IIHS Gets Picky, Private Label Products Surging, and Rate Hikes Slowing

December 14, 2022
Rolling into Wednesday we welcome special guest Ben Hadley to help us take a tour around the news. We are looking at the impact the new IIHS guidelines are having on CUVs, new consumer demand for private label grocery items, and the changes in the economy that are leading to slower rate hikes.
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The Insurance Institute for Highway Safety (IIHS) has rated only two out of 15 vehicles in the small crossover category as "good" in the first frontal crash test in the US to include a rear dummy.

  • The 2022-23 Ford Escape and the 2021-23 Volvo XC40 were the only vehicles to earn a “good” rating
  • The test adds a dummy representing a small woman or 12-year-old child positioned in the second row behind the driver, and uses new metrics focusing on the injuries most frequently seen in rear-seat passengers.
  • All 15 vehicles earned a "good" rating in the original crash test, launched in 1995, where a vehicle travels at 40 mph toward a barrier, and a dummy representing an average-size man is positioned in the driver's seat.

Supermarkets are doubling down on their in-house product lines as sales of private label products surge due to consumers looking for ways to economize.

  • Supermarkets such as Kroger and Carrefour are investing in expanding their in-house offerings across more price points and product categories.
  • Pushing lower-priced products could enable grocers to win the loyalty of consumers by casting themselves as the shoppers' ally during difficult times.

The US central bank's officials have signaled that they will raise interest rates by half a percentage point at their two-day meeting this week, scaling back from four straight three-quarters-of-a-percentage-point increases.

  • Along with the latest policy statement, officials will issue new projections showing just how close the "endpoint" may be.
  • The release of market-friendly inflation data for November on Tuesday triggered bets across stock and bond markets.
  • “”The Consumer Price Index (CPI) continues to rise fast, increasing in November by 7.1% on an annual basis. But that is down from June's rate of 9%, which was the highest in four decades.

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Ben Hadley, Kyle Mountsier

Kyle Mountsier  00:00

Oh all right, it's Wednesday, December 14, and we're rolling into Wednesday, as I welcome my man special guests this way, Ben Hadley to help us take a tour around the news. We're looking at the impact of the IHS. No consumer demand though. I didn't get it all out. It's okay. They stopped to see when they see me talking about interest rates when everybody talks about 18 times a month. What's up, sir?

Ben Hadley  00:53

Turning you up. What's good.

Kyle Mountsier  00:54

There you go. It's uh, you know, it's Wednesday. Paul's feeling a little under the weather. You're jumping in late ready to go we got your in extravaganza one week from today. Have I told you much about year and extravaganza?

Ben Hadley  01:10

No, you haven't really attorney much. Alright, so

Kyle Mountsier  01:12

check this out. We did the year and extravaganza last year as a live stream little over 1300 people watch we're hoping to get a little bit more this year. I think we're gonna achieve that. But here's what we're doing is last year was kind of like these long 20 minute interviews kind of panels that type of thing. This year. Everyone's coming in house. It's going full on tonight show we've got a band for the whole time bump ends bump outs commercial sick last time, by the way. Yeah, it was sick. But like it ended at the beginning. Everyone was like, well, we want the band back. So yeah, they're gonna be the whole time. It'll feel like the Tonight Show. We've got Michael Cirillo is going to be kind of like the side gig guy. Ed McMahon and Oh, I love it. Yeah, so that's gonna happen. And then we've even got like, a little game show that we're going to do right in the middle, like a typical Fallon show.

Ben Hadley  02:01

And go

Kyle Mountsier  02:07

Plinko is not even tonight show man.

Ben Hadley  02:09

Oh, no, he goes, he goes, Oh, I think they might call it like Blenko. But like, it's it's Plinko

Kyle Mountsier  02:18

it's Plinko. Yeah, yeah. We're also we've been talking about this. So true cars doing this. I need a true car campaign. And so if you know anyone that needs a car, needs five grand. You can help them do a little Instagram Tik Tok, you can check it out at I need a true car hashtag I need a true car on Instagram and Tiktok. And that's going to be a lot of fun. We'll show some of those videos at the end extravaganza. But enough about next week. Let's talk about about right now. We've got a few stories to talk about. The first one is kind of just kind of a toss out there. We'll see what happens with that maybe we have some commentary, maybe we don't. But the Insurance Institute for Highway Safety. The IHS has rated only two out of 15 vehicles in the small crossover category as good in the first frontal crash. crash tests in the US to include include a rear dummy. So the 2023 Ford Escape and the 22 and 23 Volvo XC 40 are the only vehicles to earn the good rating. So basically, they've got a small woman in the front seat and a 12 year old passenger passenger in the back seat. And essentially, what's what's changed is from 1995 to just recently, the front crash test ratings were all about the same. And everybody was getting goods, which is kind of the top score there. And now basically, nobody's getting a good, which, for me, it's like, so I have we both have kids, right? And one of my like, when when I'm driving alone, I'm kind of like, Yeah, whatever. Like if I get in an accident, no big deal. But there's a thing that happens when it doesn't happen to you like your kids in the car and you're like, Ed like everything's more attention. I'm like double checking car seats and Nine Yards every time. Yeah. Yeah. There's like, what?

Ben Hadley  04:11

There's like, Okay, I will say like, there's been moments I was, I was like, should I even admit this? Where I'm like, I like if I'm solo. I'll like look up and be like, Oh, my God, I arrived. Like,

Kyle Mountsier  04:24

I'm like, everyone, like, everyone does it? Yeah, I'm messing

Ben Hadley  04:27

around on like apps and like doing I'm like Slack and people. And then I'm like, Oh, I'm here. Oops, you know, like, right. If it's if it's readers in the backseat? Hell no,

Kyle Mountsier  04:39

no, it is you're on full lock. So my my question always, because these IHS ratings always change and it's always kind of like a jockeying position for dealerships and like, you know, you use that material and point of sale material and all that type of stuff. Like what does that do to consumer confidence in these vehicles in Like, like how? I always think like, you know, we've got EVs coming changes in AI HS changes in all of this stuff across a vehicle, how much time does it get for consumer confidence to return to like, Okay, I understand that last year, the car was basically the same, I was cool with it, you got a good rating. Now you don't have a good rating. So I'm gonna go over here. And like, do we lose more brand loyalty in the process because of like this change in the way a government structure perceives a vehicle, and it might not necessarily mean a change in the actual vehicle.

Ben Hadley  05:34

I'm gonna stretch here. Alright, guys, this was like, I'm gonna try to bring it into the Ben weird world, right? Where one I would say brand wise, Volvo is on the list. Perfect for them. They have to be on the list. Like that's a win. Yep. To is think about the impact on autonomy cars, autonomous cars. Okay, so like, like, take that and then extrapolate it down a few years when you know, cars are driving themselves. It's like, okay, that means you have that moral problem that we all debate, which is like, does the car crash into itself or whatever, you know, I think the more safe the car is, the more it can it can choose to protect. You know, it doesn't have to make one. Right? Yeah. And so then I think that's when it becomes a really big trigger point for people to go like, Okay, I'm going to pick this car, because it's less likely that, you know, it's going to have to do something crazy to basically like, put me in danger. Or if it does, at least, it's super, super safe. The other thing I would say is like, how the hell do you start quantifying that? Like, at some point, that agency is going to have to have like a moral compass dilemma thing, where they're trying to map out like, hey, well, not it's not just 40 miles an hour towards a barrier, it's like 40 miles an hour towards a barrier of three people. What if it's just two? What if it's four? What if it's four, four, but three of them are newborns and that's a

Kyle Mountsier  07:08

solid wall or like, you know, just a barrier that could be run through, right, man? Yeah. And well, and I think like, the decision making process for a consumer has always been like, it's it's almost like crash tests, safety ratings have kind of been like a way down on the list. Kind of like dealerships are like, Oh, we won this thing. And like, really, if I have to proceed most consumers they're like, Oh, that's cool. You know, it's a car I think it keeps me safe. Remember in the 80s when I didn't wear a seatbelt type thing? You know,

Ben Hadley  07:38

I know and so slept on our stomachs as babies and stuff it's like Yeah,

Kyle Mountsier  07:41

exactly. Yeah. So like I think there is going to be a shift over the next few years and and I think like what happens after the wreck right now you got a battery involved and you got you know, water or or you know, any different fluid on a battery? What happens to that it's like, there's so much more that has to change. And you know, the decisions are are going to are definitely going to be impacted by that. Speaking of impacted decisions, segue there it is, there it is, all right. So, recently supermarkets have been doubling down on their in house product lines as sales of private label products. So things like the Kroger brand of soy or the target brand of detergent have been the what customers have been looking at for ways to economize their purchasing patterns. Supermarkets, such as Kroger and Carrefour are investing in expanding their in house offerings across more price points and product categories. So they're pressing into that because consumers are looking at an anecdotally. Well, not anecdotally, actually, there's been a lot of research recently, to where big box retailers like WalMart are seeing a rise in overall purchases as well as the the number of items on a ticket and and also the types of items that are being purchased because people in higher income brackets are starting to shop economy products more often citing rises and inflation as the reason for that. So I think that it's just like, This is what's interesting to me. And I want to start to tie it back to just like what we're thinking about an auto every single day. Is that is that especially for high end for people in higher or middle middle to high income brackets, starting to choose products that are not products or locations that are not typical for them due to pricing and inflation. That's a that's a market shift that we haven't seen in a hot minute like, like we've still seen like this consumer price index and like consumer sentiment is still fairly even are high. But there's a shift, there's a willingness to, you know, to kind of And push away brand loyalty for like your branded products and go toward, you know, these like products like this

Ben Hadley  10:08

like your but it's still kind of brand loyalty. Right? Like it's still lighting at

Kyle Mountsier  10:12

the store. Yeah.

Ben Hadley  10:13

Yeah, like I bet. Like, I feel like there's probably a consumer perspective difference between like Target soap and Walmart soap even at the same price in a target probably just feels like, you know, way like, cleaner. I don't know, not cleaner. Probably that packaging is less but as a brand, I feel like it's Yeah, yeah. Yeah. So I feel like that mixed with like something like Trader Joe's, which is all, you know, white label? Yep. You know, I just wonder if it's like, a testament to like how important it is to build a brand as an individual business. So that you have the opportunity to capture as opposed to like, you know, looking at it from a perspective of like, these other well established brands losing? Yep, who's winning? You know?

Kyle Mountsier  11:03

Well, well, yeah. I mean, and you think about that as a dealership, it's like, if the dealership has enough of a brand and let's say you're a Toyota dealership, and this person is consistently buying a Toyota, but now they have to make the conscious decision to move used because use car monthly payments are on average, higher than new car monthly payments were in 2019. You know, they're up over 550 bucks. And so like, what's the decision making process that leads you to continue to stay with a brand? Like, are you going to the private labeled used car? Or are you just kind of shopping anywhere? Because it was much more the OEM brand and I think this is where like, the dual brand nature of a franchise dealership has to really come into play because like Target target is that all day?

Ben Hadley  11:49

I would I'd actually disagree too, because like one started COVID You saw a lot of flexibility and consumer behavior, because everybody's like, well, I have to kind of go online right now. So that was a moment similar where you're like, just seeing a consumer go. Alright, I'm getting out of habit. I'm gonna try something new. Sure. The other one I would say that's like relatively recent that feels similar is sort of the push to direct to consumer. Like with like, think about like mattresses, you know, where people were like, Yo, I'm just gonna get a casper Yeah, right, instead of TempurPedic or whatever Sealy just because, you know, I can get it for slightly less still high quality direct to consumer. We could probably tie this to some kind of direct to consumer automotive thing. My brains too tired right now to even, like, even get there though.

Kyle Mountsier  12:38

Yeah, no, I mean, I think I think you could I think that the reality is, is that we just as consumers are sensing the pressure of things like inflation and, you know, a job market that's getting that's getting squeezed and and especially in like tech that, you know, they're looking for ways to be economical, and, you know, thinking about that as the way that you're communicating especially going into our holiday season where people are spending additional money is like, how are you communicating not just product and price but availability or you know, your brand so that people continue to choose you. So like people, you know, that they they still want to they still want to shop at Kroger but they're willing to kind of go at go at that private label sale. Go Go

Ben Hadley  13:28

Echo Park would be a good example. Right? sub brand within the brand that kind of emphasizes a very specific thing you know, like that. I think that's like a massive opportunity. A lot of dealers aren't aren't capturing right now. Which is like, hey, overarching brand, but then for that segment, or for a very specific consumer, let's have this whole other thing. Driveway, another good one to get driveway.

Kyle Mountsier  13:51

Good one. Yeah, absolutely. All right, we got one more I don't have a Segway it's just the way it is, you're gonna have to deal with it. Everybody's kind of talking about it today that the Fed will be having their final meeting of the year talking through interest rates and the the hikes that they are perceiving will happen now and in the future. And it looks like they are going to be raising interest rates by only a half a percentage point. So 50 basis points, instead of three quarters of a point, this time scaling back from three straight quarters of percentage point increases. So what they're looking at is a couple of different reports. So they're looking at the jobs report in the inflation report, the inflation report, which is actually starting to come back down to a more regular rate of inflation. So they they're saying that rate hikes aren't going to have to happen as fast. And but they are still needing to raise interest rates because the consumer pricing index is still rising, although it's down two percentage points from June was just at 9%. Now it's at 7.1%. So the good news is, is we're not going to get as Fast have inflation, but an array of interest rate hikes, but they're still coming. They're still impacting consumers. And it's going to like, I think that the question is going to be really like, we've seen enough of a rise in the staying power within the holiday season from a buying and like, we've had a lot of like large market players say, hey, look, in our data, it looks like people are still buying people are still spending money. I'm just wondering what's going to happen with this most recent interest rate hike, and then happening into the new year as people kind of start to pull back and think like, Okay, what's my 2023? Budget? What am I going

Ben Hadley  15:38

to do about that? Yeah, my gut instinct to right now is, you know, that they have to, that it's wise for them to sort of overcorrect. Right. Like, it's, it makes more sense for them to, I mean, I get the this, this was lower than anticipated. But I think it still means that it might be prolonged longer, you know, like they're gonna, they're just like, for the Fed, it's probably easier for them to use their tools to go the to go back down, than to rapidly keep going up. So I think they keep you know, they're, they're basically going to have to like, over kind of create some insurance on the whole situation, so that they can take some steps backwards, if they need to.

Kyle Mountsier  16:27

Yep. Yeah, I thought I read a quote earlier this week that said, basically, you know, it seems like inflation and interest rates seem to take a sharp turn north really quickly, but then they come down a lot slower. So inflation just takes a while to come back down, interest rates take a little bit longer to come back down. So I think we're starting to see that that trend. And and, you know, I think that like consumer consumer sentiment still seems like we're going to see a lot of purchasing behavior in 2023. As we're looking at inventory coming back, it's still something where many dealerships are experiencing we were talking about yesterday, lots that are not full, you know, unless you're cdjr dealership, your lats are completely full. But I know a lot of dealerships that are still selling through their pipeline and and have sales projected all the way into January. So I don't think many people are worrying about it. But somewhat the shoes gonna drop with someone and I think it might be the consumer first.

Ben Hadley  17:24

Here's my rule of thumb for sensing a bull market. This is what I've learned over the last four years, give it to us. If I get three text messages telling me an NFT a cryptocurrency or a stock to buy three text messages in a day. We're back to bowl baby loves until that moment happens.

Kyle Mountsier  17:45

I don't think that I don't think that crypto moment is coming back for a hot minute.

Ben Hadley  17:50

But like that was back in November, that was like the norm it was like it was I know you're not on Snapchat coin but come on, man. Well, hey, segway.

Kyle Mountsier  18:03

That's not the end. That's the end. We are not financial advisors. We can tell you that for one sir. What we are is advisers on how you can take best practices industry news and insights and turn them into real action every day.

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