Frozen food is cool in everyway

According to this morning's Guardian UK shoppers are cancelling their orders of organic food and are abandoning bottled water in favour of the tap. Premium-label heat-and-eat meals are left on the shelf, along with exotic fruits airlifted in from Africa. There is a new air of austerity in the aisles of supermarkets and a back-to-basics recession diet - which has made frozen food cool again. Until recently many shoppers regarded frozen food as a rather ghastly, downmarket option. Fresh was best, and stores cut back on freezer space to make room for more chilled products. But now frozen food is back in vogue as shoppers search for value and try to cut back on waste. Sales of Sainsbury's frozen peas and roast dinner platters have more than doubled since last year and its frozen garlic bread is ahead nearly 40%. The biggest increase has been sales of frozen raw prawns - up 400% year on year. According to TNS Worldpanel market research, the fastest growing grocers are discounters such as Aldi and Lidl - which devote more space to frozen food than their bigger rivals.

Brian Young of the British Frozen Food Federation puts much of the decline in frozen-food sales down to snobbery - and reckons Marks & Spencer started the rot. "M&S led on chilled food, particularly ready meals, and made great margins. But prices went up because there was so much wastage. The packs were open and visible and people believed it was better. The other supermarkets followed. It was just a form of snobbery, and that is now fading away."

Today is 'Mega Monday' in the UK

Today is expected to be the busiest online shopping day of the year in the UK, with experts forecasting that spending will reach £320m. The internet retail trade body IMRG said it expected the peak time for shopping to be between 1pm and 2pm, as consumers who had done their research on the high street over the weekend logged on to order their gifts. The payment card issuer Retail Decisions (ReD) has forecast that the busiest minute of the day will be 1.31pm - around the time most people get back to their desks after popping to the sandwich shop. It predicts £980,865 will be spent in what has been dubbed a "mega minute". Last year's busiest minute online was 1:09pm on December 10 when UK shoppers spent an estimated £767,500.

Online sales records are being broken each year as more and more consumers start to feel comfortable shopping over the internet and "etailers" adapt to make the experience more convenient. The impact of the credit crunch has forced many consumers to consider cutting costs, and despite recent high street sales some of the best prices for electrical goods and items like books and CDs can still be found online. David Smith, director of operations at IMRG, said: "The internet has become the best place for shoppers looking to make the most out of their squeezed spending resources and find the best prices and products for presents this Christmas. Online has definitely come of age this Christmas." Smith said that although transactions levels were set to soar there would not be as many sales of big-ticket items as in previous years. "Last year people were still buying the larger electrical items like LCD TVs, but that has really dropped off this year," he said.

Most wanted: current bestsellers on Amazon
DVDs: Mama Mia, The Dark Knight, Wall-E
Video games: Mario Kart with Wii Wheel, Official Wii Wheel, Wii Nunchuk Controller
Books: The Tales of Beedle the Bard, by J. K. Rowling; Dear Fatty by Dawn French; Dreams From My Father: A Story of Race and Inheritance by Barack Obama
Toys: Silverlit PicooZ Helicopter, Original Rubik's Cube, Top Trumps - Top Gear

Source: 'Busiest online shopping day expected', The Guardian, 08 December 2008

Thanksgiving sales begin

Today is 'Black Friday' in the US. Black Friday is the Friday after Thanksgiving, and it is the beginning of the traditional Christmas shopping season. Black Friday is not an official holiday, but many employees have the day off, which increases the number of potential shoppers. Many retailers open very early (typically 5am or even earlier) and offer doorbuster deals and loss leaders to draw people to their stores.

In keeping with tradition, this morning, US stores opened early and offered steep discounts to encourage consumers to part with their cash as the Christmas shopping season kicks off. The day after the Thanksgiving holiday is viewed as an important test of how willing consumers are to spend. Crowds of shoppers turned up at dawn to snare the best deals. A worker died and at least three people were injured after being trampled by a crowd of shoppers at a Wal-Mart in the New York suburbs! Police said a throng of shoppers broke down the doors to the Wal-Mart store in Valley Stream, Long Island, shortly after 5am, knocking the 34-year-old worker to the ground.

Electronics retailer Best Buy and department stores Kohl's and Macy's also opened their doors at dawn. Toys R Us offered up to 60% discounts from 5am to 10am. However, deep discounts are likely to hurt profits even if shoppers turn out in droves. Many retailers have suffered as the US economy nosedives although value chains like Wal-Mart have fared better. US retail sales recorded the biggest monthly decline since 1992 in October as consumers cut back on spending.

Crustacean recession

It has emerged, the credit crunch is having a negative effect on Scotland's prawn fishing industry at a time traditionally known for high prices. There is uncertainty over sales as households in Ireland, the UK and throughout Europe spend less. Continental Europe represents more than 80% of the market. Demand for prawns and other shellfish normally increases in winter because catches are limited by bad weather coupled with customers who want the seafood for the festive season. The situation is affecting sales in prawns, scallops, crab and lobster.

Spam and other inferior goods rally

Earlier, this week, we saw Aldi announce the opening of many new stores in Ireland next year. Of course, this is hardly surprising, in the current economic climate, as Aldi (and Lidl) concentrate mainly on selling inferior goods. Remember, 'inferior' is purely an economic term - it implies nothing about the actual quality of the good itself. From an economics perspective, inferior goods are goods whose demand has an inverse relationship with the consumer's income, i.e. as the consumer's income increases, demand decreases and vice-versa. Inferior goods exist because as people's incomes rise they tend to move onto more expensive goods and away from cheaper ones, e.g. own-brand cereals. Likewise, if incomes are decreasing, these inferior goods will become more attractive to consumers.

Here is an example of the growth in demand for an inferior good in the US — Spam. Spam is a cheap canned precooked meat product. The labeled ingredients are: chopped pork shoulder meat with ham meat added, salt, water, sugar, and sodium nitrite to help keep its color. As it is vacuum-sealed in a can, it does not require refrigeration; Spam can last for years. The product has become part of many jokes and urban legends about mystery meat, which has made it part of pop culture and folklore.

However, the makers of Spam, the Hormel Foods Corporation, have never had it so good. Employees in their factories are working at a furious pace and piling up all the overtime they want. Why? Well, through war and recession, Americans have turned to Spam as a way to save money while still putting something that resembles meat on the table. Now, in a sign of the times, it is happening again, and Hormel is cranking out as much Spam as its workers can produce.

Even as consumers are cutting back on 'normal goods', Spam is among a select group of 'inferior goods' that are selling steadily. Pancake mixes and instant potatoes are booming. So too are vitamins, fruit and vegetable preservatives and beer, according to data compiled, in October, by Information Resources, a US market research firm.“We’ve seen a double-digit increase in the sale of rice and beans,” said Teena Massingill, spokeswoman for the Safeway grocery chain. Kraft Foods said recently that some of its value-oriented products like macaroni and cheese, Jell-O and Kool-Aid were experiencing robust growth.

The sweet taste of recession

Cadbury is one of the few companies sitting pretty in the current economic climate, benefiting as it does from the theory of 'choconomics' – basically, that our appetite for sugary treats seems to increase as the nation’s economy slips ever nearer to recession. Consumer experts think that sweet sales rise as spending on pricier luxuries like meals out declines, but we’re not so sure. An extra bar of chocolate here and there when times are hard is comfort eating, pure and simple. People could just as easily munch on an apple or nibble a raw carrot after all, but it simply doesn’t seem to have the same appeal. Just as well for our sweet manufacturers, really. So enamoured is Cadbury's with the idea that senior executives at the choc company have coined a new phrase for the financial crisis. They're calling it the 'credit crunchie'.

This is not just a drop in profits... it's a drop in M&S profits

This is a good example of the response of a relatively upmarket store to the collapse in consumer spending. Marks & Spencers is to slash the price of its clothing and food to take on the no-frills grocery and fashion stores. M&S announced the price-cutting drive today after half-year profits dropped by 34%. The main reason for the slump is their shoppers defecting to budget rivals due to the imminent recession in the UK. This is particularly acute with the recent performance of their food business where profits and market share are falling as rising food prices encouraged customers to trade down to cheaper stores as well as discounters such as Aldi. M&S will try to attract shoppers to its stores with a Christmas advertising campaign featuring boyband Take That and TV actor Robson Green as well as regular M&S faces Twiggy and Erin O'Connor.

As M&S chairman, Sir Stuart Rose, disclosed the slump, annual profits at the low-cost fashion retailer Primark bounced up by 17%, indicating that customers were prepared to pick up clothing – if the price was right. M&S indicated that it was planning to reduce the costs of hundreds of items, in attempt to match the public's desire for cheaper goods. "In the current market, customers are increasingly concerned about value and we know that we have to respond accordingly," he said.

Incidentally, the current sterling/euro exchange rate will mean the M&S reductions will be greater in Northern Ireland than the Republic.

Sligo car firm down to a three-day-week

A company in Sligo which produces precision components for carmakers like Audi, Mercedes and Ford is cutting back production because of what it says has been a dramatic drop in car sales throughout Europe and North America. Bruss, which employs 250 people in Sligo, is temporarily shutting down production on certain days during November and December to avoid over-production. The majority of staff will end up working a three day week. The decision to do so has been taken solely as a reaction to the reduction in demand for its customer's products.

Housing slump affects paint company

Here is a good example of how changes in demand in one industry can have an effect on both sales and profits in another.

Dutch company, Azko Nobel, the world’s largest paint maker and owner of the Dulux brand, today announced a 23% fall in profits to €367m. They plan to make 3,500 of their 43,000 workers redundant worldwide. Business is being affected by the end of the international boom in residential and commercial property construction which has led to a fall in market demand for decorative paints. So a slump in the building industry - with many housing projects being shelved - is impacting on paint sales. Furthermore, profits are also being squeezed by a rise in the costs of raw materials used in manufacturing paint.