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

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  • Following the ShopperImpact of Recession on the European Grocery Retail Sector

  • IGD 2009

    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

  • IGD 2009

    The global recession is ending but recovery will be sluggish

    Source: World Economic Outlook, IMF, October 2009

    -10

    -8

    -6

    -4

    -2

    0

    2

    4

    6

    8

    10

    % R

    ea

    l GD

    P G

    row

    th

    2009 2010

  • IGD 2009

    Shoppers in Europe and the US are feeling the pinch

    gas prices fuel bills food prices

    savings property value unemployment

    Last year

    And this

  • IGD 2009

    Overview Key Initiatives for Large Format RetailersA greener supply chain to save cash

    The larger retailers (Tesco, Asda, Sainsburys, 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

  • IGD 2009

    Range rationalisation is high up on the agenda at Walmart

    Since January 2009, Walmarts 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 Walmarts 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

  • IGD 2009

    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

  • IGD 2009

    Simplification to drive cost cutting is also key at Carrefour

    Category Optimisation:

    Inventory reduction: 1,400 million

    Operating cost reduction: 2,100 million

    410 million

    Purchasing cost reduction:

    Total impact by 2012:4.5 bn

    - Improve stock management from 37 to 30 days by 2012

    - Realign and consolidate functions at a head office level

    - Adopt a more demand led service model. Review the assortment with the aim of serving

    more customer needs with less SKUs

    - Better leverage its purchasing scale in the G4 markets (France, Belgium, Spain, Italy) by

    removing complexity and integrating functions

    590 million

    Source: IGD, Carrefour Analyst Meeting, 30th June 2009

  • IGD 2009

    How has the downturn impacted shopper behaviour?

    Least

    change

    Most

    change

    Source: Private Label vs. Brands, and the Future of Discounters The Shopper Perspective, 2009

  • IGD 2009

    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

  • IGD 2009

    Saving money..the sustainable way to live

    Sainsburys (UK)

    John Lewis (UK)

    Morrisons (UK)

    Whole Foods Market (US)

  • IGD 2009

    Across Europe, shoppers are buying more private label

    33%

    33%

    26%

    37%

    Total 31%

    Source: Private Label vs. Brands, and the Future of Discounters The Shopper Perspective, 2009

  • IGD 2009

    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

    Germanys high level of volume penetration is a

    reflection of the strong market share of discounters

    Source: ACNielsen, 2008 Actuals

  • IGD 2009

    The Good / Better / Best Tiering is still the standard

    Good BestBetter

  • IGD 2009

    Shoppers are looking for value and values

    VALUE VALUES

    TRUST

    PROVENANCE

    PACK SIZE

    ETHICSSUSTAINABILITY

    PERFORMANCE

    PROMOTIONS

    PRICE

    Source: IGD, 2009

  • IGD 2009

    Good is getting Better, delivering on value & values

    Delivering both Value and

    Values, Sainsburys 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

  • IGD 2009

    Tip Value Range at Real, Metro Group

    Value ranges have been re-engineered to boost credentialsBetter 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

    reformulation

  • IGD 2009

    Rewe, Germany, Aug 09 Carrefour, France, June 09 Target, USA, June 09

    Source: IGD Retail Analysis

    In-Store bold displays encourage trial at POS

  • IGD 2009

    Canada (Loblaws)

    USA(Publix)

    UK(Sainsburys)

    Retailers switch and save campaigns drive PL growth

  • IGD 2009

    Premium ranges help strengthen a retailers brand and proposition

    Premium and value-added PL also benefit from the eating-in trend in recessionary times

    Ahold, Stop & Shop, USA Carrefour Premium Range, Belgium

    Both ends of the private label spectrum flourishPremium ranges are increasingly instrumental in fresh food categories

  • IGD 2009

    Private label plays a central role in marketing campaigns

  • IGD 2009

    Value

    Standard

    Finest

    Discount

    (Launched September 2008)

    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

    Tesco has created a new tier to counteract discounters...

  • IGD 2009

    Premium Ranges Health & Sustainability

    Quality Awards Focus on Fresh

    Gourmet, Aldi Germany

    Luxury For All, Lidl UK

    Discounters continue to broaden their appeal

    Carbon footprint, Hofer, Austria

    Leaderprice, France

    Lidl, Germany

  • IGD 2009

    Aldi UK TV Advertising

    Celebrity Chef Phil Vickery

    Lidl Germany TV advertising

    A trio of Celebrity Chefs

    Discounters trial new media strategies to build their image

  • IGD 2009

    Shoppers are intent on buying more at discount stores

    26%

    29%

    28%

    31%

    Total 28%

    Source: Private Label vs. Brands, and the Future of Discounters The Shopper Perspective, 2009

  • IGD 2009

    Is it all because of the downturn?

    Buying more Begun to make changes to save money in downturn

    Both

    Private Label

    Discounters

    Source: IGD 2009 - % of French, German, British and Spanish shoppers

    14%14% 13%

    15%16% 12%

  • IGD 2009

    Following the shopper

    We make no apology for being on the side of the consumer.

    Our main focus is to delight our customers every day so we can become their preferred retailer.

    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 email it to customers, and

    1,000 customers will vote on whether we buy it.

    Richard Brasher, Tesco

    Lars Olofsson, Carrefour

    Rick Bendel, Walmart

  • IGD 2009

    Embracing new technological platforms

  • IGD 2009

    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 wont revert to type as conditions improve, so follow the shopper, and remember perception is reality

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  • IGD 2009

    Thank you!

    Ccile Riverain, IGD cecile.riverain@igd.com