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, Sainsbury’s, 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, Walmart’s 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 Walmart’s 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
Sainsbury’s (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
Germany’s 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’, Sainsbury’s 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(Sainsbury’s)
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 won’t “revert to type” as conditions improve, so follow the shopper, and
remember ‘perception is reality’
2
3
4
5
6
1
7
Recommended
