Thursday, October 3, 2013 | Edited by Daniel Moores
||Ford, Chrysler Big Winners as U.S. Volume Slips 4%
Automotive Sales Rate Hits 15.3 Million, Slowest Since April
U.S. sales of light vehicles slipped 4 percent last month as automakers were dragged down by a quirk in the industry's reporting schedule and signs of skittish consumers.
Ford Motor Co. and Chrysler Group were the only major automakers in the winners column, where they were joined by Subaru, BMW Group and Jaguar Land Rover. Sales fell at General Motors, Toyota Motor Corp., Honda Motor Co., Nissan Motor Co. and the Hyundai-Kia Group.
The seasonally adjusted sales rate -- a broad measure of the industry's health -- rose to 15.3 million units last month from 14.8 million in September 2012. Still, it was the weakest SAAR reading since April's 15.2 million rate.
The results were in line with analysts' forecasts for the first monthly decline in U.S. demand since May 2011.
The dropoff was attributed primarily to a calendar oddity that counted Labor Day holiday weekend sales in August. But some automakers said they also detected pockets of consumer jitters.
"We definitely felt a market pullback during the month of September," said Dave Zuchowski, executive vice president of national sales for Hyundai, where sales dropped 8 percent last month.
"A shorter selling month certainly contributed to this softening but waning consumer confidence influenced by concerns about a potential government shutdown and uncertainty over out-of-pocket health care costs, associated with the launch of the Affordable Care Act, were likely causal factors as well," he said.
September's results came on the heels of a 16.1 million SAAR in August, the industry's strongest performance since late 2007.
Still on track
Even with the September setback, analysts and automakers believe the industry remains on pace to post the largest annual sales total since the recession.
The SAAR has now topped 15 million units every month beginning with November 2012.
"September was a solid month for the auto industry despite two fewer selling days," said Bill Fay, group vice president and general manager of the Toyota division, where sales dipped 3 percent last month. "Industry fundamentals are strong as interest rates stay low and consumers remain confident."
Ford's sales rose 6 percent and Chrysler was up 1 percent, extending its streak of consecutive monthly gains to 42. Toyota Motor Sales fell 4 percent, Nissan was down 6 percent, Honda slipped 10 percent, and GM dropped 11 percent while outselling rival Ford by only 2,743 light vehicles.
GM's September skid marked its first drop since July 2012, with Chevrolet volume down 15 percent and GMC off 10 percent. Deliveries rose 7 percent at Buick and 10 percent at Cadillac.
GM officials blamed the decline on a 6 percent drop in retail volume and a 27 percent decrease in fleet shipments. Sales of GM's big pickups also dropped.
GM also cited a drop in the timing of fleet deliveries and the fact that September had two fewer selling days than it did last year.
"We held our own when it comes to retail market share this month thanks to strong new products," said Kurt McNeil, head of U.S. sales operations for GM. "As we look toward the fourth quarter, we expect that car-buying fundamentals will remain strong," McNeil added. He cited falling jobless claims, continued low interest rates, a recovering housing market and low energy costs.
Ford said deliveries rose to 184,452 units, with sales at the Ford division climbing 6 percent.
Demand slipped 5 percent at Lincoln. Ford's car sales rose 14 percent, fueled by robust deliveries of the Fusion and Fiesta.
F-series pickup volume, helped by incentives up to $5,000 or more in some markets, jumped 10 percent to 60,456, marking the fifth consecutive month sales have topped 60,000 units.
Ford benefited from a 15 percent spike in the average incentive it offered last month, TrueCar.com estimated.
Toyota's 4 percent decline left it with sales of 164,457 last month, the company said.
At Honda, sales at the Honda division slipped 9 percent while Acura volume dropped 19 percent. Demand for Honda's four core models was mixed, with sales of the Civic compact and CR-V crossover rising, but Accord and Odyssey minivan posting a drop in deliveries.
"Even as we catch our breath from all-time record August sales and with two fewer selling days this month, the Honda brand continues on a strong pace for the year," John Mendel, executive vice president of sales at American Honda, said in a statement.
Chrysler's 1 percent gain came from a 3 percent advance in car deliveries. Light-truck volume was flat.
Sales rose 8 percent at Ram, 3 percent at Dodge and 2 percent at the Chrysler brand. But volume slumped 24 percent at Fiat and 5 percent at Jeep.
Deliveries of the Ram pickup -- one of Chrysler's most profitable vehicles and a top volume performer in a hot segment this year -- rose 8 percent to 28,145 units last month.
Sales at Jeep are off 3 percent this year and continue to be hampered by the discontinuation of the Jeep Liberty in 2012 and the delayed launch of its replacement, the 2014 Cherokee.
Chrysler planned to begin selling the new Cherokee in the third quarter but software glitches have forced the company to postpone dealer shipments.
"Our dealers had two less selling days in September compared with a year ago, but they still outperformed the industry," Reid Bigland, head of U.S. sales for Chrysler Group, said in a statement.
At Nissan Motor, Nissan brand volume was off 6 percent and Infiniti sales were down 4 percent.
Among other automakers, U.S. sales last month rose 15 percent at Subaru, 1 percent at Jaguar Land Rover and 13 percent at Porsche. Mitsubishi Motors North America said September sales slid 17 percent to 4,001 units.
Rich Carpenter, new-vehicle sales manager at Gunn Chevrolet in San Antonio, described September as "tough."
"Labor Day is always big for sales, but September is always just a tough month," Carpenter said before Tuesday's results were released. "We're hoping to see a strong October."
At Findlay North Volkswagen in Las Vegas, September proved to be an average month despite zero percent financing on 72-month loans on many models. Dealership officials are banking on 2014 models to jumpstart sales.
"We've been, on average, increasing sales around 30 percent a month and September was down slightly from last year. But with the new models coming out...October should be right on track to get to our 30 percent mark," said Jeff Nabel, general sales manager at the store.
It's unclear what impact the budget impasse in Washington and the partial government shutdown will have on the broader U.S. economy and the auto industry's outlook.
"We're all concerned," Ken Czubay, head of U.S. marketing, sales and service at Ford, told reporters on a conference call. "We're going to have to evaluate how long it's going to last, and we'll take the appropriate measures depending on the length of the activity in Washington."
Traffic dips in D.C.
But Volkswagen Group of America, which is based in the Washington, D.C. suburbs, is already seeing the effects of Tuesday's government shutdown in areas with an outsized number of federal employees.
Mark McNabb, COO at Volkswagen of America, said he visited a few dealerships near the company's headquarters this weekend; traffic was lower than usual.
"There's roughly 800,000 government employees that could be furloughed," he said. "You know, at some point in time, it will have an impact."
U.S. sales declined 12 percent in September at the VW brand. Just two VW nameplates -- the Beetle and the Tiguan crossover -- sold better than the previous September. Sales of the Jetta and Passat sedans, the brand's best sellers, were down 9 percent and 17 percent, respectively.
Sister brand Audi posted a 6 percent sales increase. The A4 model line returned to its historic position as Audi's best seller with a surprising 29 percent jump in sales, but the Q5 model line also stayed hot with a 45 percent increase. It accounts for 25 percent of Audi's sales this year while the A4 accounts for 24 percent.
GM's McNeil said the government shutdown should not affect sales in the short term, but "if the thing drags out a couple weeks," then "it starts to more impact customer sentiment and starts to have a bigger factor on business."
"But right now, short term, we still feel better about all the positive other economic factors," McNeil added.
Confidence among U.S. consumers fell to a five-month low in September on fears of higher interest rates and sluggish economic growth, according to a closely watched University of Michigan study. Gains in hiring and household income remain tepid. And there are early signs the holiday shopping season will be flat for many retailers.
Business confidence has dipped, as well. In a survey by the Business Roundtable, a trade group for big-company CEOs, half of top executives said the budget fight in Washington was crimping their hiring plans.
U.S. auto sales have now climbed 8 percent this year and remain a bright spot in the economy, with consumers taking advantage of low financing offers, subsidized leases and other deals to replace aging cars, crossovers and minivans.
"September sales may see some modest headwinds from slightly weaker consumer confidence and uncertainty around the federal debt situation, but declining gasoline prices should be favorable for mix," Jefferies LLC analyst Elaine Kwei said last week. "Underlying fundamental demand drivers remain in place: consumer confidence is relatively high, unemployment ticked down to 7.3 percent in August, and we continue to see increases in home prices and construction activity."
(Source: Automotive News, 10/01/13)
||As Obamacare Rolls Out, Health Insurers Target Consumers with Educational Push
Early Marketing Efforts Seek to Take Advantage of Law's Complexity
While the Obamacare debate rages in the Washington budget battle, most Americans are seeking clarity on what the Affordable Care Act means in practical terms. Health insurers are lining up to help.
By focusing their early marketing efforts primarily on education, health-insurance companies are hoping to take advantage of the law's complexity to lure new members to their plans.
"We need to not only protect our turf, but we've got to acquire our fair share of the new market that's up for grabs, because a segment of consumers are going to be looking to different sources for information," said WellPoint Chief Marketing Officer Patrick Blair.
Starting Tuesday, people who don't have health insurance through an employer could enroll in and purchase a plan through a marketplace "exchange" run either by a state or the federal government. While Americans are not required by law to purchase their insurance through an exchange, it's estimated that about 7 million will choose to do so between next week and March 31, when the open-enrollment period ends.
"You're really going to see people spend more (on marketing) throughout this period," said Lindsay Resnick, chief marketing officer at KMB Group, a marketing firm that's working with several health-plan providers, including six Blue Cross Blue Shield clients, on campaigns involving digital and TV.
Digital is a major piece of the educational push. UnitedHealthcare Group offers "a 10-minute guide to health reform" on its website to help potential members understand the changes and health-care options available. Cigna Corp.'s guide, "Five Minutes to the Right Health Care Plan," is intended to help consumers "cut through the clutter" by answering five simple questions. Wellmark BlueCross BlueShield has a website called Ask Blue that focuses on costs.
Lisa Lough, VP-customer acquisition at Cigna, said the guide is part of an integrated multichannel direct-response marketing campaign during open enrollment, which also includes TV, radio, display, search and print. Cigna used Fly Communications for the direct-response creative and strategy and Generator Media for the media buy.
Ms. Lough said one of its big challenges is helping first-time insurance buyers, including young adults and diverse ethnic groups. "Social media is, of course, an important vehicle for reaching younger demographics," she added.
Most campaigns are aggressively targeting millennials with digital marketing, while direct mail is being used to reach out to Americans over 55, said Mr. Resnick.
Both regional and national insurers are spending on TV and radio ads at the state level because plan offerings vary by state. For example, 12 companies will offer coverage in the individual exchange in California, while 16 plans will be offered in New York.
(Source: Advertising Age, 10/01/13)
||Vodka Tops Consumers’ Preferred Spirits
The Liquor Also Influences Trends in Other Beverage Categories
Mixologists might love gin, and connoisseurs might tout whiskey, but vodka remains the spirit of choice among American consumers.
Vodka accounts for 30 percent of all on-premise spirits, according to cocktail trend expert Donna Hood Crecca, Technomic Inc. senior director of the adult beverage resource group. Consumption of it, both on- and off-premise, grew by nearly 6 percent in 2012, she said.
Flavored vodka is driving growth. "There's just a constant stream of flavors coming to market," Crecca said.
New iterations range from dessert and candy-shop flavors such as cake, whipped cream and root beer float, to whimsical varieties such as peanut butter and jelly, and dill pickle. "It's versatile, and there's something for every type of consumer or bartender," she said.
Unaged corn whiskey, sometime marketed as moonshine, resembles vodka and is becoming more popular in the growing whiskey category, Crecca said. "It's so on-point today," she said of corn whiskey. "It's got the authenticity -- the back story -- and great craftsmanship. Some microdistilleries are getting props from larger distributors, making it available to a broader audience.
"If you're a bar or restaurant and you have a customer base that's looking for things that are new and interesting, corn whiskey is definitely something to look at," she added.
Corn whiskey-based cocktails served in mason jars are becoming popular in New York City establishments, as well as some chains, Crecca said.
Joe's Crab Shack, a 130-unit casual-dining chain owned by Houston-based Ignite Restaurant Group, currently has a line of corn whiskey-based Moonshine Cocktails in apple pie, tea and punch flavors, served in mason jars.
In 2011, 47-unit casual-dining chain Quaker Steak & Lube, based in Sharon, Pa., won a Nation's Restaurant News MenuMasters award for innovations that included cocktails served in "bar jars" -- mason jars with mug-like handles.
Just as vodka-like corn whiskey is helping spur growth of the whiskey category overall, so are flavored whiskeys, another tactic borrowed from vodka producers.
Leading that movement is Fireball Cinnamon Whiskey, which has become a popular shooter among younger consumers. Another popular cocktail is called Angry Balls -- a combination of Angry Orchard cider with Fireball Cinnamon. An offshoot of that is the Angry Irishman, which combines the cider with Jameson Irish whiskey.
That leads to another category of cocktails in which not only different spirits but different categories of alcohol are combined.
Beer, in particular, has become a popular addition to cocktails, Crecca said, noting that even at casual-dining chain Red Robin, customers can get a drink that combines wheat beer with clementine-flavored vodka, and another that blends Coors Light with ginger liqueur and lemonade.
"When you see something like that at Red Robin, that is so mainstream," she said.
Overall, the margarita remains the most popular -- and often modified -- cocktail. For instance, the Coronita upends a small Corona beer in a margarita.
Simple spirit-and-soft-drink combinations such as rum and Coke remain popular, too. Crecca estimates that they account for about two-fifths of all cocktails. "It doesn't appear on the menu, but it's very much called for," she said.
Although customers are open to trying unusual flavor combinations, tried-and-true flavors remain the most popular. "About half of consumers would be satisfied with strawberry and lime as cocktail flavors," she said.
However, berry, pear, cherry and white peach flavors are growing in popularity, as are sweet-and-spicy combinations such as chipotle-pineapple, and tropical exotics such as mango.
Consumers are looking for better versions of traditional flavors, Crecca said, noting that customers are interested in knowing the calorie content of their mixers and often look for specific brands.
(Source: Nation's Restaurant News, 09/26/13)
Daily Sales Tip: The Question of Price
Price comments are not price objections. When someone says, "Wow, that's more than what I expected to pay," they are NOT saying they will not buy. You do not even need to respond. However, many sales reps offer to cut price at this point.
Have a quick response to "Do you discount?" How about, "No, that's the price." Or, if they ask, "Can you do any better on price?", say, "That's the price." Simple.
Most good buyers will always ask for a better price because they have nothing to lose. And they often succeed.
Source: Sales trainer/consultant Art Sobczak