GROCERY SHOPPING: WHAT S NEXT? CHALLENGES AND OPPORTUNITIES FOR RETAILERS AND INDUSTRY. Janaina Roque Integration Consulting

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1 GROCERY SHOPPING: WHAT S NEXT? CHALLENGES AND OPPORTUNITIES FOR RETAILERS AND INDUSTRY Janaina Roque Integration Consulting

2 The opportunity for growth FMCGs present very different opportunities for growth in developed and developing markets IN RECENT YEARS, WE HAVE SEEN A VERY CLEAR GROWTH TREND IN THE FMCG FOOD MARKET

3 The opportunity for growth FMCGs present very different opportunities for growth in developed and developing markets THE FMCG (FOOD) MARKET Developed v developing countries GDP CAGR: % 9.0% China BUBBLE SIZE: SIZE OF THE FMCG FOOD MARKET (ALCOHOLIC DRINKS, SOFT DRINKS AND PACKAGED FOOD) IN MM USD 7.0% 5.0% India Nigeria Vietnam Bolivia 3.0% Germany 1.0% Russia Japan USA Canada Australia South Africa Mexico -8% UK France -3% Spain -1.0% 2% 7% 12% 17% Italy Brazil 1.7% FMCG (FOOD) CAGR: % THERE IS A VERY CLEAR DIVIDE IN TERMS OF GROWTH OPPORTUNITIES: MATURE MARKETS: Capture opportunities within the existing market EMERGING MARKETS: Capture opportunities given by market growth 3 Data from Euromonitor (FMCG market size, including: soft drinks, alcoholic drinks and packaged food) and the World Bank (GDP)

4 Two approaches for growth Different strategies are required in mature and developing markets. MATURE MARKETS: Capture opportunities within the existing market KEY POINTS: VS BUILD CONSUMERS ARE CHANGING: to capture the opportunities of market growth Legacy of financial downturn More informed and ethical choices More sophistication Looking for the experience Small households, long working hours Connected and technological INNOVATE to capture the opportunities within the current market THEIR REQUIREMENTS ARE CHANGING: Value for money Trusting the business EMERGING Shopping MARKETS: accessibility Capture opportunities given by market growth

5 Innovation allows players to market share by providing what existing consumers are looking for INNOVATE to capture the opportunities within the current market Value for money GROWTH OF HARD DISCOUNTERS on the basis of consumers requirements: Trusting the business SUPERIOR DIFFERENTIATION Feel good Be good Taste good KEY TRENDS IN GROCERY RETAIL Shopping accessibility OFFERING CONVENIENCE Omnichannel C-stores

6 Hard discounters are innovating very aggressively now, thus achieving significant growth WHAT HAS DETERMINED THIS GROWTH? HARD DISCOUNTERS Value of hard discounters in the UK (MM *) 12,000 10,000 8, bn Focus on wider concept of VALUE FOR MONEY rather than simply offering low prices: Wider product range, with higher quality and including more premium offering 6,000 4,000 2, bn CAGR +9% : *Data from Euromonitor, 2014 Wider range of services, new channels, better store environment

7 Providing a great customer experience todays often means providing a good omnichannel strategy WHAT HAS DETERMINED THIS GROWTH? CUSTOMER EXPERIENCE Value of convenience (grocery retailing) and online channels (food and drink) in MM : 30,000 25,000 20,000 15,000 10,000 5,000 - C-stores 16.8bn 2.9bn CAGR : *Data from Euromonitor, bn 5.8bn Online channel +7% +4% Providing a great CUSTOMER EXPERIENCE by focusing on guaranteeing speed, accessibility and reliability with a personalised approach through an OMNICHANNEL STRATEGY: Wider selection of products and services available in all channels. More targeted mix in c-stores with focus on fresh. Lowering prices and price matching to ensure competitiveness

8 Retailers focusing on their differentiated offer cannot avoid competing on the other key trends too WHAT HAS DETERMINED THIS GROWTH? SUPERIOR DIFFERENTIATION % of people willing to pay a premium for a product that is.* Carbon neutral Fair trade Providing SIGNIFICANT CHOICE to consumers to meet the needs and interests of different segments willing to pay a premium (Health, Fairtrade, Premium quality) Great customer experience to offer differentiated formats and buying options Free range Locally sourced Organic Natural 0% 10% 20% 30% 40% 50% 60% Cheaper options also available to ensure competitiveness without foregoing higher quality factors *Euromonitor, 2012

9 Industry is as affected as retailers by these trends THESE TRENDS AFFECT INDUSTRY AS MUCH AS THEY AFFECT RETAILERS INDUSTRY IS RESPONDING TO THESE TRENDS WITH INNOVATION JUST LIKE RETAILERS

10 Manufacturers are just as affected as retailers by the same trends, and they are also bringing innovation * Supermarket-wars-threaten-suppliers-too-says-boss-of-United-Biscuits.html Superior differentiation Customer experience Value for money A more premium offering Acquisition of premium Tea manufacturer T2: Adapting to the convenience channel Relaunched CATMAN website for C-store owners: Responding to the threat of lower margins United Biscuits cancelled a long-term contract with Aldi as private-label supplier Launch of Magnum 5 Kisses (Rainforest Alliance Certified Ice Cream): Connecting with consumers on a personal level Share a Coke Initiative: The winners in grocery over the past 20 years are all struggling. [ ] The concern is that supermarkets will now lash out at manufacturers. [ ] there are plenty of supermarkets that do stock our brand, I couldn t understand why we were helping the one that doesn t. It was just the wrong thing. So we cancelled the contract. We should back those that back our brand. * Martin Glenn, UB CEO (June 2014)

11 As consumers change, both retailers and industry are affected. Partnership is the way forward COMPETITION IS BECOMING FIERCER WITH EVER-INCREASING NOISE ON THE MARKET RETAILERS AND INDUSTRY NEED TO BE IN THIS TOGETHER PARTNERSHIP AND JBP ARE THE WAY FORWARD TO CREATE WIN-WIN SITUATIONS