IRISH GROCERY AND BREXIT DOUGLAS FAUGHNAN KANTAR WORLDPANEL

Transcription

1 IRISH GROCERY AND BREXIT DOUGLAS FAUGHNAN KANTAR WORLDPANEL ECR Ireland Supply Chain & Product Availability Summit 23 August 2018 Carlton Hotel, Dublin Airport #ECRSupplyChain

2 IRISH GROCERY & BREXIT 23 rd August 2018 Douglas Faughnan

3 Today s Agenda: Facts, Evidence and Potential Implications of Brexit Implications 3

4 The Facts: We operate in an intensely competitive retail environment Retailer Value Shares and Ranking 52 w/e Retailer Shares 12 w/e Retailer Shares # % # % # % # % # % # % # % # % # % # % Source: Kantar Worldpanel Latest data 17 th June

5 The Facts: An environment were all retailers are finding growth in different ways Last Year (52w/e) Growth (%) Tesco 5.1 PL Growth Fresh Volume SuperValu 1.1 Fresh Dunnes 3 Vouchering Loyalty Aldi 2.4 Frequency Lidl 3.6 Frequency Other Outlets Total Market: +2.8% Source: Kantar Worldpanel Latest data 17 th June

6 The Facts: Meaning that we have one of the most competitive retail landscapes in Europe SuperValu Tesco Dunnes Lidl Aldi Carrefour E. Leclerc Intermarché Systeme U Casino Spain GB Mercadona Carrefour Grupo Dia Grupo Eroski Lidl Tesco Sainsbury's Asda Morrisons Aldi % Value Share 12w/e 18 th June 2018

7 22-Jul Aug Sep Oct Nov Dec Jan Feb Mar Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dec Jan Feb Mar Apr May Jun Jul 18 % change The Facts: The last time we saw prices rising in Irish grocery was a year and 7 months ago % 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% Market Growth Inflation

8 The Facts: We import more British food and drink than any other country in the world A substantial proportion of that is prepared consumer foods m % breakdown Ireland France United States Netherlands Germany Spain Belgium China Italy Hong Kong Australia Singapore Poland United Arab Emirates Denmark Canada Sweden South Korea Japan South Africa 3,739 2,283 2,266 1,501 1, Poultry, 6 Ed. Horticulture, 10 Seafood, 5 Beverages, 13 Beef, 3 Sheapmeat, 1 Pigmeat, 4 Dairy, 15 Prepared Consumer Foods, 43 Source: UK Food and Drink Federation 8

9 The Scenario: After Brexit Fall in consumer confidence? Shoppers becoming more prudent? Recession Rising Inflation? Household & Utilities cost rising?

10 The Evidence: Before evaluating the implications, lets look at the characteristics on two fronts Supply Demand By Supply, we mean things that are beyond shoppers control: e.g. pricing & promotions, retailer strategies, costs of business & raw materials, currency fluctuations, margins, share prices, etc. These factors will dictate how manufacturers and retailers act, and in turn will have an effect on shopper behaviour in store. Often volatile, reflecting short term changes in the marketplace. By Demand, we mean shoppers purchase and consumption behaviour and attitudes e.g. how and where they spend their money, and the mix of products they buy to eat and use, and why Demand also captures people s attitudes to eating in or out of the home, and how prudent they are with their money These things are affected to varying degrees by Supply side factors 2 steal 10 Kantar Worldpanel

11 The Evidence: 5 Golden Rules we learned from the last recession Demand #1 People do not suddenly start eating more or less due to price changes volume generally stable. Growth must come from elsewhere #2 Shoppers manage spend by trading down Value Own Label prospers, along with cheaper brands (brands then offered more price cuts to compete from 2010 and have continued to do so) #3 Discretionary categories are affected by levels of confidence e.g. Morning Goods, Wash Additives, Mineral Water decline Staples prosper e.g. Frozen Fish, Bread, Packet Soup #4 Shoppers are prudent eat out of the home less; carried out grows; & they take fewer risks with their food choices #5 Health as a motivator becomes less important And treats creep in lipstick effect 2 steal 11 Kantar Worldpanel

12 The Evidence: Costs will rise with three potential courses of action Supply Don t put their prices up & absorb any cost increases Less desirable for manufacturers, as squeezes margins & profit But, may be at the mercy of retailers to act this way average retailer margin c.4%; average manufacturer margin c.12% a difficult argument! OC&C report Top150 margins 5.3% but there is retailer reluctance to pass inflation on to shoppers (as per 2007/08) as it will affect competitiveness Quorn CEO: very disruptive to continually put prices up. If there is modest inflation, we try and find ways to deal with it or absorb it. Manipulate / focus on different pack sizes to work around cost increases Already evidence of this But whether truly Brexit related we don t know for sure potentially bad PR ( Toblerone, Maltesers) Put prices up and pass some / all on to shopper Again, in retailer control suppliers only advise on price to avoid collusion Happened in 2008 Morgan Stanley argue this (& cheaper property) opened door to Aldi & Lidl, as shoppers had no choice outside top 4 Difficult to execute & potentially bad PR (see: #Marmitegate) Harder in discretionary markets than staples Brands in competitive markets may suffer if plenty of competitive choice Important to understand price elasticities 2 steal 12 Kantar Worldpanel

13 The Evidence: Manufacturers already feeling the pressure and increasing prices Supply 3.7bn exported to Ireland 2 steal 13 Kantar Worldpanel

14 The Evidence: Don t underestimate Irish shoppers affection for Irish brands 58% claim they try to buy Local products 66% claim to buy Irish products when they can Spend per year 117 more than the average shopper Spend per year 152 more than the average shopper And these shoppers are more valuable 2 steal 14 Kantar Worldpanel

15 The Implications: What to expect.. Pullback on OOH spending? A return to inflation? Ramping up volume driving promos? Implications Drastic decline in brand shares? Sudden decline in volumes? 2 steal 15 Kantar Worldpanel

16 "Forecasting is the art of saying what will happen.. and then explaining why it didn't! "