State of the Nation 2009

Transcription

1 C ITM consumer insight State of the Nation 2009 Recession Bites Nielsen s annual State of the Nation report, reviewing the Grocery trade in Britain in what has proved to be an extraordinary past year, is now available. Here key findings and trends from the report are summarised. The last year has been dominated by the turbulent and at times, catastrophic global economic crisis. In the midst of the crisis, the grocery industry was at the centre of much attention as food inflation rocketed to levels not seen for decades. Throughout 2008, shoppers budgets were squeezed by the increasing cost of living. In addition to food inflation, fuel costs and utility bills shot up resulting in some struggling to make ends meet. The bank crisis, plummeting stock markets, rising unemployment and diving house values all combined to throw the world into economic meltdown. By the end of 2008, the UK officially fell into recession. So, how has this affected the grocery trade? There have been shifts in shopping patterns in terms of where people shop, how often they shop and also...how much they are prepared to pay! Inside: Bigger Stores, Smaller Baskets Loyalty Lost as Shoppers Search for Bargains Buying Choices - Branded versus Private Label How Shoppers Save Price Crunching, Inflation Busting, Better than Half Price Discount Deals! Staying In & Packed Lunches Outlook for the rest of 2009 The full State of the Nation report is now available on CD Rom. Please contact your Nielsen account team for more information.

2 Bigger Stores Smaller Baskets In 2008, total sales in the grocery sector stood at 124 billion, 3.8% up on Growth was lower than it has been for years and lower than food inflation. The strongest growth came from the out of town format which now accounts for 52% of sales. Growth here was 6.2% YoY, meanwhile the high street only saw growth of 2.3% and the convenience sector really struggled with sales only 0.5% up for the year. The performance of the out of town sector has been consistently strong for years but there has not been such a marked difference between sales here and sales elsewhere in recent times. Growth has been driven by shoppers focus on the one stop shop and the high level of offers they can benefit from by shopping at bigger stores. Furthermore, when petrol prices peaked in mid-summer the draw of cheaper fuel and fuel on offer was appealing to shoppers. That said, this draw to bigger stores did not convert into bigger shopper baskets. In fact, number of trips to buy a basket of 50+ items fell back in 2008 by 4% and more small or mid-sized basket shopping trips occurred as shoppers focused on cutting down spend by simply putting less into their trolley. Grocery Mults 96bn +5.5% Total Store Read 124bn +3.8% 77:23 G Mults v Impulse Impulse 28bn -1.6% Out of Town 64bn +6.2% 51% Contribution, > 25k sq ft High Street 33bn +2.3% 26% Contribution Convenience 28bn +0.5% 23% Contribution Large Stores 19bn +2.3% 16% Contribution 10-25k sqft Small Stores 13bn +2.4% 11% Contribution 3-10k sqft Source : Nielsen Scantrack Total Store Read including HPC 52 w/e 27 th December 2008 vs 52 w/e 29 th December 2007

3 Loyalty Lost as Shoppers Search for Bargains Rivalry between the top 4 retailers has intensified further as each compete to attract shoppers into store. Consequently over the last year people have shopped around more - the top 4 retailers have all attracted more customers into their stores. Since mid-2007 Tesco s market share growth has lost pace and the competition gained strength and momentum. Consequently, Tesco s market share reached a plateau by the end of With a high profile discounter campaign launched in the autumn, Tesco have seen shopper numbers increase but this has not been accompanied by an increase in expenditure; a consequence of pushing discount and own label lines and increasing the volume of goods available on offer. Asda and Morrisons continue to perform strongly as shoppers respond to their value proposition, and both continue to outperform Tesco in terms of growth. Asda gained an additional 1 million shopping households last year and three quarters of a million more shopped at Morrisons than did in Loyalty remains one of the key retailer performance measures but as shoppers become more promiscuous, searching out the best deals, it is increasingly difficult to achieve. Tesco s overall penetration increased in 2008 and significantly, the number of households choosing Tesco as their main store increased to 34% from 33% in While both Asda and Sainsbury s increased overall shopper numbers the number of main shoppers within each has fallen back slightly. On the other hand Morrisons has increased penetration and made progress converting a few more customers into loyal, main shoppers, but the many new trialists and converts have diluted Morrison s overall loyalty measure. The challenge for the retailer in 2009 will be to get those that visit to come back over and over.

4 Buying Choices - Branded versus Own Label During 2008 the sales, in value terms, of branded products has slightly increased over own label products. Consequently there has been a slight fall in the overall share of business of own label products to just under 48% of total purchasing. Low growth in premium own label and declines in healthy own labels have driven this trend with value and standard own label together performing about on par with branded products for the year. Price inflation has been higher on own label products than it has been on branded goods as brand manufacturers work hard to offset price increases with high levels of promotional activity. Whilst the level of expenditure on offer and therefore promotional support for own label has remained unchanged over the last three years, it has risen steadily for manufacturer brands reaching a peak at 40% in the last quarter of At a category level, brands have increased their sterling share in bakery, fruit and vegetables, soft drinks, liquor and health and beauty categories. Not surprisingly several of these categories also rank amongst the categories with the highest level of promotional spend indicating that branded manufacturers are investing hard to drive sales. For Household and Dry Grocery departments the share of own label has increased marginally. The primary driver of own label growth is through standard lines which represent the major sector within own label. A new addition to standard own label in 2008 has been the high profile launch of the Tesco Discount Brands. During the last year price and value for money took centre stage in grocery shopping decisions. The January 2009 Homescan survey revealed that more so than ever, the main motivation for buying own label products is because people believe that they offer good value for money. This reason was cited by more than 70% of shoppers. Less people indicated that they choose own label products because they consider the quality is as good as branded products. While more than two thirds of shoppers agree that their main store s own label products are as good as brands, this has fallen back slightly over recent years. The purchasing trends for own label reflect the attitudes expressed by the survey. The January survey also revealed that despite the fact that quality is important to the majority of people, consumers are increasingly reluctant to pay more for a high quality product and 1 in 4 people will even sacrifice product quality in order to get the best possible value for money. Branded Linear (Branded) % 4-Weekly Spend on Offer (Total Purchasing) 40% Private Label Linear (Private Label) 40% 35% 36% 30% 31% 25% 20% 20% 20% 15% 28/01/ /03/ /05/ /07/ /09/ /11/ /12/ /02/ /04/ /06/ /08/ /10/ /12/ /01/ /03/ /05/ /07/ /09/ /11/ /12/2008 Source: Nielsen Homescan Total FMCG Purchasing, 4 weekly periods to 27 th December 2008

5 The number of people who say that they regularly buy premium own label products has fallen back slightly over the last year, especially for the less well off C2 and D households. Reasons for purchasing supermarket premium products are varied, but there has been a significant increase in shoppers stating it is because they offer good value for money and that there is trust that the retailers will produce a good quality product. The majority of consumers who do not purchase premium own label products cite having to be careful about their supermarket expenditure as the main reason for not buying. They also say that they do not believe that premium own label products offer good value for money or deliver additional quality or benefits. What is your main reason for buying own label products? They offer good value for money They are as good a quality as branded Other reason They offer health benefits 5% 1% 1% 1% 0% 26% 29% 32% 23% 66% 63% 60% 73% Nov-05 Oct-06 Oct-07 Jan-09 Source: Nielsen Homescan Survey (GB) January 2009, October 2007, October 2006 & November 2005 I try to buy supermarket premium products because... They are good value for money I trust the retailer to produce good products I believe the ingredients are a better quality They taste or perform better I m worth it I like to buy the best They contain less harmful ingredients I am concerned about food safety and where the food originates 16% 14% 11% 9% 11% 12% 6% 28% 4 31% 36% 41% 32% 41% 31% Feb 2008 Jan 2009 Source: Nielsen Homescan Survey (GB) January 2009 & February 2008

6 How Shoppers Save A Nielsen Homescan survey highlighted that in June 2008, 55% of shoppers in Great Britain agreed that they were having to cut down on the amount they spend on groceries to off-set increases on other bills, up from 36% in October As oil prices and utilities have began to ease this number has reduced gradually with 50% in agreement when asked again in September and 4 in agreement in January Of the overall population, the survey highlighted that families have been the worst hit, particularly new families; in September 2008 almost three quarters of new families said they had to cut back on grocery shopping as other bills increased. Furthermore, during 2008 shoppers were very conscious of price increases. Food inflation levels not seen in the UK for decades caused grocery bills to shoot up along with other household bills. By September, 98% of those questioned said they had noticed prices going up. By January this had dropped to 85%. This is just ahead of the 81% who were noticing price increases back in October Though slightly less people are now saying that they are trying to save money when grocery shopping, the price inflation seen in 2008 has caused the majority of people to be much more price conscious. 60% of people said that price is now the first thing they look at when deciding what to buy and 58% of people say that the brand they finally choose will depend on price. In January 2009 our research highlighted that the primary strategy for cutting down the amount spent on food was buying more products when on promotion, with 51% of those polled saying they did this, up from 35% in October Consumers also said they are buying less indulgent products and treats and are being more careful when shopping so they don t waste as much food. Indeed this latter strategy has contributed to palpable growths being tracked in frozen (+7.6%, 12 weeks to 21/02/09) and canned goods (+15.1%, 12 weeks to 21/02/09). Other strategies that shoppers are increasingly employing to save money are comparing prices more carefully (23%), switching to more own label products (20%) and shopping around more (18%). % Spend On Offer 35% 33% 31% 29% 2 25% 23% 21% 19% 1 15% Grocery Mults Annual Average ASDA Morrisons Sainsbury's Tesco 11/06/ /08/ /10/ /12/ /02/ /04/ /05/ /07/ /09/ /11/ /01/ /03/ /05/ /07/ /09/ /11/ /01/ /03/ /05/ /07/ /09/ /11/2008 Source: Nielsen Homescan Total Purchasing 4 week ending periods to 27 th December 2008

7 Price Crunching, Inflation Busting, Better than Half Price, Discount Deals! As grocery multiples respond to the economic climate and compete to attract cash strapped shoppers into their stores, levels of promotional activity have continued to increase. In 2008 the percentage of spend on offer averaged above 2 for the year, peaking in November at over 30%. Promotional activity in store increased across the majority of retailers with the exception of Morrisons and Iceland. The proportion of expenditure on offer in Asda, who for many years followed an everyday low price strategy and had lower levels of goods on promotions than the other major retailers, is now above average and comparable to Tesco. Over 2008, ASDA and Tesco sold 28% of expenditure on promotion, whilst Sainsbury s and Morrisons had slightly higher levels at 30%. In November activity peaked for these two retailers as they both hit an all time high with 34% of expenditure sold on promotion. The major retailers have been fighting for the position of the shopper s champion, helping people through difficult financial times. Consequently the majority of key messages to shoppers have reflected this with Morrisons claiming Price Crunching Deals, Tesco offering 100 s of price cuts and 50 pence deals from ASDA, Tesco and Morrisons. In addition ASDA asked shoppers: Why pay more?, Tesco offered Inflation busting prices and in the autumn repositioned themselves as Britain s biggest discounter. Sainsbury s were counting their deals and offering many products at half price or BOGOF, as well as the Feed your Family for a Fiver campaign. This prompted Morrisons to respond with a series of All this for 4 campaigns. In Morrisons and Somerfield half price deals were followed by better than half price deals and Morrisons even offered Buy one get two free on selected soft drinks and snacks. With shoppers budgets stretched, the industry has responded with a greater emphasis on price reductions and less products purchased on multi-buy. During 2008, Tesco and Morrisons increased their price reduction offers, as did Somerfield and Waitrose. However Sainsbury s and Asda both placed greater emphasis on multi buy offers than was previously seen. Into 2009, Asda has pledged to eliminate multi-buys in favour of price cuts. However, a blanket ban on multibuys may not be sustainable in the long run. Multi-buy is still the favoured mechanic for many categories, especially those with elastic consumption patterns, such as Soft Drinks and Confectionery. Categories with a short shelf life such as fruit, vegetables, meat, fish and poultry are more often sold with a price reduction. For Household categories additional quantity is a popular mechanic. % Spend on Offer High promotion categories Medium promotion categories Low promotion categories Soft Drinks Liquor Confectionery Health & Beauty Meat Fish & Poultry Total Purchasing Delicatessen Frozen Household Bakery Dry Grocery Fruit & Vegetables Dairy Source: Nielsen Homescan Total Purchasing 52 w/e 27 th December 2008 vs 52 w/e 29 th December 2007 vs 52 w/e 30 TH December 2006

8 Staying In & Taking Packed Lunches But it isn t all about price and promotions, people are making savings through subtle lifestyle changes. Nielsen Online measured Buzz around economising and found that it increased in 2008 with consumers sharing tips on buying cheaper, eating smarter and wasting less. While the majority of people say that they have made no change to their eating habits, a proportion of people are reporting that they are altering their routines. For example, 1 in 5 people said they are eating dinner at home more often with a similar number saying they are taking packed lunches to work. despite reports of high profits for McDonalds and Dominos, our January survey found that 41% of people said they were eating from fast food outlets less often. Our survey also found that having a take away meal or eating out in a restaurant is increasingly becoming a special occasion event and the number of people doing either of these frequently (every fortnight or more) is reducing significantly. In October 2007, 2 of people said they ate at a restaurant every two weeks or more. In January 2009 only 18% of people said they eat out this regularly. Overall, 36% of people said they are buying take-aways somewhat or much less often and 46% of people asked said they were visiting restaurants somewhat or much less often. And The other useful thing I do is to give him any leftovers from our dinner the night before in a thermos flask left over pasta, stir fry, fried rice etc. mumsnet.com, June 2008 The main thing that I try to do is not have meat so often but buy nice meat for the meals which we have it. If we have a roast on Sunday, then I will do pizza on Monday and Jacket Potatoes on Tuesday and meat again on Wednesday. Netmums, June 2008 Supermarket own brands are not bad even the economy stuff is fine really, you just need to shop a wee bit smart with it. moneysavingexpert.com, February 2008 How often do you have a takeaway meal? % respondents How often do you eat out at a restaurant? 42% 40% 4 Only on special occasions About once a month 51% 46% 53% 25% 26% 24% 14% 15% 13% 16% 16% 13% 3% 3% 2% Oct-06 Oct-07 Jan-09 About once a fortnight 2 26% 29% About once a week 11% 13% 9% 10% 11% 3% 3% 2% More than once a week 3% 3% 2% Oct-06 Oct-07 Jan-09 Source: Nielsen Homescan Survey (GB) January 2009, October 2007 & October 2006

9 Outlook for the rest of 2009 There is no doubt that the rest of 2009 will be tough as people continue to keep a check on their household budget. Shoppers will continue to seek out offers and better value and back to basics shopping and cheap family meals will reinvigorate traditional grocery categories. Nielsen estimates that overall GB value sales growth will be less than +3% in total food retail and around +6% for Grocery Multiples, though the new wave of high food inflation associated with the weakening Sterling may push growth over this mark slightly. It is here that the industry will face challenges because price awareness amongst consumers has increased greatly, so managing price perception will become ever more important. Value Retailing is now a way of life in UK... so prepare to think differently!