ACSI Commentary October 2012
October 16, 2012
Commentary on Breweries, Cigarettes, Personal Care & Cleaning Products, and Soft Drinks
Nondurable Categories Remain Satisfying as U.S. Sales Taper Off
Customer satisfaction dips slightly for soft drinks and beer, but both remain among the higher-scoring categories in the American Customer Satisfaction Index (ACSI). The soft drink beverage category drops 1.2% to a score of 84, while beer slips 1.2% to 81 on the ACSI’s 0 to 100 scale. Somewhat higher pricing across the two beverage categories is the major contributor to the dip.
Consumption of carbonated soft drinks declined 1% in 2011, falling to a 16-year low, but this has less to do with customer satisfaction than with an ongoing shift in consumer preferences prompted by growing health concerns about sugary sodas. New York has become the first city to ban the sale of sugared drinks larger than 16 ounces at restaurants, theaters, and sporting events. Other cities may follow New York City’s lead. Nevertheless, as soft drinks continue to lose market share, flavored waters and bottled teas are gaining share.
The dominant market-share leaders, number-one Coca-Cola and number-two PepsiCo, remain deadlocked for customer satisfaction for a third straight year. At present, both companies slip 1% to ACSI scores of 84, which equal the 2012 score for the aggregate of all other smaller soft drink brands. While both Coca-Cola and PepsiCo continue to emphasis soft drinks, these companies have invested in other types of beverages as well, apparently recognizing the challenges that lie ahead for the soft drink market.
The big mover in the soft drink industry is Dr Pepper Snapple Group, which surges ahead of its much larger rivals and captures the industry lead with a 6% gain to 87. Dr Pepper Snapple commands about 17% of the market, but has shown steady growth in the wake of its spinoff from Cadbury Schweppes, as reflected in stock price. Over the past year, the company’s stock value has reached an all-time high.
U.S. beer consumption also has weakened, with a 2% drop in 2011 that marked a fourth straight year of shrinking sales. Price, the impact of a struggling economy on core consumers, and growth in the craft and specialty beer segment has impaired the major brands. In terms of customer satisfaction, the smaller niche brands do better than the market-share leaders. The aggregate of smaller beer makers is steady at an ACSI score of 83 for a seventh straight year.
Somewhat lower, Anheuser-Busch InBev and the combined U.S. operations of SABMiller and Molson Coors known as MillerCoors are tied with ACSI scores of 81. In 2011, Miller displayed stronger customer satisfaction at 84, but this year’s lower score for the joint venture reflects the negative impact of the generally higher-priced Coors products.
Customer satisfaction with cigarettes maintains a slow climb over the past three years, while the number of smokers in the United States continues to fall. This year, customer satisfaction with tobacco products inches up 1.3% to an ACSI score of 79, just surpassing the ACSI level cigarettes earned before new taxes led to much higher prices. Price has played some role in declining consumption, particularly in the midst of the weak economy, and also has kept the cigarette industry’s ACSI score lower relative to other nondurable categories. Still, cigarette quality remains high, as perceived by tobacco users.
Reynolds American and Philip Morris are the two major companies vying for supremacy in the industry. For 2012, Reynolds jumps into the customer satisfaction lead, improving 5% to 81 and edging out Philip Morris, which holds steady at 80.
Unlike many other manufacturing industries, where smaller brands do better in terms of customer satisfaction, Reynolds and Philip Morris outdistance the aggregate of all other tobacco brands at 77 (+1%). This may reflect the fact that the major tobacco companies are better equipped to advertise and to execute large-scale price promotions.
Personal Care & Cleaning Products
Customer satisfaction with shampoo, soap, toothpaste, detergents, and cleaning products is unchanged for a third straight year at an ACSI score of 83. Quality is recognized by customers as high, and a wide array of brands poised to meet individual consumer preferences keeps satisfaction strong for the industry. Clorox is the perennial category leader, holding at least a share of the top spot in all but 1 of the previous 15 years. For 2012, Clorox keeps the lead despite slipping 1% to 87 and edges out a surging Unilever (up 5% to 86).
The rest of the personal care & cleaning products category is grouped closely together. Colgate-Palmolive and Dial each dip 1% to 83, while Procter & Gamble remains at the bottom of the industry for a third straight year at 82. P&G ties the aggregate of all other brands of personal care and cleaning products, which drops 2% to 82. With abundant buyer choice and comparable pricing across brands, differentiation on customer satisfaction via market segmentation and positioning becomes critical for competitors. The latest ACSI data suggest that Clorox and Unilever might be the leaders in this regard.