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Even during a recession, investing in advertising and marketing apparently can bear fruit, as is evident from changes in consumer product sales over the past year. Although during difficult economic times there is a clear preference for basic food items over premium food products, sometimes innovative product categorization and effective advertising and marketing can change this trend.

For example, sales of chilled vegetables (pre-washed, pre-cut and packaged) and prepared salads surged by 74 percent in the past year, according to the November 2002-October 2003 summary conducted by the AC Nielsen research company for Haaretz. The increased sales are partially due to Strauss' entry into the prepared salads market, with its Ahla brand, which was accompanied by a broad advertising campaign and extensive marketing activities.

Strauss successfully turned a convenience product in a sleepy category into a fashionable brand-name field. Tivol had similar success when it expanded its vegetarian main course category to include Cheese Morsels, generating growth of 39 percent in sales in that category.

Another example is granola and oatmeal breakfast cereals, whose sales have jumped 15 percent mainly due to huge investments made by the food companies in the health food category. The 29-percent rise in the sale of granola bars and soya snack bars and a 25-percent increase in tofu and soya cheese sales stand out in this area.

Total consumer product sales in Israel rose by 3 percent in monetary terms this year, as was the case with large supermarket chains, whose sales represented 60% of the former category, according to Nielsen data.

Food category sales show clear trends that characterize consumer behavior during a recession, particularly the fact that many consumers stay at home. Frozen pizza sales, for example, burgeoned by 46 percent, partly due to extensive advertising by Ma'adanot (Tnuva) and Zoglobek. This increase is particularly conspicuous when compared to the sharp drop in sales at pizza chains that resulted in the collapse of the Domino's chain.

Fresh milk sales grew by 8 percent in monetary terms, both because many consumers stayed home and companies introduced a range of enriched and flavored milk products, whose prices are higher that traditional items. Instant coffee and coffee substitute sales also grew by 7 percent, while sales of roasted coffee and Turkish coffee grew by 5 percent.

Marketing helps sales

Another dairy product that enjoyed substantial growth was cottage cheese, which increased by 22 percent in monetary terms, partially due to the marketing wars between Tnuva and Strauss, which entered the cottage cheese market this year. The increase in cottage cheese consumption did not come at the expense of sales of other cheeses, which enjoyed 5-percent growth in sales, as did dairy puddings and flavored yogurts. The growth of flavored yogurts is attributed to massive investments in the advertising and marketing of Yoplait.

Other food categories suffered sharp sales declines, particularly prepared meals, which fell by 17 percent. The switch to basic food items also was evident in the beverages category, in which green, herbal and health tea sales fell by 4 percent, while regular tea sales grew by 3 percent. The drop in herbal and health tea sales occurred despite Wissotzky's investment in this field.

In an effort to cut spending, consumers bought less fresh chocolate milk and 10 percent more instant chocolate milk powder (in monetary terms), with fresh chocolate milk sales declining despite extensive investments made by Tnuva in Yotvata chocolate milk and the launching of Carlo chocolate milk.

In the soft drinks category, mineral water continues to enjoy sales growth, while sales of carbonated beverages continue to slide. Carbonated beverage sales (mainly cola) fell by 2 percent, while mineral water sales jumped by 10 percent. Mineral water sales have experienced robust growth during the past four years, but price wars have led to the erosion of prices. The decline in carbonated beverage sales corresponds to a similar trend throughout the world, as consumers have switched to healthier beverages.

Fresh juices and fruit nectar sales fell by 3 percent in monetary terms, but while nectar sales dropped due to a reduction in prices and special offers for quantity purchases, fresh juice sales declined due to the recession, the high price of such products (over NIS 10 per one-liter bottle), and a lack of innovation, despite the advertising efforts of Primor and Prigat.

Nielsen's data showed a 23-percent drop in the sales of strong alcoholic beverages, which contradicts the general trend of increased sales of alcoholic beverages in Israel. This could stem from the fact that supermarket sales of strong alcoholic beverages account for only 7 percent of nationwide sales, which primarily come from private chain stores such as Tiv Taam and specialty stores for the Russian sector. The drop in alcoholic beverage sales at supermarkets did not affect wine sales, which remained steady in the past year.

In the toiletries category, enjoyed 4 percent growth in deodorant sales, in monetary terms, continuing a trend that began a few years ago due to increased awareness. Razor blade sales rose by 8 percent due to the launching of the Mach 3 razor.

Sales of disposable diapers fell by 4 percent in monetary terms, mostly due to the erosion of prices. During the past year, competition between Hogla Kimberly, which makes Huggies, and Proctor & Gamble, which makes Pampers intensified. This led to a general drop in prices and was a factor in the collapse of the Amir paper products factory, which manufactured Tafnukim. Tafnukim's market share plummeted to 4.5 percent in the first half of 2003, compared to about 38 percent for Huggies and 30 percent for Pampers.

The consumption of other non-food household items also shows a trend toward less expensive products in which competition is also quite stiff. One example is laundry detergent, which experienced a 3 percent drop in sales. Here, too, Proctor & Gamble is a major competitor through its introduction of Tide.

Israeli consumers also bought fewer general cleaning products, whose sales fell by 6 percent, although toilet cleaning products grew by 8 percent, according to Nielsen.

Nielsen is one of the leading companies in the world in market research and data analysis regarding market and consumer behavior changes. AC Nielsen Israel is a branch of the international AC Nielsen firm of the VNU group, which operates in 100 countries worldwide.