Research launched for:The Coca-Cola Retailing Research Council Latin America by:McKinsey&CompanyInside the minds and pockets of Inside the minds and pockets of Inside the minds and pockets of Latin American consumersLatin American consumersLatin American consumersHow consumers build price perception and its How consumers build price perception and its How consumers build price perception and its impact on retailersimpact on retailersimpact on retailersTHE COCA-COLA RETAILING RESEARCH COUNCIL LATIN AMERICAThe Coca-Cola Retailing Research Council Latin America (CCRRC - LA) is dedicated to developing a better understanding of the food retailing and allied merchandise distribution business in Latin America. It concentrates in identifying and then studying selected relevant issues, presenting its findings to the manufacturing and retailing communities, in order to assist in the development and enhancement of the food retailing business.Latin America Council MembersJonathan BergerCIES USAHoward Butt IIIHEB MexicoGuillermo DAndreaCouncil Research DirectorAna Maria DinizGrupo Pao de Acucar BrazilPaulo GoelzerIGA, Inc. BrazilAntonio Coto GutierrezDia Internacional ArgentinaTim HammondsFMI USANicols IbezD&S ChileGonzalo Restrepoxito ColombiaEduardo Castro WrightWal*Mart Mexico1REVIEWING THE STUDY GOALS AND OBJECTIVESUnderstand the drivers of consumer price perception in Latin AmericaOverall goals and focus levelSpecific objectivesUnderstand the implications of pricing approaches on retailers and manufacturersUnderstand high level implications for retailers in terms of organization, supply chain and vendor relationsUnderstand high level implications for manufacturers in terms of capabilities and requirements to deliver under different retailer price approaches*Source:Team analysisMatch consumer price perception with reality to understand which are the most effective levers for retailersUnderstand the relative importance of different drivers of consumer price perception, across major consumer segments, product categories, shopping occasions* and selected marketsUnderstand how price ranks among the key factors in the consumer preferred store selection process*10% of study focus90% of study focus2THE STUDY LEVERAGED THREE MAIN SOURCES OF INFORMATION* AC Nielsen conducted the focus groups in So Paulo and the field research in all five marketsSource: Team analysis15 in-depth interviews with executives of key retailers in the regionMethodologyQualitative surveyFocus groups to test initial hypothesisQuantitative survey3,000, 30-minute interviewsCorrelate consumer research results with AC Nielsen scantrack informationUnderstand retailer perspective on consumer price perceptionObjectiveCapture insights on consumer price perceptionSegment consumersEnrich findings with AC Nielsen proprietary databasesMatch price perception with actual pricesIn-depth interviewsConsumer survey*ACNielsen database3CONSUMER SURVEY DETAILS Source: AC Nielsen, team analysisBogot673 consumer surveys6 retailers (90% market share)30 categories (3,500 SKUs)Santiago600 consumer surveys 11 retailers (95% market share)30 categories (3,700 SKUs)Buenos Aires600 consumer surveys11 retailers (70% market share)33 categories (2,500 SKUs)So Paulo600 consumer surveys13 retailers (87% of the market)30 categories (2,500 SKUs)Mexico City612 consumer surveys6 retailers (90% market share)30 categories (3,000 SKUs)4ONLY CONSUMERS WHO SHOP REGULARLY IN AT LEAST ONE MODERN FORMAT STORE ARE RELEVANT FOR OUR ANALYSIS* Includes hypermarkets, supermarkets, mini-markets and suburban supermarketsSource: Team analysisConsidered for our analysisConsumers who only shop in traditional formatConsumers who shop in it least one modern format* store regularly Typically low-end consumersUseful to gain insights on the low-end market, already studied by CCRRCAnalysis more useful in a study to increase the penetration of modern format, what is not the scope of this projectPrimary population of interest for the CCRRCOnly respondents able to provide answers and crossable data for:Accuracy of price perceptionPrice perception drivers for modern formatEffectiveness of promotional activity in price perception buildingOur sample is representative of modern format shoppers521-34 years35-49 years50+ yearsTHE CONSUMER SURVEY IS REPRESENTATIVE OF THE MAIN SOCIO-ECONOMIC CLASSES AND AGE GROUPSAge* Based on AC Nielsen socio-economic classification for each marketSource: Consumer survey%MiddleLowHighSocio-economic class*Results take into account the behavior and attitudes of low income consumers6 Source: AC Nielsen, National Marketing Associations of each countryCOUNTRY-LEVEL ACCEPTED STANDARDS GUIDED OUR INCOME LEVEL CLASSIFICATIONWe adopted the principles suggested by the National Marketing Associations of each countryHigh incomeMiddle incomeLow incomeSo PauloBuenos AiresMexico D.F.Santiago Bogot AABC1ABC+ABC1Clase alta Clase mdia altaBCC2C3CC2C3Clase mdiaDED1D2ED/EDClase baja67% of modern format shopper