Milling & Baking News - April 19, 2011 - 37

Potential for accelerated pasta sales growth seen
FORT LAUDERDALE, FLA. — The long-term outlook for the pasta industry appears healthy, and many opportunities exist to grow the category at a faster clip than other food products, said Todd Hale, senior vice-president of consumer shopper insights for The Nielsen Co., New York. Mr. Hale presented “The new normal — insights into the post-recessionary consumer and a view of the retail 2015 landscape,” at the National Pasta Association annual meeting held March 27-29 at the RitzCarlton Fort Lauderdale. In making the case for pasta’s growth prospects, Mr. Hale hearkened back to the state of the industry prior to skyrocketing commodity costs and difficult economic conditions. “If you think back to 2008 when things were working pretty well, I think there is an opportunity to make that happen again now, but it’s going to take some work,” he said. “You’re not going to be able to sit on the sidelines and watch it happen.” Mr. Hale challenged pasta manufacturers to “think about how to leverage high commodity prices to drive industry growth for you as well as retail markets,” and described the current economy as “bi-polar,” with those who have money spending it, and those who don’t holding back. Consumers may be eating out more now, but with rising gas prices that trend may change, opening the door for the pasta industry to capitalize, he said. Clearly, food inflation is an issue, Mr. Hale said. “When you look at U.S. consumers and their ability to absorb price, and when you think that only 7% of all U.S. household expenditures goes to food, it suggests there is an opportunity to pass on price when there is a legitimate reason to do so,” he said, adding that more manufacturers are talking about raising prices, cutting costs and adjusting product sizes. According to Nielsen data, 10 of the 16 categories with the sharpest unit price increases posted dollar sales gains during 2010, while only 4 of the 16 categories with the largest unit price declines grew dollar sales, including dry pasta. “It’s much easier from a category perspective to drive growth by raising prices then by cutting prices,” Mr. Hale said. If there is something to be worried about going forward in 2011, it’s gas, Mr. Hale said, but he noted that the U.S. consumer is better positioned to weather the storm than in 2008, when gas prices rose sharply. If and when gas prices rise, he said consumers likely will respond by cutting back on trips, eating out less, value buying and increasing coupon use. Turning back to the food industry, Mr. Hale said the growth in pasta has been driven by value-oriented healthier pasta. For example, he cited whole wheat, reduced carbohydrate and gluten-free pastas as helping spur category growth. Despite the growth, he stressed that industry may not be hitting the bull’s-eye quite yet. “One of the things the food industry missed out on is people really connect with food, and I don’t think we hit on that message enough in our marketing,” he said. “I think we’ve missed out on the emotional connection between food and consumers and talk way too much about value and way too much about low prices.” He continued, “Value is not just about low price, there
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also has to be some benefit associated with value to drive sales. You can win with a premium product if it’s something that delivers a benefit to consumers and they recognize that.” Looking at some of the pasta industry’s web sites, Mr. Hale suggested “jazzing them up” a little bit. Specifically he encouraged companies to add more videos to on-line content. An on-line presence also is becoming more important to the broader food industry, and retailers especially. Mr. Hale said home delivery — which was met with much fanfare several years ago before fading away — is doing much better. “We think flexible delivery is going to be a very long-term trend,” Mr. Hale said. “And if you’re brick and mortar today, you’d better become brickandmortar.com and provide some flexibility to shoppers in some unique way because they are going to demand it.” Other trends going forward include increasing demand from older consumers and growth in ethnic families. “You may need to study how you handle your mix, but there is an opportunity there,” Mr. Hale said. He said other opportunities include international growth, staying in tune with evolving macro retailer strategies, and bringing broad-based solutions to help the entire store. MBN

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Milling & Baking News - April 19, 2011

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