Q&A: Todd Hale, Consumer Research Expert
A wide-ranging conversation with the former SVP of Consumer and Shopper Insights at Nielsen about wellness claims, meal kits, delivery, e-commerce, the future of automation and the vital role of data in the world of CPG...
The following interview is the first in a series with founders, thought leaders, and supply chain executives in the CPG industry. Kicking us off is Todd Hale, the former Senior Vice President of Consumer and Shopper Insights at Nielsen, where he worked for more than 30 years. Mr. Hale, whom we spoke with in the summer of 2019, is principal of Todd Hale, LLC, an independent retail insights consultancy based in Greater Cincinnati.
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Unioncrate: Smaller brands are having lots of success these days appealing to shoppers through wellness claims. Larger companies often have to play catch-up. How do you view this trend?
Todd Hale: Contrary to what you might believe, products that aren’t necessarily good for you are doing pretty well in this economy. While better-for-you matters to many, price and value still come into play. When you look at wellness claims across the grocery store, the fast-growing ones are not necessarily the biggest sellers. Grain-free, corn-free products are more for pet foods than they are for human foods. But more of the fastest growing that might be growing 20% or 30% percent year over year are relatively small in terms of absolute size. But the big ones—gluten free, organic, natural—are big sellers and some of them are driving growth maybe 4-5% percent year over year. That’s a pretty significant level of growth. Nielsen Retail Measurement Services reports annual sales for gluten-free claims are about $88 billion and when that grows over 5% year over year, that’s a big number.
And a lot of brands are latching onto wellness claims and labeling their products to reflect them even though, say, gluten was never part of a meat product anyway. They’re going with that claim because it matters to a lot of people. Transparency is not always followed in the world of food marketing, but at least they’re letting people know what ingredients are in their products.
Look at the labeling in the pizza aisle: no artificial colors, no artificial flavors, good source of protein. There are ways to tap into those wellness claims for a product that still isn’t necessarily good for you. Frozen pizza for the most part is a family fun product purchased by greater percentages of low and middle income consumers with higher frequency and at fairly high price points. And it’s up over 5% year over year. Who would’ve thought that in an age of health and wellness a category like frozen pizza could still be doing that well. Winning brands have done it through innovation and focusing on areas where they haven’t in the past: wellness claims, fresh packaging, “bigger bolder” taste.
Speaking of packaging, do you believe that meal kits will continue to enjoy growth?
I’m someone that’s not sold that meal kits are going to be the end all be all. It’s a high price point: almost $18 to serve a family of four. And that’s on the cheaper end when you consider meal kit subscriptions services like Blue Apron, Plated, and Hello Fresh—all of which rely on e-Commerce and delivery, rather than retail.
I find it interesting that Stouffer’s (Nestlé) and Knorrs (Unilever) have come into the meal kit market in two different ways. The Stouffer’s frozen meal kit is a rather large box; it’ll hardly fit in your freezer. You’re going to buy it and you’re going to consume it right away. But I find it very unusual that that brand decided to make a frozen meal kit and turn what’s typically a 3-minute-and-30-second microwave occasion and make a frozen meal that takes about 25 minutes to prepare. And you use two different pots and cooking surfaces, a microwave and a stovetop. And so the convenience aspects is gone. It was good tasting, but I just wonder why they didn’t just come out with a frozen meat with sauce that could be added to natural fresh ingredients throughout the store.
This is somewhat like the approach that Knorr took for their One Skillet Meals line. They provide the seasoning and then consumers buy the rest — chicken, vegetables, etc.—and you make it in a single pan and it turns out to be an equivalent price when you add all those other ingredients.
Still, I applaud those efforts of companies trying to ride the wave of a trend. But even though meal kits are something that some consumers are latching onto, they are struggling online. The only traction I think a lot of companies have gotten with it is, you know, “Buy this meal kit online and well give you a deep discount.” And it turns out the consumers don’t repeat because they don’t want to pay the price point.
A recent Wall Street Journal article details how single-person households now make up nearly 30 percent of households in the U.S. How are brands are responding to this rising trend?
That single family household is a combination of the fact that we’re getting older and living longer; or our spouse is gone; or its younger folks who are staying single longer; or another lifestyle choice. So when you think about that one-member household—who is it? Is it old, is it young, and how does it affect packed-buys? I think that the industry has responded by producing smaller pack sizes as an opportunity to connect with older people. My kids have left the nest and we’re a two-member family now. I only drink 8 oz. cans of Diet Coke now. One a day.
Similarly, consider the case of Stouffer’s and its frozen meal kit. Rather than make it a product that a single-member household would never buy — a four-serving item—they could have made it serve a household of 2. So if you’re a family of 4, you’re going to buy two packages. Companies must think: How can we make multiple purchase units a part of how we market to consumers?
You recently wrote about competitive threats to convenience stores, with e-Commerce having an incredibly dynamic impact on retail itself. This is no secret, of course. Can you speak to this trend plus how delivery plays a role?
The retail channels that have really suffered from the massive expansion of e-Commerce have been specialty retailers—department stores, apparel stores, shoe stores, toy stores. Other retailers, like convenience stores, drug stores, dollar stores, and grocery stores continue to grow, but they’re growing at a slower rate. Last year was the first time since 2008 where we saw a decline in store counts from the prior year. So it’s kind of a wake up to the fact that, yes, e-Commerce is having a real impact and brick-and-mortar stores are closing at a relatively alarming rate.
Convenience stores are less likely to be impacted by e-Commerce with the exception of restaurant/food delivery. The GrubHubs of the world—delivery apps and services—are probably going to have an impact on convenience stores that do a lot of food service business. Wawa, for example, is a phenomenal retailer when it comes to food service on the East Coast (they even do catering). But there are a lot of people who would prefer to have food delivered at not an inexpensive price—which means they’re not going out to a restaurant or a brick and mortar store to buy food.
If a retailer hasn’t yet felt the impact of e-Commerce and haven’t seen a lot of store closings, hold onto your hats. Because somebody’s going to come out with some new way to reach the consumer.
There’s so much pressure these days on automation, speed of delivery, and last-mile logistics, much of which has been driven by Amazon. How to keep up and stay profitable, particularly fulfilling food orders?
It’s interesting that companies are trying to leverage automation and e-Commerce to sort of go that last mile of retailing, if you will, to give consumers options to make it easier to shop. Sam’s Club recently announced they’re going to offer same-day delivery for alcoholic beverages in certain markets, through Instacart. Amazon announced two-hour alcohol beverage delivery services in the past. In fact, my wife and I tried it one afternoon. It showed up four minutes late (outside the two-hour window). But because alcoholic beverage prices are kind of fixed in Ohio, we didn’t save any money by buying on Amazon. I could’ve driven two-and-a-half blocks to my local Kroger and had that product in my home two hours sooner.
What intrigues me a lot these days is how difficult it is for companies, whether they’re a retailer or a manufacturer, to make money in e-Commerce. Look at GrubHub, for instance. They’ve had phenomenal success driving revenue and engagement—but they’re not making money. Amazon just announced they’re getting out of the restaurant delivery business, and they usually don’t back out of a business unless they can’t make a profit in the long run.
So it’s amazing to see all this investment in automation and technology to try to make food delivery a profitable business. Kroger’s first-quarter financials were recently released and it shows slow growth (same store sales grew 1.5%), even though its e-Commerce business up 42%. Their stock took a hit as they continue to invest in e-Commerce and automation. In fact, Kroger is breaking ground already on some of its 20 automated warehouses specifically for online grocery shopping around the country. That’s really going to help them cut the cost of delivery and make e-Commerce shopping investments more profitable. But being able to do it right, in the long term, is going to be a challenge. One potential solution is to continue to connect with shoppers electronically via recipes and other offers. When retailers work with manufacturers to help them develop content that drives engagement with shoppers—that’s important. Brands need to play in that space.
Why is data important for driving growth?
It’s interesting to see the partnerships that are happening between research information firms and big-time vendors, especially when it comes to measuring the impact of e-Commerce sales and how it relates to store-level data.
Gaining that holistic view of the world is difficult, to say the least. Costco’s a big miss for the retailer measurement industry today—they don’t cooperate. Neither does Aldi, which is going to expand to 2,500 stores in the next 3-4 years. Kroger has an exclusive store-level deal with IRI, but both information companies include Kroger data in their market reads. Nielsen has gone off and done their own exclusive deals with retailers that’s making a challenge for manufacturers to have a comprehensive view of the world they’d like to have. Amazon is going to have Nielsen e-Commerce data, exclusively; IRI is not.
In short, having the ability to look at the entire market is a challenge for brands. CPG brands will have to come up with unique ways to mine and merge and combine different data sets to capture that all-outlet view to enable better forecasting and demand planning, especially for the small players. To be able to afford that kind of expertise internally can be a challenge, so some companies will need to go someplace else to acquire information, handle it, and make sense of it.