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Two Studies See a Positive Sales Outlook; Another Warns

Two Studies See a Positive Sales Outlook; Another Warns

Two weeks ago, we took a look in this space at various predictions concerning how holiday sales would unfold this year in the period from Thanksgiving through the balance of 2007. The outlook at that time was favorable, a view that continues to pertain as the season unfolds.

The chief reason this year's holiday period may be more robust than usual for the food distribution industry is that as the economy takes a bit of a dip now, consumers are reacting by returning to meals prepared at home in a bid to economize. Two surveys that we'll consider in this column assert as much.

A third study, however, posits that consumers are growing less satisfied with the prices they pay for many food products. That study is the well-known American Consumer Satisfaction Index, which is produced by a school at the University of Michigan along with a couple of partners and sponsors.

Before we take a closer look at the ACSI, let's visit the two other studies that sketch out in greater detail what type of opportunities may be in front of the consumer packaged goods industry this year. After all, what's good for vendors is often what's good for retailers.

With a view to looking at opportunities from manufacturers' perspectives, the Grocery Manufacturers Association, Washington, commissioned studies from two research firms, Ernst and Young and The NPD Group.

The short version of the findings is that CPG manufacturers' best opportunities to boost holiday sales this year are in the areas of seasonal flavors, seasonal packaging and convenience foods. All cater to the upturn in the frequency of holiday meals eaten at home. More specifically, as a GMA statement details, the Ernst and Young Consumer Products practice predicts a 5.5% growth in retail food sales for the holiday season as compared to 4.5% sales increase across all retail sectors. Food sales are expected to run ahead of all other sales for reasons cited in NPD Group's Consumer Insights study, namely that more than 80% of respondents to a survey plan to eat their holiday meals at home, or at a family member's home. By the same factor, survey respondents say they will either prepare their own holiday meals or have them prepared by a family member this year.

NPD research also finds that nearly 30% of Americans have not finalized New Year's Eve plans, suggesting a possible upside potential for food sales for that holiday too.

Against that backdrop, let's return to the ACSI study, which considered a wide range of manufactured and durable goods and detected the first quarterly decline in consumer satisfaction registered since 2005. Overall satisfaction for the third quarter of this year dropped a slender 0.1%, but that drop was generated largely by consumer reaction to price increases for food products and for cigarettes. The satisfaction index for food producers dropped by 2.4% and by 1.3% for cigarettes. The study notes that food and beverage prices increased 4.2% for the 12-month period that ended in August. Cigarette prices rose 6.5% for the period. The overall inflation rate for the period was 2%.

In sum, the three studies contain mostly good news, but the ASCI ratings must be seen as an early warning signal.