You are here
It's one thing for supermarket retailers to have to check how the financial winds blow each season. A new study suggests they have to check how the actual winds blow as well. The connection between weather and retail sales is apparent to anyone who watches the local supermarket have a run on snow shovels and food staples just before a blizzard, or on umbrellas when it's raining. Measuring the long-term impact of weather on sales—and looking forward far enough to prepare for how particular weather shifts could affect sales—is a far tougher task.
In a study of last winter's impact on sales of cough and cold items, Information Resources, Inc. found that the fifth-warmest winter on record and the continuing drought that followed a lack of snow in any place not named Buffalo, N.Y. left American consumers a good bit healthier than in past winters. It was retailers who felt the pain.
Of the top 15 items in the supermarket and drug channels with a high proportion of winter sales, according to data from Chicago-based IRI, 10 suffered significant drops in the winter of 2001-2002. They included such cough and cold staples as facial tissue (off 4.5 percent), nasal products (-6.9 percent), cough drops (-3.8 percent), cough syrup (-3.8 percent), and cold/allergy/sinus tablets (-5.8 percent).
"Our analysis demonstrates the impact that unpredictable weather can have on product sales," says Ed Kuehnle, group president of IRI North America. "Manufacturers, particularly those of seasonal products, must account for these factors in forecasting and planning, as do retailers."
The impact wasn't only on those products that normally do well in the winter, according to the data. Categories that are traditionally not big cold-weather sellers—pest control, suntan lotions, charcoal, and marshmallows, for example—saw a huge surge in sales.
It was an unusual winter by historic standards, but recent trends have shown the climate getting warmer, and that may force retailers and suppliers to reexamine product mixes, market strategies, and promotional efforts. It will certainly force them to watch the Weather Channel as closely as CNBC or CNN.
"By predicting weather conditions, retailers can prioritize the timing of promotions and the importance of placement," Kuehnle says. "If, for example, it is forecast to be a warm winter, first aid would be prioritized versus skin care, sun care may make an early appearance on a seasonal display, and charcoal could be kept out year-round.
"We have also tested spot radio, looking at going on-air based on weather alerts, and found that it is an effective way of promoting brands that are weather-dependent," he adds. "Retailers could target their co-op media to weather and seasonally appropriate brands on a more ad hoc or alert-driven basis."
As the weather has warmed in recent years—1998 was the warmest winter on record, and the past three are all in the top 10—cough and cold product sales have cooled. Only in 1999 did sales of cough and cold products in the food channel increase, jumping a solid 5 percent, according to IRI. In the last four years, though, unit sales are off almost 5 percent in the food channel and 6.3 percent across all channels. Dollar sales have ticked only fractionally higher across the board, indicating it's been a tough time for the cold and flu product manufacturers and the people who sell those products.
"Weather, cold/flu, and allergy are typically good predictors of OTC sales," Kuehnle says. "Economic indicators may be predictive of the less need-driven OTC categories—skin renewal, for example—premium tier products, and private label performance across OTC.
"We have found that some markets have been good and consistent lead markets to predict cough/cold sales," he adds. "We have also modeled weather data and found a strong relationship between the weather at a market level and sales of things like first aid remedies, skin care products, and bottled water."
The weather is one of those business factors retailers cannot control. But like so many other variables in a retail environment, Kuehnle contends, it is one retailers can measure and manage.
"As companies dissect their sales data to determine how effective various advertising and marketing initiatives were in driving sales, Mother Nature is one of many influencing factors that need to be considered," he says. "Assessing the impact such factors have on other seasonal categories provides an extremely valuable benchmark."
"Nonfoods editor Bob Vavra can be reached at [email protected].