UNITED KINGDOM S ATTRACTIVENESS FOR SWEDISH FOOD SUPPLIERS JANUARY 2018

Transcription

1 UNITED KINGDOM S ATTRACTIVENESS FOR SWEDISH FOOD SUPPLIERS JANUARY 2018

2 The UK offers a large market for food suppliers, with consumers demanding both quality and convenience. However, the retail landscape is challenging and highly competitive; hence it is important that companies looking to enter the market understand fully what it takes to succeed as a supplier in the UK. Over the years, Business Sweden has supported many Swedish food suppliers to enter and grow on the UK market, creating valuable knowledge and a network among key actors and stakeholders. The large market, with customers open to innovative and international products, is extremely interesting for food suppliers from all over the world. British consumers have become accustomed to a wide variety of product choices and increasing convenience in how to shop. Furthermore, because of London s role as a leading global city and cultural capital attracting visitors and investments from around the world, London and the UK make excellent places to build brand awareness for expansion to additional markets. This places increasing demand on both retailers and food suppliers, and further emphasises the importance of knowing how to attract the demanding and discerning UK consumer. Proper preparation and in-depth market insight are key to success in the UK s competitive retail environment. In this report, we provide an overview of the UK food retail market, exploring both the grocery and foodservice sectors. We analyse the market s challenges and opportunities in order to help Swedish food suppliers reach their full international potential on the UK market. 2

3 THE UK FOOD RETAIL MARKET IS COMPLEX, OFFERING BOTH OPPORTUNITIES AND CHALLENGES Food & Grocery market Challenging Landscape Fragmented Foodservice Better Health, Less Waste 213 bn Market value forecast in 2020 vs. 57 bn Market value in 2017, with 3 years of steady growth However, stagnation due to challenges such as consumer selectivity, price-sensitivity, currency fluctuations and Brexit Four large retailers dominate, but are increasingly challenged by discount and online players 362,629 Total UK outlets, indicating significant fragmentation Four consumer trends affect the entire food retailing market, from grocery to foodservice Online = #1 Market Driver Private Label Success Strong Organic Segment An Insightful Approach 17.5 bn Food and drink e-commerce market value forecast in % UK value share for private label, highest in the EU Organic segment shows strong growth, with supermarkets as the largest sales channel Several areas to focus on to be attractive to food retailers 7.5% e-commerce value share in 2017 (second only to South Korea) Expected to be major source of growth for UK grocery market Fresh produce and dairy anchor the organic market Food Business Days and Try Swedish provide insight and sales opportunities 3

4 THE UK GROCERY MARKET IS LARGE BUT STAGNATING THE MARKET IS AFFECTED BY A NUMBER OF CHALLENGES GROCERY MARKET CHALLENGES MARKET VALUE OF GROCERY RETAIL UK ( BN) The UK grocery market is growing, but has stagnated in recent years; by 2020, the market is expected to be worth 213 bn Consumers remain price-sensitive and focus on seeking bargains, though they are increasingly selective in their choices Currency fluctuations are expected to put additional pressure on grocery retailers, with those retailers who primarily source goods from overseas possibly struggling to compete based on price Brexit, and the associated uncertainty, is likely to have a material impact on the sector Superstores & Convenience Small Supermarkets Supermarkets / / Discounters Online Other Retailers Despite a stagnating overall market, Swedish grocery exports to the UK have grown on a yearly basis from 270M in 2011 to 420M in 2017 SOURCE: STATISTA 4

5 THE BIG FOUR GROCERY RETAILERS DOMINATE THE MARKET REPRESENTING OVER 70% Tesco s mission: We make what matters better, together Market leader in UK grocery sector for over 25 years, with sales of 51 bn in and 440,000 employees in the UK Despite positioning itself to lower prices and a competitive agenda, Tesco was the first UK supermarket to develop an online shopping presence Over 17 million active members for its UK loyalty card program Co-op 6.2% Aldi 7.6% Ocado, 1,1% Iceland, 2% Others 3.4% Morrisons 10.5% Asda 15.0% Tesco 27.6% Sainsbury's 16.0% Sainsbury s mission: We will make customers' lives easier, offering great quality and service at fair prices, serving our customers whenever and wherever they want Sainsbury s has a middle-of-the-range positioning, offering a wide range of prices and products, from budget to premium, and aiming to attract consumers from all income groups Sells numerous organic and environmentally friendly products Asda s mission: To be Britain s best retailer exceeding customer need everyday Asda s strap-line is everyday low price Asda has focused on large stores and is predominately based in the North and South East of England Morrison s mission: To be the consumer s first choice for food, delivering products of outstanding quality and great service at a competitive cost through working faster, simpler and together With stores located throughout the UK, a typical Morrison s store is aimed at the mid- to lower-end Approximately 55% of sales comes from private label range SOURCE: IBIS WORLD REPORT, KANTAR WORLD PANEL, COMPANY WEBSITES 5

6 PRICE SUPERMARKETS TO FACE COMPETITION FROM DISCOUNTERS, CONVENIENCE, ONLINE IN THE FUTURE UK FOOD AND GROCERY VALUE 2017 & FORECAST 2022 ( BILLION) DIFFERING POSITIONS OF TOP GROCERY PLAYERS ,1 16, , ,4 16 QUALITY SOURCE: IGD, ANALYSIS 6

7 THE FOODSERVICE* MARKET IS HIGHLY COMPETITIVE AND COMPLEX, BUT GROWING STEADILY THE WHOLESALE FOOD AND DRINK VALUE (IN BN) FOODSERVICE AS AN INDUSTRY Worth a staggering 57bn, the UK foodservice industry is the 4th largest employer in the UK The foodservice industry has experienced 3 years of continuous and steady growth Contracted Industry & Public Sector 4.0 Total wholesale food & drink value 13bn Hotels, Pubs & Restaurants 5.0 However, the industry remains highly fragmented, with a large number of companies operating across numerous subsectors Retail,Travel & Leisure ,915 81, ,122 hotel, pub and restaurant outlets retail, travel and leisure outlets contracted industry outlets Approximately 362,629 total outlets in the UK THE FOODSERVICE INDUSTRY IS SIGNIFICANTLY MORE FRAGMENTED THAN THE RETAIL GROCERY MARKET SOURCE: FEDERATION OF WHOLESALE DISTRIBUTORS *ENCOMPASSES ALL BUSINESSES RESPONSIBLE FOR MEALS PREPARED OUTSIDE OF THE HOME 7

8 Main Brands Sector Turnover Company Rank OF EUROPE S TOP 10 FOODSERVICE GROUPS, 5 ORIGINATE FROM THE UK UNITED KINGDOM SWEDEN billion 2.15 billion 2.18 billion 3.3 billion 1.69 billion 38.8 billion* Contracted Pubs Pubs Quick Service Restaurant Pubs In-Store SOURCE: ENDOLE *USING 02 JAN 2018 EXCHANGE OF 1 EUR = GBP 8

9 HOWEVER, THE ENTIRE UK RETAIL FOOD MARKET SUPPLY CHAIN IS TAPPING INTO CONSUMER TRENDS Good for me, good for you : A trend in which vegetables will become the stars of the plates and in which underutilised normally more sustainable, species of fish and lesser known cuts of meat will form a bigger part of British diets. Gourmet get together : Where people will eat together more to make them feel comforted in this time of political uncertainty with Brexit. The Brits will choose to eat classic dishes that invoke nostalgia but that have been reimagined for the modern consumer. Awaken my senses : Comprising bright colours and experimental flavours as the proliferation of social media brings to life playfulness and creativity. TEXT Telling a story : Based on demand for seasonal produce, foraged food and artisan products that have a story behind them. THESE TRENDS WILL BE FELT ACROSS KEY INTERNATIONAL CUISINES - AMERICAN, MODERN EUROPEAN, ASIAN & MIDDLE EASTERN SOURCE: THE GROCER, BIDFOOD OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH 9

10 THE UK E-COMMERCE MARKET FOR GROCERIES IS ONE OF THE WORLD S LARGEST AND CONTINUES TO GROW THE ONLINE GROCERY MARKET SIZE IN BILLIONS FOOD AND DRINK* E-COMMERCE VALUE ( MN) UK CAGR 7.7% France Germany Spain * SOURCE: KANTAR WORLDPANEL, IDG, MINTEL, EUROMONITOR, ANALYSIS *INCLUDES GROCERY AND ONLINE PLAYERS, DOES NOT INCLUDE FOODSERVICE 10

11 ONLINE IS THE MAIN DRIVER ON THE UK GROCERY RETAIL MARKET UK ONLINE GROCERY MARKET CHARACTERISTICS Largest players within online grocery in the UK are Tesco, Sainsbury s and pure player Ocado, seeing strong competition from newcomer Amazon Fresh The core online grocery buyers are younger consumers and consumers with high income The average spend per purchase remains higher online than offline; this high online spend is a combination of shoppers choosing online primarily for large stock up trips and retailers requiring a minimum spend UK online grocery channel share is predicted to grow from 6 to 7.9 percent over the next five years Consumers place increasing pressure on delivery times, which has become a competitive advantage among online retailers 50% of all Brits are current online grocery shoppers 1 in 10 Brits do all of their grocery shopping online 85 is the average UK online basket, making it the largest in the world 11.5 bn is the value of the UK online grocery market (2018) SOURCE: EUROMONITOR, KANTAR WORLDPANEL, IDG 11

12 THE UK HAS REACHED THE POINT WHEN ALL RETAILERS FOCUS HEAVILY ON ONLINE SALES BECAUSE THEY HAVE TO, THEIR CUSTOMERS EXPECT THEM TO. RETAILERS IN THE UK RELY ON DIGITAL SOLUTIONS TO MAINTAIN MARKET SHARE. TIM BARRETT, SENIOR RESEARCH ANALYST RETAILING EUROMONITOR 12

13 DELIVERY WILL DRIVE GROWTH IN FOODSERVICE AS OPERATORS FACE CHANGING TECHNOLOGIES DELIVERY REACHES ALL MARKET PLAYERS While the foodservice industry as a whole is expected to continue growing, individual operators will face significant changes in terms of competition and industry roles Leading fast food brands face increasing competition from smaller boutique chains Operators struggle with how to best appeal to changing technologies and consumer trends affecting the entire supply chain Delivery has risen quickly to become a significant catalyst in the British foodservice industry, driving growth in foodservice visits year-on-year Rapid rate of expansion looks set to continue as companies like Just Eat, UberEATS and Deliveroo expand their reach across the country, encouraging more foodservice operators to adopt delivery as a route to market SOURCE: BHA MARKET REPORT 2016, NDA GROUP, THE CATERER BRITISH FOODSERVICE VISITS GROWTH (YEAR-ON- YEAR) 2015 TO % 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1,3% *FORECASTED FIGURES 1% Visits 0,4% 0,7% Forecast 0,5% 0,8% 0,5% 13

14 PRIVATE LABEL IS EXPECTED TO BE A MAJOR SOURCE OF GROWTH FOR THE UK GROCERY MARKET SHARE OF PRIVATE LABEL VALUE IN SELECTED EU COUNTRIES (2018) PRIVATE LABEL GROWTH IN THE UK UK Spain Germany France Netherlands Italy Greece 18.1% 16.3% 42.6% 40.1% 32.9% 29.2% 52.5% In 2018, private label made up 52.5% of UK value share Market share in the United Kingdom stayed above 45% and appears ready to resume growth as supermarkets expand their private label programs to combat the competitive challenge from discounters Private label s share has remained above 40% in the UK since 1997 Private label is now at the forefront of European retailers communications, looking to increase shopper loyalty The price gap between private label and brand has closed to 29% on average, due in part to material costs increasing Value Market Share SOURCE: KANTAR WORLDPANEL, NIELSEN GLOBAL, PLMA YEARBOOK 14

15 A NUMBER OF PRIVATE LABEL CATEGORIES HAVE SHOWN STRONG GROWTH SINCE 2013 PRIVATE LABEL VALUE SHARE BY CATEGORY 90% +2,6% 80% 70% 60% 50% +3.7% +0.4% -0.2% -0.6% -0.2% -8.9% 40% 30% +2.1% +1.8% -0.9% 20% 10% 0% Delicatessen Bakery Dairy Frozen Dry grocery Household Non-alcoholic beverages Health & Beauty Alcoholic Beverages Confectionary SOURCE: PLMA YEARBOOK

16 THE ORGANIC SEGMENT SHOWS STRONG GROWTH ACROSS THE UK FOOD RETAIL MARKET ORGANIC SALES ACROSS MARKET CHANNELS ( MN), ,600 1,400 1,200 1, % Growth 1,500 1, % Growth % Growth Supermarkets Box schemes and online Independents 286 SUPERMARKETS ARE THE LEADING CHANNEL FOR ORGANIC FOOD BUT GROWTH IS HIGHER IN OTHER CHANNELS SOURCE: SOIL ASSOCIATION ORGANIC MARKET REPORT 16

17 THE 4 LEADING ORGANIC RETAILERS ARE SAINSBURY'S, TESCO, WAITROSE AND OCADO Rank Retailer Grocery Market Share Organic Market Share (2016 estimate) Importance for Corporate Strategy PL Organic Brand Organic Range (2015) % 28% High SO Organic 709 product lines (300 SO Organic) % 26% High Tesco Organic 742 product lines 3 5.4% 23% High Duchy 778 product lines (500 Duchy) 4 0.5% 7% High % 4.5% Low Wholegood + Duchy ASDA Organic 3344 product lines 150 product lines % 4.5% Low M Organic SOURCE: KANTAR WORLDPANEL AND MARKET ESTIMATES 17

18 THREE WELL-KNOWN INDEPENDENTS FOCUS SOLELY ON ORGANIC FOOD IN THE UK GROCERY MARKET About: While Whole Foods is not exclusively organic, it has a strong loyalty to organic products within its range and stocks a majority of the main organic brands available elsewhere in the UK. Given that it is experienced in selling organic in the US and is a key player there, much of the future UK strategy will likely follow a similar approach. No of stores: 7 URL: wholefoodsmarket.com About: Planet Organic is an independent retailer in London with a young customer base. Planet Organic sells almost exclusively organic food and drinks, as well as many natural remedies and health and beauty products. Its newer stores focuses heavily on the food to go offer. No of stores: 7 URL: planetorganic.com About: as nature intended is a London-based, exclusively organic chain with stores in central locations. It focuses mainly on brands and offers a good springboard for smaller, innovative organic brands. It prides itself on working with passionate and knowledgeable suppliers with quality products. No of stores: 6 URL: asnatureintended.uk.com SOURCE: INTERVIEWS, COMPANY WEBSITES 18

19 DURING THE LAST SIX YEARS, THE ORGANIC MARKET HAS GROWN STEADILY AND IS WORTH 2.2 BILLION UK SALES OF ORGANIC PRODUCTS ( MILLIONS) % +9% +33% +19% +9% +1,6% -13% -6% -3,7% +4,5% +2,7% +4% +4,9% +7% +6% SOURCE: SOIL ASSOCIATION ORGANIC MARKET REPORT 19

20 THERE ARE MANY POSSIBLE ROUTES TO MARKET FOR THE UK RETAIL MARKET Producer/ Exporter Agent/Sales Rep Distributor Retailer/ Convenience Stores Customer Wholesaler Importer IT IS CRUCIAL TO HAVE KNOWLEDGE ABOUT THE MARKET IN ORDER TO CHOOSE THE MOST SUITABLE DISTRIBUTION MODEL 20

21 SIMILARLY, THERE ARE MANY POSSIBLE ENTRY ROUTES TO THE UK FOODSERVICE MARKET Producer/ Exporter Distributor Retailer/ Convenience Stores Foodservice Operator Cash & Carry Wholesaler 21

22 WHAT DO COMPANIES THAT SUCCEED IN THE UK FOOD AND BEVERAGE SECTOR DO? SUCCESS FACTORS Carry out thorough market research beforehand in order to approach retailers with appropriate insights and understanding Make necessary adjustments to products and packaging, such as image and language, to suit the market Ensure a product has the necessary certifications, labelling and ingredient requirements Create a marketing plan and allocate the necessary budget to build your brand and consumer awareness of your product; allocate budget for tastings, product samples, advertisement, campaigns, etc. Understand your unique selling points, including what makes you different and how you add value, in order to tell a convincing story Set up the right logistics flow in order to be able to offer an attractive market price to your local partners and end consumers Understand what your target customers are looking for and how to reach them; similarly, understand what buyers selling to your customer group are looking for, and focus on the most promising segments and customers Be persistent and plan for the long-run: invest in and cooperate with local partners to show commitment to the market COMMON MISTAKES Believing the consumer immediately understands your products and offering Not making necessary adjustments to the market in terms of e.g. packaging, storytelling Being chosen by a retailer rather than choosing which retailer to work with Not allocating sufficient time and budget for the market Not setting up a proper logistical chain to reach an attractive price for the market Not setting proper pricing and margins when working with retailers and/or distributors 22

23 THERE ARE SEVERAL INTERESTING FOOD INDUSTRY EVENTS IN THE UK TO EVALUATE FOR 2018 Casual Dining Show Imbibe Live Speciality & Fine Food Fair Food Matters Live Date: Feb 2019 Location: London Website Register Date: 1-2 July 2019 Location: London Website Register Date: 1-3 Sep 2019 Location: London Website Register Date: Nov 2019 Location: London Website Register Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Natural & Organic Products Europe London Food Tech Week The Lunch Show Date: 7-8 Apr 2019 Location: London Website Register Date: May 2019 Location: London Website Register Date: Sep 2019 Location: London Website Register 23

24 THERE IS AN OPPORTUNITY FOR SWEDISH SUPPLIERS TO SELL AT THE TRY SWEDISH SHOP AT OCADO.COM THE TRY SWEDISH SHOP IS HIGHLY SUCCESSFULL AND CONTINUES TO GROW (SALES IN MN) A SUPPLIER RELATIONSHIP WITH OCADO IS THE FIRST STEP TO ACCESSING THE GROCERY RETAIL MARKET Since 2012, Business Sweden has introduced Ocado to Swedish grocery suppliers that have been listed in the Try Swedish shop The close collaboration has resulted in the Try Swedish shop being one of Ocado s best performing international shops, with an increasing number of suppliers, products and sales figures for each year of operation The shop offers a unique opportunity to establish sales and distribution on the UK market, reaching 70% of British households Becoming a supplier to Ocado provides a shortcut to strategic expansion on the UK market, as well as a test and reference case for selling on the UK market The first step to becoming a supplier to the shop in 2019 is a prescreening by Business Sweden followed by introduction to Ocado s buying team Interested in hearing more? Please contact: edward.lindquist@business-sweden.se SOURCE: OCADO 24

25 TEAM FOOD LONDON Edward Lindquist Phone: Samiksha Jalan Phone: For continuous updates, please follow us 25

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