The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
25 – 29 de mayo de 2009

The World

Hard times upscale spirits and new products: One of the hallmarks of spirits industry during the last couple of years has been the growth of the premium and super premium segments. This trend, according to a recent report by the Nielsen Company, is now one more victim of the worsening economic situation. Their report on consumer attitudes is showing that consumers are also trading down in spirits market. For example, consumers are “opting for cheaper bottles” of wine when they go to restaurants. Likewise, according to the report, “about a third of beer, wine and spirits consumers are ordering fewer drinks”. If this isn't enough it seems that consumers are also looking to save money by not letting the restaurant decide which liquor to put in a mixed drink but rather “calling for a specific brand name of liquor”. Besides the movement towards premium spirits, recently the segment has also been characterized by consumer willingness to experiment with new drinks and brands. What we seeing now is that besides trading down consumers are showing an increasing unwillingness to stay with the tried and true.

Before, if a consumer had a bad experience with a new drink they would mark it up to bad luck and just move on. Now, consumers are much more reluctant to risk “wasting money” on a bad experience. Taken together what this means is that consumers are more likely to stay with known brands; new brands, for the time being, will have a harder time making it in the market. Besides what Nielsen reports, we are also finding that changes are taking place in the home consumption segment. Because consumers consider that the brand says a lot about who they are or what they want other people to think that they are, consumers who no longer can afford the upscale or premium brands will by cheaper brands and try to pass them off as upscale spirits.

A chip by any other name... has tax and marketing implications: A product's definition is much more than just a description of what's in the box or can. In the UK it seems that Pringles, the Procter & Gamble potato chip company has been fighting in a British court for clarification regarding whether or not their snack “it's a potato chip”. Last week the court of appeal judge judges ruled that indeed it is a potato chip. This is important because “in Britain, most food isn't subject to the 15% national tax, but potato chips are”. What this now means is that the Pringles are subject to the tax. If you are worried about the company coming up with back taxes don't be. According to a spokesperson for Procter & Gamble “the company has been paying tax and so does not owe the taxman”.

What is of particular interest about this case is that when Pringles first came on the market some 30 years ago their traditional potato chip competitors and even potato producers challenged the designation of the Pringles' product as a potato chip. They wanted it designated as a reconstituted potato product. Procter & Gamble, on the other hand, fought for the product to be labeled as a potato chip. The reason for this, of course, is all about marketing. Consumers, P&G reasoned, would be much more willing to try a potato chip in a can than they would be to try a new product called a reconstituted potato sold in a can.

Mexico

No change in forecast for slowdown in supermarket sales: Yes, sales picked up at the end of April in reaction to the emergency influenza measures. Nevertheless, ANTAD, the retailers’ association, is saying that same store sales are still forecast to contract by 4% this year. Largely, this is due to the projected contraction of the economy, now placed at more than a 5% downturn.