Five Non-Economic Factors Now Steering Category Sales

Five Non-Economic Factors Now Steering Category Sales

It's all about the economy all the time, or so we've believed throughout this long downturn.

However, the latest category sales data from SymphonyIRI Group, while confirming the economy's continued over-arching importance, provides a broader picture as well.

This week's SN highlights the latest annual results of 50 key categories tracked by SN. These are spotlighted in profiles throughout the issue. As you'll see in that coverage, factors other than the economy are exhibiting big roles both positive and negative.

How this plays out is crucial not just for these categories, but also for broader performance results across retail.

Here's a look at five of these “non-economic” category factors and the roles they are playing:

• Health: The laws of health are arguably more powerful than the laws of economics. Everyone will age, and everyone will get sick at some point. Those facts, plus more consumer education about health, helped drive vitamins to a 10% sales jump despite lingering hard economic times, and the impact was seen across retail channels.

• Innovation: There's no substitute for innovation in creating sustained demand for categories. A prime example is yogurt, which has benefited from new advances in probiotics (notice that's the health angle again). This helped lead to a 5.7% sales gain in supermarkets for an already large category at a time when people are still pinching pennies.

• Convenience: Quick meal solutions are producing big business. For example, the refrigerated side dishes category has advanced $170 million since 2007. The $224 million refrigerated pizza category is red hot. While some of this is due to value-oriented products, the importance of convenience as a factor can't be ignored.

• Safety: Bad publicity is a huge negative for products, even worse if it involves safety concerns. That was the case recently with internal analgesics, which posted a drop in sales in the wake of safety worries following recalls for some Johnson & Johnson products. One angle to track is how troubles for a national brand impacts store-label business in the same category.

• Regulation: Cigarettes remained in the hot seat as government levied higher taxes on the category in efforts to curb smoking. The result was predictable: unit sales declined more than 5% in the food channel. Strangely, sales advanced overall, but that's because the higher taxes were factored into that number. All of this is probably being closely watched by marketers of other categories that are in danger of drawing similar government scrutiny.

This focus on non-economic factors isn’t meant to downplay economy’s ongoing influence. In fact, it’s almost as if parts of last year’s annual SN category roundup could have been republished today, word for word.

That story quoted from a SymphonyIRI Trends Report that appeared about a year ago: “Recent reports indicate that the recession is easing, but consumers remain firmly entrenched in savings mode.”

Further, that story outlined retailer behaviors that continue to today. “Many traditional supermarkets have responded to consumers’ quest for grocery savings with sharper pricing on everyday items and enhanced private-label offerings.”

However, the non-economic drivers cited here are just the tip of the iceberg of what we'll see when a more sustained recovery takes hold. At that point categories will have to stand for more than just value. It's impossible to predict exactly when a lasting upturn will arrive, but it's not too early to ensure categories are well positioned.