The Lempert Report LIVE

Resilience in the Food Industry Amidst Economic Pressures

January 16, 2024 Phil Lempert Episode 110
The Lempert Report LIVE
Resilience in the Food Industry Amidst Economic Pressures
Show Notes Transcript Chapter Markers

Discover the profound shifts in consumer experiences as Lisa W. Miller, celebrated author and industry expert, joins us to dissect the revelations from her 2024 consumer survey. We delve into the escalating costs and waning satisfaction that shadow traditional leisure activities like dining out and watching movies. With keen analysis, we confront the challenges these industries face, from staffing shortages to price increases, and explore their substantial impact on family finances and the pursuit of everyday joy. Amidst the turmoil, we also spotlight the resilient rise of food co-ops and the implications of major market consolidations, shedding light on the evolving food industry landscape.

Listen in as we navigate the convergence of economic pressures and lifestyle choices shaping family budgets and consumer habits. The conversation takes an intriguing turn as we discuss the 'Zellenial' demographic, a segment caught between millennials and Generation Z, known for their economic tenacity and socially conscious spending. This engaging discussion not only reflects current consumer discomforts but also uncovers the silver linings in community-driven initiatives and the potential for market adaptation in an ever-changing world. Join us for a compelling journey through the highs and lows of modern consumer behavior and the search for connection in a digitized age.

Phil:

Welcome to the Wentworth Report LIVE. On today's broadcast. A very special look at customer pain points for 2024 with our guest Lisa W. Miller, author of the Business of Joy and her latest consumer survey. The Walmart AI exit strategy. Dollar store's latest threat to supermarkets. On FoodN ot Phones, how screen time is hurting our eyesight and on the bulls eye, Kellogg's has what they hope is a new path to the Zillennials. Do they? Sally has the day off. Let's get started. Lisa W. Miller is president of Lisa Miller Associates, creating motivating insights and driven actions, and she gets right to the heart of 'So What?' and 'Now What?'. She brings over 30 years of consumer insights and innovation experience, collecting over 450,000 consumer interviews. Her insights come from an impressive background as VP of innovation at Brinker International, serving brands including Chili's and Magianos, and VP of consumer strategy and insights at PepsiCo and at Quaker. Today she'll share her latest 2024 consumer survey findings. Lisa, welcome to the Lempert Report LIVE.

Lisa:

Thanks so much. Excited to be here.

Phil:

So first I want to talk about Joy, and one of the things that obviously you know your book talks about, all your interviews talks about, has to do the importance of us being joyful, and I found from the Greater Good Science Center at the University of California at Berkeley a comment and I want to get your reaction to this that people who commit daily micro-acts of joy experience about a 25% increase in emotional well-being over the course of a week. Is that true?

Lisa:

Oh my gosh, I love that statistic and Phil, that just nailed it right. Is that basically those little moments of joy is what helps us get through the day? And I always say that joy is a choice, it's how we choose to see the world. And yes, there was a statistic I read from the government just saying that if you have more joy it reduces the heart you know your heart disease and all of that. So not only is joy just feel good, it's actually good for our health. So I love that statistic. So Joy, everybody needs to make room for it.

Phil:

Combination of mental health and well-being Great. So let's talk about your new survey First up. You know I know that a lot of your background is food service, but certainly as supermarkets get more into gross rounds, as supermarkets are fighting tooth and nail to get some of those food service dollars so that we eat at home, there's a lot that we can learn from your survey, and I guess the first question that you asked had to do with having dinner and moviegoer frustrations. Tell us about that.

Lisa:

Well, I will say we are in a share of wallet war for our fun money, for consumers' fun money, and so back in the day, you know it'd be like everybody's like, let's go to dinner in a movie. Well, now it's getting kind of expensive.

Phil:

Very expensive. It's outrageously expensive.

Lisa:

And what's interesting, when you look at the data that's up on the screen about the moviegoer frustrations. Half of moviegoers basically say prices are up too much. And then you can read down the list with not enough staff, even dirty restaurants. What's fascinating, though, Phil, is that since April/ May, all of these numbers have gone up a lot. So what happened then? Barbie, Oppenheimer all of these people are coming back to the movies and they're pretty frustrated, so it's not that joyful.

Phil:

And also what's interesting to me in just a firsthand observation. The Palm Springs Film Festival just took place and the attendance was down considerably. And one of the things that I was talking to someone about is why are people not wanting to go to films? And they said, no, the world has changed, you can now. You don't have to go to a film festival to see these state of the art films that are not these blockbusters, you can just stream them. So we're really experiencing a whole new way of looking at movies, whether it's through streaming. I mean, it used to be VHS and Beta and those big discs. Then it was the small discs, Blockbuster's gone and all that. But now touch of a button, we could just stream. So what about the restaurant goers and their frustrations when they go to restaurants as that part of the dinner of the movie?

Lisa:

Well, definitely. And on the movies, one of the things that movie theaters need to talk about is just this experience sitting at home watching it. Even if you have the best entertainment center, still not the same as the big screen. So there's opportunity for movies to really market that. When it comes to restaurants, you can see that the pricing frustrations are even higher with 60%, but not surprising what's happening not enough staff, the wait times are long and it's just again. It's just not that joyful. So when you're trying to figure out what do you want to go do dinner and a movie people are picking one or the other because, don't forget, for a lot of households with young kids, you've got babies sitting on top of that, and so people are just having to make tough choices and they want to have fun. Consumers half of Americans are craving I mean literally feel they're craving social connections with people to get out with their family and friends. It's just expensive.

Phil:

Very expensive and if you take a look at the prices that continue to go up for food because of whether it's climate change or supply chain issues and the like, I was just talking to a friend of mine a week or so ago and was complaining about how they used to go to a diner if you would, and they could get scrambled eggs for breakfast and toast and so on and it was affordable. And now he was telling me that it's like 20 bucks for scrambled eggs and potatoes and toast and coffee and that's just absurd.

Lisa:

Oh no, I was going to say one story I just had the time in is speaking of that same thing. I went to breakfast with a friend. Two oatmeal, a coffee and a tea, plus tip at a full service restaurant $41 for two oatmeal in Dallas.

Phil:

Unbelievable.

Lisa:

Guess what that was 'not worth it'.

Phil:

Yeah, so it goes back to your Quaker days and having like a little cup of oatmeal that you could bring with you and add some water to. Let's pull back away from movies, away from restaurants, and talk about retail in general, not just grocery retail. But what are people feeling, what frustrations, what are their pain points when they're going shopping for just about anything these days?

Lisa:

Well, I bet everybody out there can guess what's the number one on the list, which is prices have gone up too much. Now this one is actually impacted also because of the holidays, and so we saw November and December increases in frustrations and not enough staff and pricing and still dirty restrooms and things like that. But it is impacted by the holidays. What I would say is that those retail outlets that really can focus on the customer experience and a joyful experience, training the employees I always tell people the next best dollar spent is on your employees. I know the marketing people might get mad at me, but the training in the retail space restaurant space, movies train your people because that is going to be the differentiator moving forward.

Phil:

Well, if we look at certain retailers like Wegmans, Danny and Colleen, you know, put their money where their mouth is. They do great training, they have very loyal employees, which then translates to a great customer experience, to your point. So I think that that's really, you know, something that we can never forget in retail, that it's not just about price, but that whole holistic experience, if you would, and it starts with the employees. When you look at your crystal ball and you look at some of the pain point and frustrations over the next six months and certainly we're in a very stressful time, with wars going on, with elections going on and so on what do you see happening? Is it still going to all be about prices or are there going to be some other pain points that we've got to recognize?

Lisa:

Well, I think the key to 2024 is going to be recognizing the value equation. It's the simple thing what you get for what you pay. But now you're paying with your time and your money. Is it worth my time, is it worth my money? And so what's happening is that we've raised the prices. So, like, the denominator of that equation is we're upside down on the value equations in most business verticals, whether it's grocery, restaurants, movies, retail the value equations upside down. So in 2024, what can you do to add value to what you're giving? So, if you have to take a price increase, what can you give back in the experience? And that's where training, really focusing on your people, can provide that little extra. I will say two other points. One is for the grocery people. Now is it a unique moment in time where delivery is kind of in a crazy place restaurant delivery and so for grocery stores, if they can think about that, when people are coming and shopping, how can you entice them to get to the food service part of it? Because right now people are really tapping out of delivery and it could be a unique share of wallet opportunity for the grocery store. And then, the last thing that I would say when I ask people about their New Year's resolutions. Basically people are talking about wanting to prioritize and connect in person. They want to find joy in an all kind of loops backfill with where you started with your quote. It's investing in little moments in joy In retailers, grocery stores, restaurants, movies. If they can invest a little bit of joy for their employees, it'll transcend to their customers.

Phil:

Well, Lisa, that's a great forecast, if you would, for our audience, for retailers, for restaurant tours to be able to put at the top of their list, adding a little joy to their customers, and I think it'll come back with new business and new profits. So, lisa, thanks so much for joining on the Lempert Report LIVE today .

Lisa:

Thank you so much, Phil. Have a good one.

Phil:

You too. So let's talk about a story that we've been talking about a lot over the past few weeks. It's about self-checkout Walmart, where we've seen all these stories about self-checkout. Well, a new announcement just came out from Walmart as it relates to Sam's Club, and what they've said is they're going to stop checking receipts at Sam's Club. Now, if you've got to Costco or Sam's Club, there's always somebody at the door checking your receipt to make sure that you're not stealing anything. We've had that experience with a lot of self-checkout as that's expanded, as the shrink has increased on that. But what they're doing very interesting is that they're using AI. It's a tradition that they're going to start that I think is going to translate to supermarkets and drug trains very quickly. So basically, what they're doing is they're going to have this AI device that checks what's in your shopping cart as you leave, against your register receipt, and that way you don't have to be confronted by somebody. What's interesting about this technology and this is a quote from Sam's Club they will have no problem scanning a queen-sized bed, an entire Witcher wardrobe or a cart full of breakfast cereal. So it'll be interesting to see how that works if it does work, and certainly as it relates to drug chains as well as supermarkets. Dollar stores have been expanding terrifically. We know that. But there's been some downside. If we look at dollar stores and I'm not talking about the customer experience, but the retail experience there's a new study that's just come out that finds that one out of every 20 independent grocery stores will go out of business within a couple years of a dollar store arriving in their area. Dollar stores have announced more than a thousand new stores opening every single year, and when we take a look at this study that comes out of the College of Agriculture, health and Natural Resources, they found that when dollar stores enter markets, independent grocery stores shut down, so it's not affecting the chain stores as much as independence. And as we take a look at what's going on with the Kroger/ Albertsons merger now again being put on hold from a lawsuit from the state of Washington AG, basically what they're talking about, in my opinion, is that this CNS deal that is gonna take over 400 stores from Kroger and Albertsons is not gonna be enough to satisfy. What I think is gonna be the key here for the FTC as well as the different attorney generals, is being able to divide some of these stores. I think it'll be upwards of 600 stores, not 400 stores. Among smaller independent grocers, those stores that might have 20 to 100 stores, they're the ones that are gonna pick up these extra stores, especially in California and the state of Washington. And I think that, while a lot of the attention of the unions and the AGs have focused on loss of jobs at retail, that's not the issue. The issue for me is I don't think we're gonna see any loss of jobs at retail. We'll see loss of jobs at headquarter level when we start to see consolidation in buying and merchandising, certainly in operations and distribution. That's number one. But again, for me, let's not forget that the combined buying power, if you would, of having over 30,000 store brands between Albertsons and Kroger, that's gonna be the key, that's gonna be a powerhouse and probably put them as the third largest CPG brand, if you would, in the US, and that's gonna be the dynamic that nobody's talking about that. Frankly, I think that the attorney generals and these lawsuits are missing the key point and that's gonna be even more powerful than the retail side. Also, the important thing to note is, with these dollar stores, keep in mind they've got a lot less employees than an independent grocer does, they might only have two or three employees in a dollar store versus the scores of people that are in an independent grocer. So as these dollar stores proliferate, that's where it hurts the economy, not only for consumers and consumer choice, because there's so much of the ultra-processed food that's sold in dollar stores but frankly, that's where we're gonna see a loss of jobs. So I think it's really important, as the industry looks at this Kroger/ Albertsons deal, to look much more holistically at what's going on with dollar stores, with the CPG brands being affected by the store brand consolidation, not focused on the loss of jobs at retail, because I don't think that's gonna happen nearly as much as everybody portends that it's gonna be. So the other thing that we're seeing with dollar stores because of what's going on there is we're seeing a rise of co-ops, and that's been fascinating for me. I happened to when I was in college. I was part of the Philadelphia Co-op. That was my first working experience in a co-op and the great news is that, with this dollar store phenomenon taking place, more communities are funding dollar stores. Now the problem is it takes a lot of people it takes three to five years to create a co-op. But if we can see that channel of distribution growing, I think it helps the communities, I think it helps the assortment of products that are out there and certainly it gives everybody much more of a good feeling of working. On FoodNotPhones today, there's a report that comes out from an eye doctor, Irfan Jeeva, who has raised concerns about the impact of excessive screen time on our kid's eyesight, pointing to the increasing need for glasses among youngsters. What they're talking about is the digital devices, including phones, tablets and TVs, are contributing factors significantly to the deterioration of kids' eyesight. So certainly one solution are these blue tinted glasses that a lot of people are now using as they're doing their screen time. But, most important, let's go back to the premise of Food Not Phones. Talking to each other, not looking at screens. That's what's critical more than anything else In today's society. We keep on seeing more reports from a health standpoint, from a wellness standpoint, of what's going on with screen time, and we really need to start paying attention to that before it's too late. On today's bullseye, it looks like the cereal giant Kellogg's is focused on targeting what they're calling the Zellenial. You know the Zellenial is a demographic cohort that sits on the cusp of millennials and Generation Z. This is a group that's born between 1992 and 1998, although some like to expand the range to those born up to the year 2000 or even 2002. Now, regardless of that, it seems that this group, depending on how the years are calculated, is between 30 to 48 million people. What's interesting to me and alluring to marketers about this group is that they're more economically secure than Generation Z. They have higher spending power than millennials, and surveys report that they have high brand loyalty and low price sensitivity. Perhaps this group is an ideal target for us to go after. No one yet, at least, has tried to attach food trends and preferences to this group. It's likely that there will be a spillover from both millennials and Generation Z's tastes and habits, but one thing is very clear there's certainly a digital generation that will have at the top of their food phones the impacts of the environment and climate change, an attachment to social causes and, hopefully, health and wellness, which is what Kellogg's new vegan brand, eat your Mouth Off, is hoping for. By the way, I certainly hope they didn't pay a lot of money, or practically any money, to a branding group to come up with this name. Eat your Mouth Off, is rolling out on grocery shelves right now, although I've checked at least a dozen different stores and I haven't been able to find it, but I did see it available online at Walmart, Kroger and Ralphs. I haven't tasted it, obviously, and frankly I find the package designed to be amateurish and trying a bit too hard with its bold depiction and symbolism of a smiling mouth. This cereal is 100 plant-based, with 22 grams of plant-based protein, 0 grams of sugars and 2 grams of net carbs or less per 40 grams. Serving Now the chocolate flavor. Ingredients are soy protein, isolate pea protein, isolate canola oil, lentil protein, modified tapioca starch, cocoa processed with alkali and then trace ingredients of oat fiber, sucralose, esteem-bea leaf extract, natural flavors and BHT. For I just love the brilliant marketer who aided the asterisk showing a trivial amount of sugar. Is that even legal? Kellogg's just marketing this 7.5 ounce box at $8.99. And while that might seem to be priced higher than most, taking a look at the rise in the price of breakfast cereals from quarter one twenty twenty-two to quarter one twenty twenty-three on Amazon, compiled by Pattern Data Science, the average price for all breakfast cereals rose 13.6%. They cite examples, again priced on Amazon, of Captain Crunch at $10.24 a box Chex at $7.68 a box and Cheerios at $8.00. Their study did not compare the net weight per box. Now let's put pricing on the sidelines. The question I have is this sub generation that clearly is an important group, which I predict will be the next marketers dream target aligns with the values of this brand, its image, its ingredients and its two flavors of chocolate and fruity. Hey, we're talking about adults here, not the taste buds of a six year old. We certainly need a bit more food research about millennials, but knowing that they care strongly about the environment and social causes, I would have at least expected eat your mouth off. To highlight and contain no GMO ingredients like soy and canola. The taste better be fantastic. To overcome all these obstacles, I'll take bets on how big this brand might be on the shelves or how long Might be a good idea, but this one only misses the mark. Thanks for joining us today on Lempert Report LIVE and we'll see you back here next week. Same time, same place. And in the meantime, don't forget to go to SupermarketG uru. com.

Lisa:

Be sure to visit SupermarketG uru. com for the latest marketing analysis issues and trends. Don't forget to join us back here next Tuesday at 2:30 pm Eastern for more.

Customer Pain Points in 2024
Dollar Stores Impact on Grocery Stores and Kellogg's Targeting Zelenial Generation