Understanding online s rise in produce

Understanding online s rise in produce

Key Take-outs Online grocery is currently worth 7bn and has grown by nearly 70% over the past 5 years. Online grocery has seen a strong performance over the past year growing by 4.8% whilst main estates struggle to sustain their share. Healthcare and Fresh & Chilled are the fast growing grocery sectors online. Produce Online has experienced growth of 8.6% that is predominantly driven by shoppers buying more often. The online produce market has gained market share over time and currently makes up 6.6% of total spend on fresh produce. The winning produce types are limes, avocado, spinach, kale and sweet potatoes; these are generally perceived as slightly more premium categories. Produce Online has gained more than 30m from main estates, premium and convenience retailers and also experienced significant incremental gain from new and repeat shoppers. 2

Total Online Grocery

How has online performed over the past year at total grocery level? Even though total grocery has experienced a flat performance, online has seen growth of 4.8% over the past year which was driven by shoppers doing their online grocery shopping more often. Measure 52 w/e 16 52 w/e 14 Change Change Aug 15 Aug 16 (Actual) (%) Spend ( 000) 6,665,272 6,982,991 +317,719 +4.8% Packs (000s) 4,250,429 4,500,506 +250,077 +5.9% Penetration (%) 25.62 25.25-0.37-1.5% Frequency 14.06 15.05 +0.99 +7.1% Spend per Buyer ( ) 972.23 1023.58 +51.35 +5.3% Volume per Buyer (Packs) 619.99 659.69 +39.70 +6.4% Spend per Trip ( ) 69.17 68.03-1.15-1.7% Volume per Trip (Packs) 44.11 43.84-0.27-0.6% Price per Pack ( ) 1.57 1.55-0.02-1.1% Value up 4.8% worth 317.7m -200,000-100,000 0 100,000 200,000 300,000 400,000 500,000 Spend ( 000) 6983m (+4.8%) + 317.7m Packs (000s) 4500.5m (+5.9%) + 389.1m Price per Pack ( ) 1.55 (-1.1%) - 71.3m Volume per Buyer 659.7 (+6.4%) + 422.2m Penetration (%) 25.2% (-1.5%) - 33.1m Frequency 15 trips (+7.1%) + 463.5m Volume per Trip (Packs) 43.8 (-0.6%) - 41.3m * Penetration contribution includes population growth of 1% 4 52 w/e 14 th August 2016

What are the fast-growing grocery categories online? All grocery categories have experienced growth except Toiletries which underlines the growing importance of online shopping. The fastest growing category is Healthcare followed by Fresh and Chilled that has seen growth of 6.5% and continues to be the largest sector of online grocery. 100% 5.6 90% 80% 70% 8.1 1.8 5.4 Total Alcohol Total Ambient Groceries 3 4.2 60% 50% 40.5 Total Fresh +Chilled 2.4 6.5 40% Total Frozen 14.7 30% 20% 27.2 Total Healthcare 4.7 10% 11.4 Total Household -0.5 0% Total Toiletries -2 0 2 4 6 8 10 12 14 16 Spend Share % YOY change % 5 52 w/e 14 th August 2016

Which Fresh & Chilled subcategories performed the strongest online? Total Fresh & Chilled: 6.5% Fresh Fish has seen the biggest growth of 12.4% followed by a strong performance of Wholehead Produce growing by 8.6%. Fresh Fish Chilled Bakery Products Growth: 12.4% Wholehead Produce Growth: 8.2% Fresh Poultry & Game Growth: Growth: 8.6% 7.4% 6 52 w/e 14th August 2016

Total Online Produce

How has Produce performed online over the past year? Produce is growing faster online (+8.6%) than in market average (+3%). The performance was predominantly driven by shoppers purchasing online more often, helped by the wider drive by retailers to get more people online more often. Total Produce: +3.0% Measure 52 w/e 16 52 w/e 14 Change Change Aug 15 Aug 16 (Actual) (%) Spend ( 000) 622,058 675,765 +53,707 +8.6% Volume (000 kg) 360,904 392,299 +31,395 +8.7% Penetration (%) 22.72 22.58-0.13-0.6% Frequency 13.59 14.55 +0.96 +7.1% Spend per Buyer ( ) 102.34 110.74 +8.40 +8.2% Volume per Buyer (kg) 59.38 64.29 +4.91 +8.3% Spend per Trip ( ) 7.53 7.61 +0.08 +1.1% Volume per Trip (kg) 4.37 4.42 +0.05 +1.1% Price per kg ( ) 1.72 1.72-0.00-0.1% Value up 8.6% worth 53.7m -10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 Spend ( 000) 675.8m (+8.6%) + 53.7m Volume (000 kg) 392.3m (+8.7%) + 54.1m Price per kg ( ) 1.72 (-0.1%) - 367k Volume per Buyer (kg) 64.3 kg (+8.3%) + 51.6m Penetration (%) 22.6% (-0.6%) + 2,496k Frequency 14.6 trips (+7.1%) + 44.5m Volume per Trip (kg) 4.4 kg (+1.1%) + 7,066k * Penetration contribution includes population growth of 1% 8 52 w/e 14 th August 2016

How has Produce online grown over the past 5 years? The value of online in produce doubled over the past 5 years that supports the fact online becoming an important channel in fresh produce. It gained shares by more than 50% and stands for 6.6% of spend share in total produce. 180000 Actual 000 160000 140000 Value ( 000) 120000 Volume ( 000 Kgs) 100000 80000 60000 40000 20000 0 N D J F M A A M J J A S O N D J F M M A M J J A S O N D J F M M A M J J A S O N D J F M M A M J J A S O N D J J F M A M J J A 11 12 13 14 15 16 9 12 w/e 14 th August 2016

Market Share of Produce bought online 4.1% 52 w/e 19 th August 2012 6.6% 52 w/e 14 th August 2016 10

What are the winning produce types online? Category Value; Year on Year Value Growth 55.1% 30.5% 21.8% LIME 53.4% KALE 30.4% AVOCADO SWEET POTATO SPINACH 11 52 w/e 14th August 2016

What are the distribution channels at the produce market? Main estates stand for more than a half of total spend in produce but they have experienced decline over the past year. Online has seen growth and reached its share of 6.6% at the produce market. Main Estates Aug 15 56.5 6.2 Discounters Premium Convenience Aug 16 54 6.6 Internet 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% All Others Spend Share % Main Estates: Tesco Supermarket & Extra, Sainsbury s Supermarket, Asda, Morrisons Discounters: Aldi and Lidl Premium: Waitrose and M&S Convenience: Tesco Express & Metro, Sainsbury s Local, The Co-operative Internet: Tesco, Asda, Sainsbury s, Morrisons, Waitrose, Ocado, M&S 12 52 w/e 14 th August 2016

Where is online in produce gaining from? However is it just about the switching Main Estates 25m Convenience 2.2m Premium 4.4m 41.5% of total gain 13 52 w/e 14 th August 2016

NEWS wall 14

Thank you For further information please contact: Chris Cowan Tel.: +44 (0) 2089 674 034 chris.cowan@kantarworldpanel.com