Following the Shopper. Impact of Recession on the European Grocery Retail Sector

Transcription

1 Following the Shopper Impact of Recession on the European Grocery Retail Sector

2 Agenda The economic downturn and its impact on retailers economic models The new shopper landscape Driving retail value Following the shopper in the new era Summary

3 The global recession is ending but recovery will be sluggish % Real GDP Growth Source: World Economic Outlook, IMF, October 2009

4 Shoppers in Europe and the US are feeling the pinch gas prices fuel bills food prices Last year savings property value unemployment And this

5 Overview Key Initiatives for Large Format Retailers A greener supply chain to save cash The larger retailers (Tesco, Asda, Sainsbury s, M&S and Waitrose) are focused on: Reducing CO2 emissions from the distribution network and store portfolio Simplification of replenishment using Retail Ready Packaging, consolidation of deliveries Increasing levels of transport collaboration and efficiency. Cutting the amount of waste sent to landfill Reducing the quantity of packaging and carrier bag use Use of intermodal transport rail, canal and river barges The development of more eco-friendly stores Cutting water consumption

6 Range rationalisation is high up on the agenda at Walmart Since January 2009, Walmart s UK business, Asda, has reportedly removed up to 30% of SKUs in some categories as it looks to strip out cost, remove excess inventory and increase velocity of trading Best practice from Asda's less is more initiative is now being used to help roll-out the programme in Walmart s core US market Walmart is currently focusing on rationalising the number of brands that it carries in its stores around the world Brands in Show categories are being targeted i.e. those categories which have a low growth potential and low importance for Walmart Source: IGD, Walmart

7 Asda Innovation: Prefilled Display Boxes 1. More space per product 2. Better availability 3. Signposting of lower price points, link-saves and ladder deals. 4. Ease of replenishment for high volume lines

8 Simplification to drive cost cutting is also key at Carrefour Total impact by 2012: 4.5 bn Operating cost reduction: 2,100 million - Realign and consolidate functions at a head office level Inventory reduction: 1,400 million - Improve stock management from 37 to 30 days by 2012 Purchasing cost reduction: Category Optimisation: 590 million - Better leverage its purchasing scale in the G4 markets (France, Belgium, Spain, Italy) by removing complexity and integrating functions 410 million - Adopt a more demand led service model. Review the assortment with the aim of serving more customer needs with less SKUs Source: IGD, Carrefour Analyst Meeting, 30 th June 2009

9 How has the downturn impacted shopper behaviour? Least change Source: Private Label vs. Brands, and the Future of Discounters The Shopper Perspective, 2009 Most change

10 New behaviour will persist according to retailers A whole new consumer generation will come out of this so no-one should hold their breath waiting for things to go back to the way they were. Andy Bond, CEO of Asda Walmart

11 Saving money..the sustainable way to live Whole Foods Market (US) John Lewis (UK) Sainsbury s (UK) Morrisons (UK)

12 Across Europe, shoppers are buying more private label Total 31% 33% 33% 26% 37% Source: Private Label vs. Brands, and the Future of Discounters The Shopper Perspective, 2009

13 European Private Label Volume & Value Share, 2008 Switzerland (led by Migros) and the UK are the most developed PL markets in terms of volume & value Germany s high level of volume penetration is a reflection of the strong market share of discounters Source: ACNielsen, 2008 Actuals

14 The Good / Better / Best Tiering is still the standard Good Better Best

15 Shoppers are looking for value and values PRICE PROMOTIONS ETHICS SUSTAINABILITY VALUE VALUES PACK SIZE TRUST Source: IGD, 2009 PERFORMANCE PROVENANCE

16 Good is getting Better, delivering on value & values Delivering both Value and Values, Sainsbury s sales from its Basics range are up 50% on 2008 Waitrose is currently repositioning a significant part of its core private label offer to a single, unified value-focused brand

17 Value ranges have been re-engineered to boost credentials Better packaging and reformulation to improve the quality / value equation In 2008/2009, value ranges have been at the heart of retailers strategies The new value ranges have similar designs: crisper photography & white background a high level of product Tip Value Range at Real, Metro Group reformulation

18 In-Store bold displays encourage trial at POS Rewe, Germany, Aug 09 Carrefour, France, June 09 Target, USA, June 09 Source: IGD Retail Analysis

19 Retailers switch and save campaigns drive PL growth Canada (Loblaws) USA (Publix) UK (Sainsbury s)

20 Both ends of the private label spectrum flourish Premium ranges are increasingly instrumental in fresh food categories Ahold, Stop & Shop, USA Carrefour Premium Range, Belgium Premium ranges help strengthen a retailers brand and proposition Premium and value-added PL also benefit from the eating-in trend in recessionary times

21 Private label plays a central role in marketing campaigns

22 Tesco has created a new tier to counteract discounters... Value The Discount Brands range is c. 20% cheaper than Tesco standard PL and approximately twice the cost of Tesco Value 30% of Tesco shoppers are now regularly buying into the Discount Brands range Discount (Launched September 2008) Standard Finest

23 Discounters continue to broaden their appeal Premium Ranges Health & Sustainability Quality Awards Focus on Fresh Leaderprice, France Gourmet, Aldi Germany Lidl, Germany Luxury For All, Lidl UK Carbon footprint, Hofer, Austria

24 Discounters trial new media strategies to build their image Aldi UK TV Advertising Celebrity Chef Phil Vickery Lidl Germany TV advertising A trio of Celebrity Chefs

25 Shoppers are intent on buying more at discount stores Total 28% 26% 29% 28% 31% Source: Private Label vs. Brands, and the Future of Discounters The Shopper Perspective, 2009

26 Is it all because of the downturn? Buying more Both Begun to make changes to save money in downturn Private Label 15% 16% 12% Discounters 14% 14% 13% Source: IGD % of French, German, British and Spanish shoppers

27 Following the shopper We make no apology for being on the side of the consumer. Richard Brasher, Tesco Our main focus is to delight our customers every day so we can become their preferred retailer. Lars Olofsson, Carrefour When our buyers in China are buying products nine months in advance, we will give them a phone, they will take a picture of the product and it to customers, and 1,000 customers will vote on whether we buy it. Rick Bendel, Walmart

28 Embracing new technological platforms

29 7 key themes for your business The downturn has changed behaviours and created opportunities. New behaviours could become permanent, and new sticky loyalties formed Value has come to the fore, and price competition will continue through the recovery Retailers and manufacturers are seeking routes to reduce their cost bases - more efficient operating models to support a demand-led assortment Discount retailers continue to grow, and continue to evolve. It has become a mature channel manage it as such though one that continues to provokes response Private label has been an area of significant investment for many retailers and there are no signs of this investment reducing. Shoppers recognise the improvement Customers are seeking value and values, and are prepared to change for them. A new language may be needed to talk to shoppers with, tackling the big picture Shoppers won t revert to type as conditions improve, so follow the shopper, and remember perception is reality

30 Thank you! Cécile Riverain, IGD