The changing face of the UK grocery market and shopper

Transcription

1 The changing face of the UK grocery market and shopper #CoopConference17 VANESSA HENRY

2 Today s agenda Forces of change shaping our industry Check in: Where we are today What channels and formats will be best placed to win? IGD 2018 Page 2

3 Today s agenda Forces of change shaping our industry Check in: Where we are today What channels and formats will be best placed to win? IGD 2018 Page 3

4 Key macro-level trends driving change RESOURCE RESILIENCE Skills gap and demand planning SOCIETAL SHIFTS Urbanisation and personalisation ALTERING AUTHORITIES De-globalization and antiestablishment TRANSFORMATIVE TECHNOLOGY Automation and connectivity Source: IGD UK Grocery Channel Forecasts 2017

5 Significant lifestyle changes are underway More single person households Cities will expand as population increases People will be working longer as retirement age rises Societal Shifts Living space will become more of a premium Life expectancy will continue to rise More dual income households Health consciousness will rise Technology will continue to impact the everyday

6 We re entering an age of interconnectivity Vehicles Including vehicle to vehicle and vehicle to network communications Home Smart locks, energy management, connected appliances Transformative Tech Tech Health Wearables, smart sleep. diagnostic tools & services Living Ecommerce, robotics, AR, baby and kids, education and training Cities Access to information and services, and predictive alerts Leisure Gaming, sports and play

7 However, fundamental shopper truths will remain VALUE TIME QUALITY HEALTH Help me save money Help me save time Help me get the best quality Help me make healthy choices

8 Help me save money EDLP over special offers Price reductions over multi-buys 63% 63% There should be fewer offers and have EDLP instead I prefer price reductions over multi-buys

9 Simpler and clearer value communication

10 Help me save time 6 TRIPS PER WEEK 26 TRIPS PER MONTH

11 Pay-and-go technology in action to speed up shopping

12 Help me get the best quality Better appearance Healthier products British / local products Better ingredients Better flavour products Ethical products More environmentally friendly Freshly prepared products Brand name IGD 2018 Pag e

13 Be more local sell products that tell stories

14 and ethical can translate to better quality

15 Help me make healthier choices Solutions Advice Incentives?

16 Today s agenda Forces of change shaping our industry Check in: Where we are today What channels and formats will be best placed to win? IGD 2018 Page 16

17 Signs of weakness in the UK economy Overall economic growth slow Inflation returning to normal Real pay falling, esp in pub sector Concerns over household debt Shopper confidence weakening Car sales slowing, house prices sluggish

18 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Shopper confidence index (higher = more confident) UK shopper confidence is challenging

19 Annual inflation, CPI (%) Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Inflation has returned to the UK economy All items Food & drink

20 Shoppers are sensitised to inflation Food prices Energy bills Petrol prices No wage increase Interest rates Tax and benefit changes Change in personal Job security House prices Other Top personal economic concerns for the year ahead Share of respondents (%)

21 Median household disposable income ( per year) Household income growth has slowed 30,000 25,000 20,000 15,000 10,000 Previous 10 yrs Latest 10 yrs

22 Growth, last 3m on same 3m yr ago (%) Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Grocery retail volumes were static in Value sales Volume sales

23 Some shoppers feeling the Brexit Blues I worry about the UK economy as BREXIT proceeds Shopper opinions of BREXIT impacts, all shoppers I worry about my job security as BREXIT proceeds I worry about my finances as BREXIT proceeds I spend more carefully since the EU referendum Share of respondents (%) Disagree slightly Disagree strongly Agree slightly Agree strongly

24 Respondents (n) Brexit preparation appears patchy Q20: On a scale of 0-100, how would you rate your business s overall readiness for Brexit? Average: Business readiness (higher is better)

25 Respondents (n) Few businesses seem to be talking about Brexit Q14 and Q15: How much guidance has your company received from / offered to supply chain partners regarding the potential impact of Brexit? Lots Some Level of guidance None Don't know / declined Guidance received Guidance offered

26 UK farm business income ( per-year) Leaving the UK could shock UK farming 140, , ,000 80,000 60,000 40,000 20, ,000-40,000 All farms Small Medium Large Low perf Medium High perf perf Baseline / no change Scenario: evolution Scenario: unilateral liberalisation Scenario: fortress UK

27 Today s agenda Forces of change shaping our industry Check in: Where we are today What channels and formats will be best placed to win? IGD 2018 Page 27

28 Grocery retail market size ( bn) YOY Growh (%) Inflation will drive growth in UK grocery % 9% 8% 7% 6% % 3.2% 3.2% 3.1% 2.7% 2.9% 2.3% 2.5% 1.4% 1.2% 2.1% 2.2% 2.1% 0.4% 1.8% 1.4% 0.6% Market value ( bn) YOY % Change June 2016 forecast % Change 5% 4% 3% 2% 1% 0%

29 Large stores account for 50p in each 1 today 60% 50% 40% 30% 20% 10% 0% Hypermarkets Supermarkets Convenience Discount Online Other Source: IGD UK Grocery Channel Forecasts 2017

30 but they ll be challenged by other channels in the next few years 60% 50% % 30% 20% 10% 0% Hypermarkets Supermarkets Convenience Discount Online Other Source: IGD UK Grocery Channel Forecasts 2017

31 Top three growth channels to deliver + 23bn sales IGD 2018 Source: IGD channel forecasts 2017 Pag e

32 Online set to continue to drive appeal 43% of all British grocery shoppers say they ve shopped online for some part of their groceries in the last 4 weeks 60% say it s likely they will be shopping online and getting their groceries delivered to their home in the next 2-3 years

33 New stores and quality driving food discounters Expanding store networks Improving in quality, staying low on price Differentiating their offer

34 Convenience retailing at a glance

35 C-stores appealing to shopper needs Increasing participation from new generations of shoppers Speed of in-store experience Targeting more missions, more effectively

36 Food-for-now: a massive growth opportunity UK Food-to-go market size - bn 17.4bn 23.5bn +6.2% Source: IGD Research, Retail Analysis

37 and it will be a significant c-store growth driver

38 Large stores are having to evolve their offer Re-thinking space Getting the range right Focus on fresh food: for now and for later

39 Additional market developments / / /

40 Omnichannel will become increasingly important 4.6 of British shoppers say they will shop online in the future (home delivery) Average number of channels claimed to be used per month 60% say they will shop online for ambient but still go in-store for fresh 50% of British shoppers say in the next 2-3 years they will be grocery shopping online and using click and collect services 28% 34% say they are interested in using voice activated devices to buy groceries in the future 98% 44% say they are interested getting personalised offers to their phone in different parts of a store of British shoppers claim to have used a larger format store in the last month Source: IGD Shopper Vista Research

41 In summary Forces of change are in motion, shaping how we live, and how we shop But fundamental shopper truths remain: saving time and helping save money are particularly poignant Attracting and retaining shoppers is even more vital while volume growth remains challenging Aligning with customer missions and values will help retailers lead, rather than follow trends Discount, online and convenience are driving growth But remember larger formats will still account for 50p in every 1

42 Checklist to engage your shoppers 1. Be more than just a store 2. Think missions to build baskets 3. Engage with the health trend 4. There s more than one way to do fresh 5. Give shoppers back time 6. Exceed expectations 7. Engage with and reward your shoppers 8. Be local sell products that tell stories 9. Be famous for something 10. Add personality to everything you do

43 IGD 2017 Page 43