Consumer satisfaction with food companies weakens

After almost two years of stalling scores, the overall American Customer Satisfaction Index (ACSI), Ann Arbor, Mich., fell 0.3 percent for the third quarter, which brings the Index to a score of 75.7 on a 0-100 point scale. The national index is updated each quarter and factors in scores from more than 225 companies in 45 industries and from government agencies over the previous four quarters. Accordingly, it will be difficult for the U.S. economy to look to strengthened consumer demand for a boost.


As for food companies, customer satisfaction dipped for the first time in three years, falling 2.4 percent to an ACSI score of 81. Rising food prices seem to be the culprit, but some slippage in quality is also to blame as satisfaction with 9 of the 13 largest manufacturers declines.  Even Heinz, which has led the industry for the past decade, fell 1 percent to 88. Cereal maker Quaker Oats and confectioner Hershey (both -1 percent to 86) are close behind and Mars (-2 percent) and Sara Lee (unchanged) were next at 85.


Fresh and frozen meat producer Tyson plunged the most (-6 percent to 77) to the bottom of the industry, an all-time low and well below other food companies.  Customers are complaining about quality and a recall of deli meats probably hasn't helped either.  Kellogg also faced a big drop, down 5 percent to match the industry average at 81.


At the other end of the spectrum, ConAgra surged 6 percent to nearly offset a steep drop in 2009.  Discounts on many frozen food lines and the introduction of new products created better value for money and higher quality, but not without a cost.  The lower prices are eating into earnings and ConAgra's profit forecast has been reduced.


After three years of stagnant scores, customer satisfaction with pet food fell slightly, down 1 percent to 83, even though pet food remains one of the highest-scoring products with no company ever below 79. Mars Petcare led the way, up 2 percent to 85 and tying the aggregate of smaller pet food brands. Del Monte was next, after a 4 percent surge to 83. Colgate-Palmolive's Hill's Pet Nutrition and Nestlé Purina PetCare share the next industry slot with identical scores of 82, just below the industry average. Hill's jumped 3 percent, while Nestlé Purina plunged 5 percent.  Iams had an even larger drop, down 6 percent to 80, as quality fell from in best in class to about average, according to customers, which is unlikely to be satisfactory when buyers expect premium quality and are charged accordingly.


"Periods of stalling ACSI growth have often been followed by weak, and sometimes negative, GDP growth," says Professor Claes Fornell, founder of the ACSI and author of The Satisfied Customer.  "Consumer spending is unlikely to exhibit much of an increase unless bond buying by the Federal Reserve leads to more employment, inflation, consumer confidence and higher stock prices.  With the drop in ACSI, consumer spending for the final quarter of 2010 does not look like it will improve enough to spur much economic growth."


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