The changing face of the UK grocery market and shopper · Source: IGD UK Grocery Channel Forecasts 2017 Skills gap and demand planning RESOURCE RESILIENCE De-globalization and anti-establishment

The changing face of the UK grocery market and

shopper VANESSA HENRY

#CoopConference17

RETAIL CONFERENCE 2018 #CoopRetail

Forces of change shaping our industry

Today’s agenda

© IGD 2018 Page 2

Check in: Where we are today

What channels and formats will be best placed

to win?



Today’s agenda

© IGD 2018 Page 3



to win?


Key macro-level trends driving change

Source: IGD UK Grocery Channel Forecasts 2017

Skills gap and

demand planning

RESOURCE

RESILIENCE

De-globalization

and anti-

establishment

ALTERING

AUTHORITIES

Urbanisation and

personalisation

SOCIETAL SHIFTS

Automation and

connectivity

TRANSFORMATIVE

TECHNOLOGY


Significant lifestyle changes are underway

People will be working longer as retirement

age rises

Life expectancy will continue to rise

Health consciousness will rise

More dual income households

More single person households

Cities will expand as population increases

Living space will become more of a

premium

Technology will continue to impact the

everyday

Societal

Shifts


We’re entering an age of interconnectivity

Transformative

Tech

Health

Wearables, smart sleep.

diagnostic tools &

services

Living

Ecommerce, robotics,

AR, baby and kids,

education and training

Leisure

Gaming, sports and play

Vehicles

Including vehicle to

vehicle and vehicle to

network

communications

Home

Smart locks, energy

management,

connected appliances

Cities

Access to information

and services, and

predictive alerts

Transformative

Tech


However, fundamental shopper truths will remain

Help me

save money

Help me

save time Help me get the

best quality

Help me make

healthy choices

VALUE TIME QUALITY HEALTH


‘Help me save money’

EDLP over special offers Price reductions over multi-buys

“There should be fewer offers and have EDLP instead”

“I prefer price reductions over multi-buys”

63% 63%


Simpler and clearer value communication


‘Help me save time’

6 TRIPS PER

WEEK

26 TRIPS PER

MONTH


Pay-and-go technology in action to speed up shopping


‘Help me get the best quality’

© IGD 2018 • Page 12

Better flavour

products Freshly prepared products

British / local products

Better ingredients

Ethical products

More environmentally

friendly

Brand name

Healthier products

Better appearance


Be more local…sell products that tell stories


…and ethical can translate to better quality


‘Help me make healthier choices’

Solutions Advice Incentives?



Today’s agenda

© IGD 2018 Page 16



to win?


Signs of weakness in the UK economy

Overall economic growth slow

Shopper confidence weakening Car sales slowing, house prices sluggish

Concerns over household debt

Inflation returning to normal Real pay falling, esp in pub sector


UK shopper confidence is challenging…

-15

-10

-5

0

5

10

Au

g-1

4

Feb

-15

Au

g-1

5

Feb

-16

Au

g-1

6

Feb

-17

Au

g-1

7Sho

pp

er c

on

fid

ence

ind

ex

(hig

her

= m

ore

co

nfi

den

t)


Inflation has returned to the UK economy

-6-4-202468

101214

Jan

-00

Jan

-02

Jan

-04

Jan

-06

Jan

-08

Jan

-10

Jan

-12

Jan

-14

Jan

-16

An

nu

al in

flat

ion

, CP

I (%

)

All items Food & drink


Shoppers are sensitised to inflation

0 20 40 60 80 100

Other

House prices

Job security

Change in personal…

Tax and benefit changes

Interest rates

No wage increase

Petrol prices

Energy bills

Food prices

Share of respondents (%)

Top personal economic concerns for the year ahead


Household income growth has slowed

10,000

15,000

20,000

25,000

30,0001

980

198

5

199

0

199

5-9

6

200

0-0

1

200

5-0

6

201

0-1

1

201

5-1

6

202

0-2

1

Med

ian

ho

use

ho

ld d

isp

osa

ble

in

com

e (£

per

yea

r)

Previous 10 yrs Latest 10 yrs


Grocery retail volumes were static in 2017

-2

0

2

4

6

Jan

-15

Jul-

15

Jan

-16

Jul-

16

Jan

-17

Jul-

17

Gro

wth

, la

st 3

m o

n s

ame

3m

yr

ago

(%

)

Value sales Volume sales


Some shoppers feeling the ‘Brexit Blues’

-100 -80 -60 -40 -20 0 20 40 60 80 100

I spend more carefully since the EU referendum

I worry about my finances as BREXIT proceeds

I worry about my job security as BREXIT proceeds

I worry about the UK economy as BREXIT proceeds

Share of respondents (%)

Shopper opinions of BREXIT impacts, all shoppers

Disagree slightly Disagree strongly Agree slightly Agree strongly


Brexit preparation appears patchy

0

5

10

15

20

0-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100

Res

po

nd

ents

(n

)

Business readiness (higher is better)

Q20: “On a scale of 0-100, how would you rate your business’s overall readiness for Brexit?”

Average: 48


Few businesses seem to be talking about Brexit

0

5

10

15

20

25

30

35

Lots Some None Don't know / declined

Res

po

nd

ents

(n

)

Level of guidance

Q14 and Q15: “How much guidance has your company received from / offered to supply chain partners regarding the potential impact of Brexit?”

Guidance received Guidance offered


Leaving the UK could shock UK farming

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

All farms Small Medium Large Low perf Mediumperf

High perf

UK

far

m b

usi

nes

s in

com

e (£

p

er-y

ear)

Baseline / no change Scenario: evolution Scenario: unilateral liberalisation Scenario: fortress UK



Today’s agenda

© IGD 2018 Page 27



to win?


Inflation will drive growth in UK grocery

169.1 175.0 177.5 178.2 180.3 184.5 189.6

195.7 201.8

207.7 212.9

3.2% 3.5%

1.4%

0.4%

1.2%

2.3% 2.7%

3.2% 3.1% 2.9% 2.5%

0.6% 1.4%

1.8% 2.1% 2.2% 2.1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

50

100

150

200

250

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

YO

Y G

row

h (

%)

Gro

ce

ry re

tail

ma

rke

t siz

e (

£bn)

Market value (£bn) YOY % Change June 2016 forecast % Change


Large stores account for 50p in each £1 today…

0%

10%

20%

30%

40%

50%

60%

Hypermarkets Supermarkets Convenience Discount Online Other



…but they’ll be challenged by other channels in the next few years


0%

10%

20%

30%

40%

50%

60%

Hypermarkets Supermarkets Convenience Discount Online Other

2017 2022


Top three growth channels to deliver +£23bn sales

© IGD 2018 Source: IGD channel forecasts 2017 • Page 31


Online set to continue to drive appeal

43% …of all British grocery shoppers say they’ve shopped online for some part of their groceries in the last 4 weeks

60% …say it’s likely they will be shopping online and getting their groceries delivered to their home in the next 2-3 years


New stores and quality driving food discounters

Expanding store networks Improving in quality, staying low on price

Differentiating their offer


Convenience retailing at a glance


C-stores appealing to shopper needs

Increasing participation from new generations of shoppers

Speed of in-store experience Targeting more missions, more effectively


Food-for-now: a massive growth opportunity

0

5

10

15

20

25

2014 2015 2016 2017 2018 2019 2020 2021 2022

UK Food-to-go market size - £bn

£17.4bn

£23.5bn +6.2%

Source: IGD Research, Retail Analysis


…and it will be a significant c-store growth driver


Large stores are having to evolve their offer

Re-thinking space Getting the range right

Focus on fresh food: for now and for later


Additional market developments

/

/

/


Omnichannel will become increasingly important 4.6

Average number of channels claimed to be used per month

60% …of British shoppers say they will shop

online in the future (home delivery)

50%

…say they will shop online for ambient but still go in-store

for fresh

98% …of British shoppers claim

to have used a larger format store in the last

month

28%

…say they are interested in using voice activated devices to buy groceries in the future

44%

…say they are interested getting personalised offers to their phone in different parts of a store

34% …of British shoppers say in the next 2-3 years they will be grocery shopping online and using click and collect

services

Source: IGD Shopper Vista Research


In summary…

• Forces of change are in motion, shaping how we live, and how we shop

• But fundamental shopper truths remain: saving time and helping save money are particularly poignant

• Attracting and retaining shoppers is even more vital while volume growth remains challenging

• Aligning with customer missions and values will help retailers lead, rather than follow trends

• Discount, online and convenience are driving growth

• But remember – larger formats will still account for 50p in every £1


Checklist to engage your shoppers

1. Be more than just a store

2. Think ‘missions’ to build baskets

3. Engage with the health trend

4. There’s more than one way to

do ‘fresh’

5. Give shoppers back time

6. Exceed expectations

7. Engage with and reward your

shoppers

8. Be local – sell products that tell

stories

9. Be famous for something

10. Add personality to

everything you do


© IGD 2017 Page 43

Documents

The changing face of the UK grocery market and shopper · Source: IGD UK Grocery Channel Forecasts 2017 Skills gap and demand planning RESOURCE RESILIENCE De-globalization and anti-establishment