Consolidation among consumer packaged goods companies and the uncertainty regarding the future of the nation's economy are expected to have positive impacts on coupon activity this year.
According to NCH, a Lincolnshire, Ill.-based coupon-processing and promotion information management firm, the projected upturn in coupon promotion and redemption is typical of a period following a number of high-profile mergers involving large manufacturers.
Last year saw the merging of such manufacturing powerhouses as Keebler and Kellogg's, Best Foods and Unilever, Quaker and Pepsi, and Warner Lambert and Pfizer.
Executives at NCH told SN that companies have historically pulled back on their promotional reins during initial acquisition times, but then they begin distributing coupons full force after the consolidations as they look to grow their newly acquired brands.
NCH figures show that the number of manufacturer coupons distributed in 2000 decreased by about 3% to 248 billion.
"The large guys can make a big enough difference to sway the market," said Charles Brown, vice president of marketing for NCH.
"They don't all follow the same strategy, but most do," Brown said. "They save a few dollars by issuing fewer coupons or cutting back on the attractiveness of the offer. Then [after the merger], they'll pump up top-line sales by increasing coupon distribution. I've definitely seen that happen. After mergers they're really pumping up the volume."
Still, more than 4.4 billion coupons were redeemed last year, saving consumers about $3 billion collectively, according to information management firm Carolina Manufacturer's Services, Winston-Salem, N.C.
Manufacturers are increasing expiration periods to about 3.4 months, and the face value of coupons is rising, to between 75 and 80 cents, CMS data shows.
Despite these consumer-friendly perks, most industry sources agree that the economy will be the ultimate driving force behind increases in coupon usage for at least the next year.
"Consumers still love coupons," said Lori Osley, Oklahoma City-based retail financial products manager for wholesaler Fleming Cos., Dallas. "A lot depends on the economy; we're an industry that when the economy doesn't do well, coupon redemption is up."
Brown agrees. "In past recessionary periods, manufacturers distributed more coupons. For retailers, it's great, because it's helping the consumer that's more conscious of spending."
Retailers also benefit, from the amount they are paid for handling the coupons, which typically equates to the face value of the coupon plus 8 cents, Brown added. Last year about $360 million was awarded to retailers based on coupon transactions, he said.
Fleming, one of the many organizations that operate as a coupon clearinghouse, helps take some of the burden off the retailer by handling many aspects of coupon transactions, Osley said.
In terms of marketing, freestanding inserts remain the dominant method of distribution, capturing an 82.4% share of all distribution by media type, according to NCH. Point-of-purchase machines are the second most frequent form of distribution, but they only constitute an 8% share. However, the use of electronic coupons, particularly those distributed over the Internet, is growing at double-digit rates.
"It's a necessary evil," said Osley. "There will be more in electronic couponing, and retailers will have to learn to handle black-and-white coupons at the retail level. There are some concerns, but retailers are forced to do it because everybody else is."
Catalina Marketing Solutions, St. Petersburg, Fla., has been working through a network of 15,000 supermarkets for 17 years, providing targeted couponing in-store based on actual purchase behavior. With access to more than 60 million households, the firm tracks purchases either through a customer's historical data or by what is in the cart at the actual time of purchase, and it dispenses coupons at the register, which the cashiers relay to consumers along with the purchase receipt.
"Our redemption rates run four times the industry averages," said Catalina's President, Sue Klug. "Redemption periods have gotten a lot tighter; it depends on the purchase cycle of the item. We have not seen wild gyrations in good or bad times, and we post outstanding redemption rates regardless of the economy.
"They're 'smart' coupons," she added. "Many of the manufacturers that we work with are involved in strategies to get people to buy more or to get them to buy a larger size. Center Store works well for that, especially items with expandable consumption. If you have more chips in the house, guess what: You'll eat them."
Catalina's research has shown that cereal and paper products have the highest purchase frequency, but items like diapers, dog food and paper products are becoming tough sells in supermarkets due to competition from other channels.
"Coupons are effective ways for the retailer to get these sales back into the store," Klug said. "The retailer can issue an incentive to get people to purchase diapers in their store. Retailers have really embraced this type of technology for the purpose of combating channel erosion.
"With private label, also -- in categories where manufacturers are not participating, the retailer can purchase and promote their store brand," she said.
Among categories, NCH found that Center Store items accounted for seven of the Top 10 showing the highest growth among coupons distributed in 2000, with disposable diapers topping the list (see chart). This marks a jump from the category's No. 7 spot in 1999, when it entered the Top 10 for the first time.
In terms of the largest volume of coupons distributed, ready-to-eat cereal, which placed first in 1998 and second in 1999, dropped to the eighth spot in 2000, with the highest-volume slot being filled by household cleaners, followed by the condiments, gravies and sauces category.
The profile of a typical coupon-using consumer continues to contradict stereotype, Osley told SN. The Association for Coupon Professionals -- of which Osley and Brown are board members, along with Catalina's Director of Corporate Research, Pam Samaniego -- has found that college-educated individuals in high income brackets who are between the ages of 35 and 55 use coupons most frequently, because "they can really determine the value of a coupon," Osley said. In addition, more single men are redeeming coupons than ever before, she added.
This may change in the future, but one thing seems fairly certain: Targeted marketing seems to be the way to go with coupons.
"There's a call to do smarter couponing," Klug said. "More technology is available, and better information is available, so we should use it. The Internet provides us with the ability to have individual communications. There are other ways to reach out and touch your target rather than just blanket the world."
