their primary methods of cutting back on spending. What’s really happening when consumers do this, though, is simply a shift of food dollars from a symbolically ”unnecessary” category of expense to a category of expense that is almost impervious to recession or even depression: groceries. Our own study of food and restaurant culture over the years has revealed that highly convenience-oriented restaurant trips are the most susceptible to economic fluctuations, because consumers feel they are wasting cash just to avoid cooking, when the food they are about to have at Chili’s, Applebee’s, etc. just isn’t that much better than home-cooked food. But, more critically, such a shift in food spending does not dampen the American desire to avoid cooking on certain dinner occasions.

This leads us to the one grocery department that offers consumers a restaurant equivalent: prepared foods.

Not only do we believe that today’s rising grocery prices will lead to increased grocery sales, but we also see an intriguing opportunity for prepared foods to aggressively present itself as the “discount restaurant meal,” allowing consumers a symbolic means to replace convenience-oriented restaurant trips they used to make once or twice a week with hot fresh fare from their local grocer.

The current economic situation, if cleverly marketed, could temporarily upend the normal framing of prepared foods as an expensive alternative to cooking from scratch with grocery pantry items.

The question is not whether your grocery store can offer better food than Chili’s or Applebee’s, we know it could be positioned as better quality, but can the grocery store meet the marketing challenges of understanding and meeting the cultural shift in consumer behavior?