About Time! The importance of the convenience sector in 2017 and beyond

Transcription

1 About Time! The importance of the convenience sector in 2017 and beyond James Walton Chief Economist May 2017 Numis Securities Limited, The Stock Exchange, London Page 1 IGD 2017

2 Testing a hypothesis People are becoming increasingly time poor Convenience store shopping is saving people time Convenience is becoming a local hub beyond grocery shopping IGD 2017 Page 2

3 Agenda Introduction to convenience & trends 7 key findings Conclusions IGD 2017 Page 3

4 Convenience multiple store numbers growing fastest Segment Stores, 2016 (n) YOY change (%) Share of stores, 2016 (%) Multiples 4, Co-ops 2, Non-affiliated independents 19, Forecourts 8,748 n / c 17.5 Symbols 15, Total * 47, Source: IGD Research, May 2017 Note: Market definitions changed in 2012, previous data not comparable * Excludes 2,868 forecourt JVs IGD 2017 Source: IGD Research and William Reed Business Media, May 2017 Note: Market definitions changed in 2012, previous data not comparable * Excludes 2,868 Page 4 fo

5 Convenience multiple sales are growing Segment Sales, 2016 ( bn) YOY change (%) Share of sales, 2016 (%) Co-ops Multiples Symbols Forecourts Non-affiliated independents Total * Source: IGD Research, May 2017 Note: Market definitions changed in 2012, previous data not comparable * Excludes 2,868 forecourt JVs IGD 2017 Source: IGD Research, May 2017 Note: Market definitions changed in 2012, previous data not comparable * Excludes 2,868 forecourt JVs Page 5

6 UK share, 2016 (%) Multiple operators perform very strongly Source: IGD Research, May 2017 Co-ops Forecourts Multiples Non-affiliated independents Share of stores Note: Market definitions changed in 2012, previous data not comparable Share of sales Symbols IGD 2017 Source: IGD Research, May 2017 Note: Market definitions changed in 2012, previous data not comparable Page 6

7 Convenience ranges have changed dramatically Value share of sales, Multiples 2016 Other Chilled News 4 Soft drinks 6 16 Tobacco Bread & bakery 5 6 Confectionery Alcohol Ambient grocery Fruit & veg Source: IGD Research, May 2017 Note: Market definitions changed in 2012, previous data not comparable IGD 2017 Source: IGD Research, May 2017 Note: Market definitions changed in 2012, previous data not comparable Page 7

8 Convenience and trends summary Convenience store numbers are back in growth Convenience multiples store numbers growing fastest Convenience multiples are out-performing other types Convenience channel will grow by 4.4bn by 2021 Shoppers continue to favour quick local food solutions IGD 2017 Page 8

9 Av household disposable income ( per year) Most shoppers are not becoming more cash-rich 35,000 30,000 25,000 20,000 15,000 10,000 5, / / / / / / / / /16 All households Lowest income quintile IGD 2017 Source: ONS data shown at currency values Page 9

10 UK individuals (000 s) There are more busy people than ever 35,000 30,000 25,000 20,000 15,000 10,000 5, Economically active Economically inactive IGD 2017 Source: ONS Page 10

11 Average actual working time (hours per person per week) But each busy person works about the same time IGD 2017 Source: ONS data is for 1 st and 2 nd jobs Page 11

12 Trends shaping pressure on time IGD 2017 Page 12

13 We are becoming smartphone reliant 1.3 hours Average time spent by all adults aged 16+ on smartphones each day 3.5 hours Average time spent by all adults aged on smartphones each day IGD 2017 Source: Ofcom, 2015 Page 13

14 Testing a hypothesis - conclusions People are becoming increasingly time poor People are becoming time pressured Convenience store shopping is saving people time Convenience is becoming a local hub beyond grocery shopping IGD 2017 Page 14

15 Agenda Introduction to convenience & trends 7 key findings Conclusions IGD 2017 Page 15

16 Brand NEW research Online diaries 300 shoppers 1,811 diary responses All food and grocery shopping trips In-store accompanied shops, intercepts and observations April 2017 IGD 2017 Source: McColl s research: Base 1811 trips Page 16

17 7 key findings summary 1 Food and grocery shopping is very time consuming 2 Local neighbourhood convenience store shopping helps people save time 3 Post-millennials are driving the growth of convenience stores 4 There is strong demand for services at convenience stores 5 Convenience stores are now catering for a variety of missions throughout the day 6 Convenience is helping shoppers buy the products they need time efficiently 7 Convenience stores are satisfying shoppers IGD 2017 Page 17

18 1 Food and grocery shopping is very time consuming 16.7 HOURS A MONTH 9.8 HOURS TRAVEL 6.9 HOURS IN-STORE IGD 2017 Source: McColl s research: Base 1811 trips Page 18

19 1 Shopping little and often 6 TRIPS PER WEEK Proportion of shopping trips by channel 3% 2% 8% 41% 10% 26 TRIPS PER MONTH 36% Supers/Hypers Convenience Food discount Variety discount Specialists Online IGD 2017 Source: McColl s research: Base 1811 trips Page 19

20 2 C-stores saving up to 50% of time on some missions Convenience trips Shopping missions by average time spent (minutes) All trips Top-up 21 Top-up 38 Health and beauty 22 Health and beauty 50 Evening meal 25 Evening meal 46 Non-food 26 Non-food 52 Food-to-go 26 Food-to-go 40 IGD 2017 Source: McColl s research: Base 1811 trips Page 20

21 2 Shopping more in c-stores can save people 8 working days a year Hours spent shopping Per year Per month Average convenience = 36% of trips Convenience = 40%+ of trips Convenience = 50%+ of trips Convenience = 60%+ of trips Convenience = 70%+ of trips Convenience = 80%+ of trips IGD 2017 Source: McColl s research: Base 1811 trips Page 21

22 2 Saving time by mainly walking to convenience stores Main mode of travel on most recent trip CONVENIENCE store trips Walk 42% Car 40% 67% 23% Car (lift) 9% 6% Bus 7% 3% 1% Bicycle 3% 1% Train 1% 0% IGD 2017 Source: McColl s research: Base 1811 trips Page 22

23 2 Saving time is key, particularly for c-store shoppers % stating each of the following as reasons for choosing store on last trip All trips Convenience store trips Convenient location (59%) Convenient location (73%) Good range (34%) Quicker in-store (25%) Good quality products (33%) Good quality products (18%) Good availability (32%) Good range (17%) Saves money (30%) Good availability (15%) Easy to park (27%) Easy to park (14%) Quicker in-store (27%) Opening hours (13%) IGD 2017 Source: McColl s research: Base 1811 trips Page 23

24 3 Post-millennials are driving growth in c-stores % of shoppers claiming to use these channels for the majority of their food and grocery shopping in the last month 63% 53% % 17% 17% 7% 5% 7% 3% 2% 2% 3% Supers & hypers Convenience Food discount Online High street discount Frozen food IGD 2017 Source: IGD ShopperVista; Base: 1,323 shoppers aged 18-25; 8,972 shoppers aged 26+, Sep 16-Feb 17 Page 24

25 3 Time saving is more important to post-millennials % stating QUICKER and EASIER in-store is an important 26+ store choice driver % 44% IGD 2017 IGD ShopperVista; Base; 212 shoppers aged 18-25; 1,511 shoppers aged 26+ Sep 16 Page 25

26 3 Post-millennials more willing to spend extra to save time Sometimes I go to the NEAREST STORE even if it is more expensive 26+ Sometimes I spend a bit more for EASIER TO COOK/PREPARE products % % 54% 52% IGD 2017 Source: IGD ShopperVista; Base; 212 shoppers aged 18-25; 1,511 shoppers aged 26+ Sep 16 Page 26

27 4 Strong demand for services at c-stores % of most recent trips using services Any services Satisfaction with services on last convenience store trip National lottery PayPoint 3% Satisfied Cashpoint Parcel pick-up/return Post office 25% Neither Mobile top-up Café/restaurant Takeaway e.g. Subway 96% Dissatisfied McColl's Convenience IGD 2017 Source: McColl s research: Base 647 Convenience store trips Page 27

28 4 Services drive incremental purchases % of c-store trips using services and also buying other products Fresh food 44% Ambient food 23% Drinks 22% IGD 2017 Source: McColl s research: Base 1811 trips Page 28

29 4 Convenience integral to the local community Type of store believed to be best for RANGE OF SERVICES Supers/hypers 49% Type of store believed to be best for SERVING THE NEEDS OF THE LOCAL COMMUNITY Supers/hypers 35% CONVENIENCE 30% CONVENIENCE 44% Specialists 28% Online 3% Variety discounters 3% Specialists 3% Food-to-go specialists 3% Online 1% Variety discounters 1% Frozen food specialists 1% IGD 2017 Source: McColl s research: Base 300 shoppers Page 29

30 4 Difficulty in accessing services without a local c-store % believing it would be harder to get the SERVICES needed if their local neighbourhood c-store was not there 46% IGD 2017 Source: McColl s research: Base 300 shoppers Page 30

31 4 A fear of longer travel times without a local c-store % believing it would take them LONGER TO TRAVEL to a store if their local neighbourhood c-store was not there 57% IGD 2017 Source: McColl s research: Base 300 shoppers Page 31

32 5 C-stores catering for a variety of missions throughout the day 10-2 p.m. 35% Services Lunch food-to-go 5-10 p.m. 18% Staple top-up Drinks for evening meal Main meal component 6-10 a.m. 24% Services Newspapers/magazines Breakfast food-to-go 2-5 p.m. 23% Staple top-up Lottery ticket Meal accompaniment Lunch food-to-go IGD 2017 Source: McColl s research: Base 1811 trips Page 32

33 6 Opportunity to make the most of time spent in c-stores Average number of minutes shopping in c-stores % of last c-store trip where bought everything required % of convenience store trips involving IMPULSE purchases (unplanned/semi-planned) 91% 68% 32% IGD 2017 Source: McColl s research: Base 1811 trips Page 33

34 7 Convenience stores are satisfying shoppers Ease of getting in/out of store Product availability Choice of products Saving money Product quality Store environment Customer service Enjoyable shopping experience % very/fairly satisfied with the following on last convenience store shopping trip: 82% 87% 86% 85% 90% 88% 92% 95% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% IGD 2017 Source: McColl s research: Base 300 shoppers Page 34

35 Testing a hypothesis - conclusions People are becoming increasingly time poor People are NOT becoming time poor They ARE becoming time pressured Convenience store shopping is saving people time Time in store is 7 minutes People can save up to 8 days a year Convenience is becoming a local hub beyond grocery shopping Strong demand for services Lifeline of community for many IGD 2017 Page 35

36 Thank you

37 McColl s Retail Group plc Transforming neighbourhood convenience 22 May 2017

38 Jonathan Miller Chief Executive, McColl s 38

39 A long and rich history The Group was founded in vending operations The Martin s chain of newsagents and convenience stores was acquired The Group consolidated its store fascia McColl s for convenience and Martin s or RS McColl for newsagents Robert Smyth McColl sets up the first RS McColl Retail operations were added to the Group The Group sold its vending interests to focus entirely on retail operations. The Group successfully floated on the London Stock Exchange 39

40 A leading neighbourhood retailer Convenience stores Our 1,001 convenience stores provide a great range of everyday products and local services to our customers living in neighbourhoods across the UK. Our change in focus convenience is the future 2016 Where we operate in the UK 19,500 colleagues 4.5 million customer transactions per week Growing average basket spend of 5.24 (2015: 5.12) Newsagents With 374 newsagents across the country, we are the UK s No. 1 specialist confectioner, tobacconist and newsagent Convenience stores Newsagents All figures correct as at 27 November

41 The McColl s difference We are a neighbourhood retailer Over 90% of our shops are in neighbourhood locations We re open when we re needed Seven days a week from early morning until late at night Providing the products that customers want Essential food and groceries, fresh fruit and vegetables, ready meals and food-to-go And services that make life easier Post Office, Parcel collections and returns, ATMs, PayPoint and lottery 41

42 A loyal and local customer base Our customers live locally and shop frequently 53% of our customers live within 400m of our shops 31% of our customers visit every day They fulfil a variety of missions Top-up is fundamental planned and distress Services are a key footfall driver Food-to-go is rapidly growing Newsagent mission remains important Our customers rate us highly on: Staff friendliness/helpfulness Ease of shop Speed of service Community involvement The staff are very helpful They do do a really good selection of fruit and veg If I lost this store it would be an astronomical effect on our family life 42

43 2016 transformational acquisition Acquisition of portfolio of 298 quality convenience stores from the Co-op Well invested and profitable stores in complementary neighbourhood locations Excellent strategic fit for McColl s Straightforward transition with further synergy opportunities to be unlocked over time Over half of the stores now trading as McColl s Performance in line with management expectations Expect to complete integration by August

44 A true convenience business 47% convenience 73% convenience % convenience Summer 2017 (forecast) Convenience Newsagents 44

45 Our clear and progressive strategy 45

46 Increasing our neighbourhood presence 1

47 1 Bringing McColl s to more neighbourhoods Growing our scale through acquisition acquisitions per year Average payback c.3 years Average EBITDA/store 70k Giving more customers access to good quality, good value groceries and providing essential services Leverage economies of scale Better buying Efficiency savings 47

48 1 A more visible brand in the community Clear brand proposition Clear and consistent messaging Point of difference Drive customer awareness Grow McColl s as a single convenience brand Celebrate our community involvement Over 300 charities and good causes supported Explore other channels of community engagement Develop social media presence Community Champions 48

49 2 Growing our convenience offer

50 2 Meeting the evolving needs of our customers Top-up shopping is key Explore meal solutions Healthier choices Tailor offer locally Newsagent mission remains important Evolving our mix growing our margin Lower margin Cigarettes and tobacco News Higher margin Fresh food Food-to-go 50

51 2 Food-to-go presents a significant opportunity IGD forecast food-to-go will grow by 35% by 2021 to 21.7bn An area of focus for McColl s Food-to-go/coffee-to-go offer in more than 400 stores 14 Subway franchises Attractive returns High margin category Subway c.2 year payback Great footfall driver Popular with younger customers Significant opportunity in the acquired Co-op stores 51

52 2 Huge potential in our existing estate A range that meets the needs of today s customer and based on local demographic Improved look and feel Bright, clean environment an essential part of fresh food retailing Mission-based store layouts Ease of shop a priority Driving LFL growth Early results encouraging Some key categories up by double-digit %s 2017 At least 20 refresh stores planned 52

53 3 Excellent customer service

54 3 Putting customers first Staff friendliness/helpfulness a core attribute at McColl s Customers rate us 9/10* Investing in customer insight Customer focus in all decisions Bespoke market research and broader insight, used to drive business plans Improving our customer communications High levels of engagement in stores Seeking more opportunities to engage e.g. focus groups, social media channels Re-launch Plus loyalty card *him! Convenience tracking programme

55 3 Essential neighbourhood services Hub of the neighbourhood 40% of visits include services, profitable in their own right UK s No.1 Post Office operator c.600 Post Offices Internet collection points 183 Amazon lockers 676 Collect+ points 1,375 PayPoint terminals >45 million newspapers and magazine deliveries Post Offices Internet collections PayPoint Newspaper delivery 55

56 The value of time? Food and grocery shopping is very time consuming Local convenience stores help customers save time No simple equation for how customers value convenience Convenience in its broadest sense Evolving the offer essential McColl s well placed to capture growth 56

57 McColl s Retail Group plc Investor enquiries Telephone: investor.relations@mccolls.co.uk Media enquiries Telephone Headland Consultancy: mccolls@headlandconsultancy.com