Food and Drink Federation Sales Directors Forum. Leeds Marriott Hotel 15 th July PDF Free Download

Food and Drink Federation Sales Directors Forum Leeds Marriott Hotel 15 th July 2014

MARKET REVIEW FOCUS ON PRICE AND PROMOTIONS Food & Drink Federation 15 th July 2015 Leeds

Copyright 2012 The Nielsen Company. Confidential and proprietary. DAILY TELEGRAPH 8 TH JULY 2014 Overall UK inflation levels at 1.5% Food Prices +0.6% inflation for June Lowest inflation level since BRC began measuring in 2006 Could be worse Clothes -13.7% Electricals -4% Price and Value will remain on agenda Source: Gordon Raynor, Chief Reporter, 08 Jul 2014 3

Copyright 2012 The Nielsen Company. Confidential and proprietary. CONSUMER CONFIDENCE IMPROVEMENT SLOW TO REACH GROCERY SALES When economic conditions improve what will you continue to do? Source: Nielsen Consumer Confidence survey 4

Copyright 2012 The Nielsen Company. Confidential and proprietary. SHOPPING DIFFERENTLY FOR FMCG Total Market Convenience On Line Discounters (Scantrack ) (Homescan ) (Homescan ) (Homescan ) Share of 14% FMCG Sales 5% 9% Source : Nielsen 52 weeks to 24 th May 2014 6

Copyright 2012 The Nielsen Company. Confidential and proprietary. DISCOUNTERS: THE ALDI OFFERING IS APPEALING TO MORE AND MORE SHOPPERS Considers those who would consider shopping at the retailer As you have indicated that you have not shopped at any Discounter or Value Stores over the last few months, please can you tell us why? (Please scan all that apply) Q12a And which of these stores would you consider shopping at in the future? [MA]. Neilsen Homescan Survey 2013 Base: All Supermarket shoppers, 2011 (n=1205), 2012 (n=1212), 2013 (n=1168) 7

Copyright 2012 The Nielsen Company. Confidential and proprietary. EVERYONE IS TALKING ABOUT PRICE % respondents who associate Waitrose with low prices for most items * *Q18, Thinking about the same statements again, please indicate which stores you associate with each of the statements. For each statement you can select as many stores as you like ( low prices for most items ). Base: 2013 n=218, 2012 n=302, 2011 n=245 8

Copyright 2012 The Nielsen Company. Confidential and proprietary. AS SHOPPERS INCREASINGLY STICK TO A LIST, DISCRETIONARY PURCHASE IS UNDER THREAT % said yes Base: All HM/SM shoppers, 2012 (n=1212), 2013 (n=1168) Ref. Q132, Now we have a few questions about your attitudes towards grocery shopping. In general when shopping, to what extent do you agree or disagree with the following statements? [Yes or no] 9

TOP 4 PERFORMANCE LAST 12 MONTHS.. MARKET SHARE SALES TREND REASONS WHY 28.6% Recovered then Stalled -0.6% 3 years of falling market share High level of in store promotions/use of coupons Highest spending Supermarket on Advertising 16.5% Momentum Slowing +1.8% Benefited from increased selling space in 2013 Brand Match and Advertising still differentiate Growths slowed in Q1 2014 Copyright 2012 The Nielsen Company. Confidential and proprietary. 16.4% 11.1% Improving Growths +0.9% Declines Accelerating -1.9% Consistently perceived as cheapest supermarket Improved Store Equity and now ahead of Tesco Impacted by Asda and Discounter growth Still attracting new shoppers But FMCG spend per visit down -2% Source: Nielsen Homescan Total Till 52 weeks to 24/5/2014 10

TOP 4 PERFORMANCE LAST 12 WEEKS VALUE SHARE ASDA LEADING WAY Value Share Of Total Grocers % Chg Yr Ago TOTAL GROCERS 1.3% TESCO 28.2-3.3% SAINSBURY 16.4-0.4% ASDA 16.4 1.7% MORRISONS 10.9-5.0% CO-OPERATIVE 5.6-0.1% WAITROSE 5.0 7.2% ALDI 5.2 32.6% Copyright 2012 The Nielsen Company. Confidential and proprietary. MARKS AND SPENCER LIDL ICELAND 2.1 3.1 4.0 Source: Nielsen Homescan Total Till 12 weeks ending 24 TH May 2014 2.1% 6.1% 22.5% 11

Copyright 2012 The Nielsen Company. Confidential and proprietary. SHOPPER BEHAVIOUR IN MARKET The shops are having to price competitively to get people to part with their money. There is clearly a big supermarket war going on, and Lidl and Aldi are a big factor in that. Mr Archer said that the rise of discount supermarkets and shops such as Poundland signified a long-term change in culture in the nation s spending habits. He said the lengthy economic downturn meant people have got into the habit of looking for the best deals Source: Howard Archer Chief UK Economist, Global Insight telegraph 8 th July 13

PRICE AND PROMOTIONS

Copyright 2012 The Nielsen Company. Confidential and proprietary. PRICE AND PROMOTIONS.. RETAILER AND MANUFACTURER BIGGEST CONCERN Issue Manufacturer Retailer Optimise Price / Trade Promos 82% 92% On-Shelf availability 62% 65% Brand/Portfolio Management 65% 60% Assortment/Layout 70% 55% Unmet Needs 60% 65% Source: Nielsen study 2014 86 manufacturers, 53 retailers Top 2 Priorities Source: Nielsen Homescan Total FMCG Grocery Multiples 2013 15

PROMOTIONS VARY IN POPULARITY, PRICE REDUCTIONS APPEAL TO NEARLY ALL SHOPPERS % Respondents Offer Type as % of Total Promotional Spend Copyright 2012 The Nielsen Company. Confidential and proprietary. Multibuy Source: Nielsen Homescan Survey (GB) January 2014 44% 48% Price Cuts State of the Nation 2014 16

WAITROSE INCREASED PROMOTIONAL SPEND DURING 2014 % Exp On Offer: Total FMCG 44% 42% 40% 38% 36% 34% 32% 2013 2014 Copyright 2012 The Nielsen Company. Confidential and proprietary. 30% 28% 25-May-13 22-Jun-13 20-Jul-13 17-Aug-13 Source: Nielsen Homescan Grocery Multiples 4 weeks ending periods to 24th May 2014 14-Sep-13 12-Oct-13 09-Nov-13 07-Dec-13 04-Jan-14 01-Feb-14 01-Mar-14 29-Mar-14 26-Apr-14 24-May-14 17

% SPEND ON OFFER STILL NEAR RECORD LEVELS High promotion categories Medium promotion categories Low promotion categories Copyright 2012 The Nielsen Company. Confidential and proprietary. Source: Nielsen Homescan Total FMCG Grocery Multiples 52 w/e 4th January 2014 vs 52 w/e 5th January 2013 State of the Nation 2014 18

PROMOTION AND GROWTH DO NOT CORRELATE 4 weekly growth FMCG spend bought on offer Copyright 2013 The Nielsen Company. Confidential and proprietary. Source: Nielsen Scantrack Grocery Multiples Total Store Read Spend on offer: Nielsen Homescan Grocery Multiples State of the Nation 2014 19

DEVELOPING EFFECTIVE PRICE & PROMOTION CAPABILITIES

Copyright 2012 The Nielsen Company. Confidential and proprietary. COMPANIES FACE A NUMBER OF CHALLENGES IN DELIVERING EFFECTIVE PRICING & PROMOTION PROGRAMMES $1 TRILLION SPENT EACH YEAR SIGNIFICANT SPEND UNSOPHISTICATED & UNSATISFIED KEY CHALLENGES 2 nd largest expense in CPG,3.5x Ad spend 80% (1) spend too high 40% events ineffective Retail execution vs plan 70% (1) unhappy with planning and execution tools and technology (1) Source: Booz&Co/POI,CGT Customer Planning Trade Management Benchmarking Study, Nov 2013 21

Copyright 2012 The Nielsen Company. Confidential and proprietary. PRICING & PROMOTION PLANNING Delivering success in pricing and promotion management requires excellent capability in five core activities Analyze, assess, learn and adjust to improve promotion effectiveness Perform better Set strategic direction and targets on volume, pricing, and promotion investment Prioritize better Establish excellent shelf execution in real time Execute better Optimize promotion plans to drive effective JBP engagement with Customers Plan better Accurately manage promotion funds, deductions and claims settlement Budget better 22

Copyright 2012 The Nielsen Company. Confidential and proprietary. 5-10% PROMOTIONAL EFFICIENCY SAVINGS FINANCIAL VALUE STRATEGIC VALUE OPERATIONAL VALUE TIME VALUE 5% - 10% (1) improvements in Trade Promotion effectiveness Build a lasting organizational competitive advantage Shift to smart analytic-based decision-making Fast, efficient planning with less effort 200MN TURNOVER BUSINESS INVESTING 25% IN TRADE PROMOTIONS - 50MN COULD DELIVER EFFICIENCIES OF 2.5MN- 5MN TO REINVEST TO GROW YOUR BRANDS WITH FAVOURITE RETAIL PARTNER (1) Source: Gartner; (2) Source: Various studies including McKinsey, Deloitte and BCG 23

Copyright 2012 The Nielsen Company. Confidential and proprietary. SUMMARY A few headlines Price and Promotion is still the dominant theme. But more so! Shopping has changed. Store choice and in-store behaviour are moving Savvy shopping is here to stay, regardless of any economic improvement In a high cost, low growth environment getting smarter is essential Leading businesses are already investing in their RMO capabilities 24

BARRY WILLIAMS SVP/CHIEF MERCHANDISING OFFICER FOOD TRADING

Our strategy

Funded by Low Cost Operating Model Lowest cost multi-channel retailer BUY FOR LESS Innovative sourcing ideas Leverage the power of WMT WO4L Streamline the end to end supply chain WAYS OF WORKING Organisation to deliver the strategy

The playing field has changed Source: Count of Asda current estate

Market outlook Latest 12 weeks read shows ahead growth consistently ahead of market 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% Total Tesco Asda Sainsbury's Morrisons (Kantar 12w/e 22 Jun-14)

Market outlook Asda growing ahead of Kantar for 4 consecutive months *Kantar 4 week growth (up to 4 w/e 22 nd Jun)

Food and Drink Federation Sales Directors Forum. Leeds Marriott Hotel 15 th July 2014