Sponsor (Oct-Dec 1964)

breakthrough would boost results far higher. What's the advertising significance? The research and promotion burden of boil-in bags (like most other new products) is being borne, not by retailers or distributors, but by national packers — where the big-money is. In-store competition Different brands (and different products within one brand) must also compete with each other within the store. This time they're vying for space with frozen-food display cases. The reason is as logical as it is simple: Refrigerated cases are expensive to buy, install and maintain. Therefore, store managers hold their number to a minimum (thereby creating space shortages) and will continue to do so, the Nielsen study indicates, until the cases "become as cheap to buy and to operate as the simple shelving on which ordinary groceries are displayed." Just how tough is this in-store contest? Plenty! The miUion and a half food transactions, which Nielsen researchers analyzed, included 639 different sizes, brands and types just for frozen vegetables. In all, the study uncovered some 2823 different items. The typical retailer eliminates seven-eighths of those on the market and tries to stock only the remainder — in this example, about 350 items. In that competition — 1 chance out of 8 just to get into stores ■ — packers, plus their wholesalers and brokers will have to use strong advertising and clever promotion as their major vehicles for wheeUng into the confidence of store managers. Reverse promotion rule It's axiomatic in merchandising that fast-moving items build profit. That's especially true in frozen foods where the relatively few fastturnover products may contribute as much as 60 percent towards gross profits — a real fistful in the notoriously narrow-margined grocery field. Yet, frozen foods are tricky in that they don't always follow the rules. For example, the margin on 34 • • • frozen foods standard groceries is so narrow that even if a slight price-cut increases volume impressively, the revenue gained may not offset revenue lost. Thus, a 3-percent markdown (or added promotional expenditure) may lead to a 30percent increase in sales but a 20percent decline in profit. In frozen foods, however, a 3percent markdown (or extra advertising expense) may lead to a 30percent rise in volume and a 17percent increase in profits. What this means in advertising terms is that frozen foods require their own merchandising-promotion programs. And their beneficial margins usually allow for spending a little extra. Shifting sands Vegetables — to no one's surprise — are the largest-selling frozen product, accounting for 36.1 percent of unit sales, according to the aforementioned Nielsen survey. (Frozen fruit juices are in second place with 22.4 percent of unit sales.) Yet last year frozen vegetable sales dipped 15 percent. During the same period, frozen baked goods surged 9 percent and ethnic dinners, i.e., Italian, Mexican and the like — increased 26 percent. Frozen pizzas advanced an enormous 77 percent. Besides reflecting the growing public interest in speciaUzed new products, the above also illustrates how abruptly the over-all market — not to mention share-of-market — can shift. When the market's so fickle, the alert food packager wdll use as much advertising as he can muster to help keep abreast of, if not control, the tide. The profit paradox Among frozen foods* interestingly enough, the items that sell the most don't always contribute the most to dollar volumes. Frozen vegetables (with 36.1 percent of unit sales, as noted) delivered only 28.2 percent of dollar sales in the Nielsen study. The 22.4-percent unit sales racked up by frozen juices translated into only 13.7 percent of dollar volume. Thus, store managers themselves apply still another squeeze on the hyper-competitive business. They naturally prefer to stock the items that contribute most to their profits. How misleading that picture can be! Lower-priced items (costing between 11 and 21 cents) account for nearly 25 percent of store sales, while higher-ticket products (from 70 to 99 cents) account for a mere 5.6 percent. Judging by volume alone the store manager apparently should stock up heavily with low-cost frozen foods. But the higher-priced products, while relatively minor in numbers, generated more than 50 percent more dollars when results were totaled. How can the smart packager change customer demand so that more people buy higher-priced, more profitable items? Special promotions, merchandising gimmicks and price adjustments all help on a temporary basis. But the trick is really turned by national advertising. SPONSOR i