Takeaways from Deb Conklin’s speech:
One of the things that we do differently than anybody else is our DSD network to get your products to our customers in a fresh and timely manner. It is a difference maker, and it's something we can do that a lot of our competition can’t. [Editor’s note: DSD, or Direct Store Delivery, means that a distributor delivers products directly to stores rather than to the retail company’s distribution center.]
As we think about the economy, if you'd asked me last year.. I would have said that we were going to be in a recession right now. I'm kind of shocked, we're not. This whole concept of a soft landing I didn't think was really possible. And I think that's where we've ended up... I think the one thing we've got going for us from a timing perspective is from a geopolitical standpoint. It's an election year, and that tends to change what happens in the economy one way or the other. And I think that's going to have an impact on us.
Without a shadow of a doubt, we're coming off a year that was the highest inflation in 40 years, it was the most inflation I'd ever seen in my professional career... We're seeing things slow. But I think what we're seeing is a consumer... that is going to continue to bend but not break ...
We're still not back to pre-COVID inflation... We're much better than what we were... Inflation is slowed. Not that there's deflation, stuff’s not getting cheaper... Think about everything you buy, your home, your car, your groceries, your restaurant bill, all more expensive... Food is more expensive than it's ever been, and that's scary for a lot of people, specifically for the people who are experiencing a lack of food security.
The labor participation rate is still up... Most people who want a job have a job or can get a job... Something to watch is the next generation of kids coming into the workforce, and the baby boomers are retiring at greater and greater rates. Not only is the consumer changing, but the workforce is changing dramatically. And we got to be able to flex to that, not only how we lead our individual teams, but how we serve our customers is going to be very different over time.
There are a ton of unknowns. If you think about the world that we live in, you think about interest rates going up, a capital tightening, people spending less in businesses. What people miss out on is business spending drives a boatload of the economy, not only investments in capital and growth but new jobs, and that's more people who have money to spend to go buy stuff. And so when you think about what the unsure nature of business spending looks like, it could go a lot of ways. I think it's less and less likely that we'll see a recession, specifically because it is an election year. But we better be prepared. Mike Tyson said everybody has a plan until they're punched in the mouth... So part of being a good business leader is the ability to say, hey, there could be a recession.
There is definitely more unrest and more craziness going on in the world we live in. In our country, the United States, people are so divisive. If you're on the left or the right, we haven't found a lot of common in the middle. And that's part of the problem we have in the world we live in today. People are diametrically opposed on what they think is right, and we're not coming together to find a common ground. And that's going to drive a lot of unknowns.
M&A [Mergers and Acquisition] is going to continue. And that means we have to continue to stay flexible and nimble, because the only thing that is constant is change.
We've also seen this continued rapid growth in the alternate channel... I think the consumer is wanting and demanding different things. They're wanting different experiences. In our case, they want natural and organic food, not processed food when they're on the go. When they go by the gas station, or they go by Dollar General, they want to have a healthy item. They don't want to just have Cokes and smokes. And it's okay for us to think about how we go to market differently as a result.
Most consumers are going to as many as three or four stores [a week]. And they're shopping both online and in brick and mortar... 83% of retail executives say that they are trying to pull together better how the consumer interacts with them in both brick and mortar and digital. And so they're putting different playbooks in place to try to figure out what that means.
Our industry, we're in a “rising tide raises all boats” environment. We are taking share from conventional... Our industry itself is growing at a 6 to 8% CAGR [Compound Average Growth Rate]...
One of the questions I got that was very interesting is, what is the impact of semaglutide and Ozempic and other weight loss drugs and the consumption of food... We're seeing people opt out of some of the conventional products and into the natural organic. I think when you lose weight, you're feeling healthier, like, “Hey, I'm gonna opt into more of a healthy lifestyle.” But I don't think we're seeing as much of a change in consumption of overall food, as people thought there might be six months ago as the weight loss craze with these meds have really taken shape.
If you also think about the products that we sell, milk and dairy and yogurt and meat, snacks, and beverages. Those are all areas where we collectively kind of punch above our weight... We have some product lines in that family that are double-digit in unit growth.
One of the other metrics that I really thought was important and I loved is how much people are thinking about their personal financial metrics, and how that's driving their behavior... I remembered as a kid, my mom always made a list, we went to the grocery store. I haven't made a list for the grocery store in forever. Now, more than 65% of consumers make a list before they go and they're doing everything they can to stick to the list to keep their budget in control. Those are behaviors that we all need to be aware of because we need to make sure we make the list.
We're also seeing this continued move to private label. That's tough for a roomful of people who are brands... It's amazing to me how many people go shop product at two different retailers, and say, “I can get it for three cents less there.” You just put seven miles on your car to do it. But they save three cents... I’ll give you some statistics: 36% of consumers are looking for affordability first, 26% are looking for health first, and then 14% are worried about the planet. Think about our brands in this room and what we do, man, do we hit those top three pretty well. We’ve got to work a little bit harder on the promotional planning and make sure volume is going through... because that's the difference maker.
Even high-income families are shopping at Walmart, and it's growing. People are looking for a deal... When you think about the different ways consumers are buying, they're going to Costco and buying their toilet paper and their paper towels. And then they're going to another location and they're buying their produce. And they're going to another one. So they're going all over the place.
Consumer behaviors are changing... The data says or is predicting that in five years 40% of goods that are being consumed will be private label. That's staggering. It's absolutely staggering. So one of the reasons why we have to make sure that we're taking cost out of the supply chain and we're being a good advocate for the supply chain is we have to help make each other more competitive.
When you think about the macro trends and what's happening, one of the things that I've learned way more than what I ever realized over the last year is our products are lifestyle. If you're gluten free, or dairy free, or clean, you live that lifestyle. That is who you are. And what that drives is even during tough times, you're still consuming those goods that you feel are good for you. You're not trading off and going. “Well, I wanted to eat gluten free, but now what the heck, it's more expensive, I'm gonna eat Oodles of Noodles,” right? Nobody's saying that. Nobody's saying that.
One of the things that I love about what our team does is they're usually two, three years out thinking about what the consumer is wanting, where their behaviors are going, and how do we get ahead of that with y'all... It matters what we do. And people truly do care about what they're putting in their body. And they want to have this better experience with products that they feel good about.
I do think COVID accelerated online purchasing. But most people are unlike me, they are in the store and online, and they're having these different relationships. But can you imagine 13% of grocery sales being digital? That's shocking, specifically because there has been no cracking of the code of how do you make really frozen and refrigerated product really be able to be shippable on an easy basis.
Consumers are discovering products online. In my day and age, we watched a chef, and he's using an ingredient, like, “Oh, I'm gonna go buy that.” Now everybody's on social media, almost three hours a day of social media for the average American... They're being influenced by what they see. It's what they buy, how they cook, the brands they identify with, it is a changing world... The world was really, really big, the world is getting small.
At the end of the day, people want to be seen where they're at, they want to be met where they're at. And that's what you're seeing a lot of here in this microcosm, where marketing and relationships are happening at the most narrow level, at the individual level.
