FMCG Weekly News Update - w/c 14th march 2016

Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 18th March

Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2

• Retail footfall wanes in February amid ‘Brexit’ fears• Aldi copies big brand ads for Easter campaign• Ocado reveals better-than-expected first quarter numbers• Dunnes close to overtaking Tesco in Ireland• Sainsbury's delivers first positive LFL growth in over two years • Weekly sales down at Waitrose and John Lewis• Boots to clear checkouts of confectionary• Online market continues strong growth• Waitrose launches mobile self-scan trial• Asda to axe several hundred jobs• Industry attacks Government’s sugar tax plan• Waitrose launches gardening magazine for customers• Loyalty scheme launched for ‘Lidlers’

Weekly News Summary –14th March 2016


Retail Footfall Wanes In February Amid Brexit FearsWeak consumer confidence, caused in part by uncertainty around Brexit, has led to a dip in retail footfall during February.

Figures published by Ipsos Retail Performance show a -7.9% drop in store visits last month compared to January and -1.3% fewer than in February 2015.

The retail and footfall consultant compiles the Retail Traffic Index (RTI), which is derived from the number of individual shoppers entering over 4,000 non-food retail stores across the UK.

February began quietly, with footfall in the first week down -4.9% on the previous year. The half-term holidays during Valentine’s Day week saw shopper numbers increase but they were still down by -0.9% compared to last year.

Dr Tim Denison, director at Ipsos Retail Performance, said: “After chasing down the bargains in January, shoppers exercised more restraint in February. This was somewhat unexpected given the enduring strength of disposal income and employment levels, but does coincide with weakening consumer confidence about the future of the economy.

“It’s difficult to believe that the Brexit debate, coupled with the weak pound, was the main cause for shoppers to jitter but it may be part of the mix. Uncertainty is never good for growth and may cause the service economy to stutter.

“The swing from +1.9% growth in January to -1.3% contraction in February may also be down to the fact that shoppers preferred to go sales hunting in store rather than online, boosting footfall in January. Since then, a return to regular shopping patterns has pushed shoppers back online at the expense of store visits.”

Across the regions, Wales and South West England was the only region where year-on-year growth was recorded in February, standing at +0.2%. London and the South East saw the biggest drop in footfall at -4.2% although elsewhere in the country the drop was minimal compared to 2015.

Despite February’s poor performance, Ipsos Retail Performance expects to see a return to year-on-year growth in March thanks to the full Easter fortnight falling within the month, unlike last year when it straddled March and April. Footfall during the month is forecast to rise by +0.9% compared to the same month in 2015.

But an early Easter means that footfall over the fortnight is predicted to be -1.4% lower than last year.

Dr Denison explained: “Easter usually serves retailers better the later it falls. It is traditionally the time when wheelbarrows squeak into action and paint pot lids flip communally for the first time in the year, but only if the clutches of winter have passed.

“Retailers will, no doubt, plan to promote heavily over the Easter season to encourage home improvers and gardeners out of hibernation, but it will be the weather, as always at this time of year, that has the biggest say over how successful they will be.” Source: NamNews 14th March 2016


Aldi Copies Big Brand Ads For Easter CampaignAldi has launched its Easter television advertising campaign under the tagline #AldiFavouriteThings.

Two of the advertisements highlight the price difference between its Easter lines and those of well-known brands. The first features a gorilla playing drums, copying the famous Cadbury ad, and highlighting the price difference Aldi’s own label chocolate bunny and a Lindt chocolate bunny.

Another ad recreates the 1994 ‘Diet Coke break’ advertising campaign that saw girls swoon over a topless construction worker. However, Aldi’s ad sees a new hunk advertising the price difference between its hot cross buns and those from Marks & Spencer.

Meanwhile, a third ad follows a more traditional Easter theme with eight year old Josie Cooper flying through an Alice in Wonderland-esque world populated by Easter treats such as hot cross bun mountains, coiled butter fields and chocolate fountains.

Source: NamNews 14th March 2016


Ocado Reveals Better-Than-Expected First Quarter NumbersOcado’s share price spiked nearly 7% this morning after it revealed forecast-beating trading figures for its first quarter to 21 February.

Gross retail sales increased 13.8% to £287.7m, whilst gross group sales, which include income from its agreement with Morrisons, rose by 15.3% to £312.4m.

Average orders per week climbed 16.9% to 214,000 with group revealing that it recently had its first week when it shipped more 250,000 orders. However, amid falling grocery prices, average order size fell by 2.9% to £111.41.

Tim Steiner, Ocado's Chief Executive Officer, said: "We are pleased with the steady progress in our business, maintaining double digit sales growth in a retail environment that remains challenging.”

He added: "We believe our focus on customer satisfaction and commitment to improving what we offer to consumers through innovation and our proprietary IP will support further growth. Notwithstanding the tough nature of the marketplace, we expect to continue growing ahead of the online grocery market."

Ocado's share price has been under pressure in recent weeks following Amazon’s tie-up with Morrisons, which cast doubt on the group’s long term prospects. Ocado is currently in talks with Morrisons about it taking space in its new Customer Fulfilment Centre (CFC) which is under construction in Erith, south east London. The deal would significantly boost both parties operations, although Morrisons said last month that the agreement is subject to detailed terms being agreed and it will only proceed if it enables it to achieve profitable growth online.

Ocado made no mention of the agreement in its trading statement today or whether it had made any progress on its long-promised overseas licensing deal.



Dunnes Close To Overtaking Tesco In IrelandLatest supermarket share figures from Kantar Worldpanel in Ireland for the 12 weeks ending 28 February show SuperValu maintaining its lead, whilst Dunnes outperformed the market and moved to within a whisker of grabbing second place from an improving Tesco.

SuperValu grew slightly ahead of the market, increasing sales by 3.7%. This boosted the retailer’s market share to 25.0%, reaffirming its position as the number one supermarket in Ireland.

Meanwhile, Dunnes’ recent run of success continued with sales 7% higher than last year – an increase of almost €3m per week across the quarter. Kantar Worldpanel said bigger baskets remain the primary driver of growth for Dunnes, with the average shopping trip now coming to €37.60, almost €2.50 higher than last year. This has helped lift the group’s market share to 24.1%, just behind Tesco who remained in second place on 24.2%

However, there was more good news Tesco with its sales increasing by 0.6% year on year, its third successive period of growth. Kantar Worldpanel said Tesco was benefitting from more frequent visits with each shopper visiting the retailer 14 times on average over the past quarter compared with 13 visits last year.

Elsewhere, Lidl’s double digit growth continued, improving its market share by half a percentage point. Over 66% of Irish households shopped in a Lidl store in the past 12 weeks, compared with less than 60% five years ago. Aldi’s growth was more modest but remained robust, with larger shopping trips helping lift its sales by 3.0%.

Overall, the Irish grocery market continued its strong performance with shopper spend increasing by 3.6% over the 12 weeks, making the third successive period where growth has been above 3%.

David Berry, director at Kantar Worldpanel, explained: “Over the past twelve months we have seen a gradual increase in the level of price inflation, increasing from slight deflation of -0.1% in March 2015 to inflation of 2.6% in the past 12 weeks. Interestingly shoppers don’t seem deterred by rising prices, increasing their spending well ahead of the rate of inflation.

“There are signs that the Irish public may be sticking to their new year’s resolutions, with healthy foods performing well ahead of the market. Sales of fresh fish increased by 13% in the past 12 weeks, while fruit saw an 11% boost and sales of nuts have increased by 17% compared with last year. However, we’re still looking to treat ourselves too – sales of chocolate confectionary were up 14% this quarter, while ice cream saw a 13% sales increase compared to the same period last year.”



Sainsbury's delivers first positive LFL growth in over two years Sainsbury's has delivered a 0.1% gain in ex fuel LFLs for Q4 (the nine weeks ending 12 March 2016), its first positive growth for over two years in this much-watched measure of underlying trading performance.

Supermarket recovery drives upliftExplaining Sainsbury's progress, CEO Mike Coupe highlighted volume and transaction growth, and exceeded internal targets for availability and service levels. Investment in product quality has also helped with healthier products featuring strongly in product launches this quarter as Sainsbury's continued its programme of upgrades to 3,000 own label products.

Promotional participation reducedPromotional participation continued to fall during the quarter (reducing to 28% according to Kantar Worldpanel) as Sainsbury's follows through on its phasing out of multi-buys on grocery products, a programme it will complete by August this year. Savings from this strategy shift are being reinvested in lower everyday prices with the retailer also warning that it expects food deflation to continue to impact sales growth.

Encouraging growth online and in convenienceOnline grocery sales growth picked up to almost 14% for the quarter, helped by the expansion of click and collect to over 100 sites. Sainsbury's also opened 16 convenience stores, including its second micro convenience store in Richmond. To see our report from Sainsbury's first micro convenience store in Holborn,

Growth in non-foodSainsbury's also recorded strong growth in the non-grocery elements of its business. Clothing sales were up by over 10% and entertainment by nearly 11% following several major product releases. Sainsbury's Bank achieved volume growth of 15%.

Source: IGD 15th March 2016


Weekly Sales Down At Waitrose And John LewisAfter revealing disappointing year end results last week, latest trading figures from the John Lewis Partnership show sales at both its chains fell in the week to 12 March.

At Waitrose sales were down 3.1% to £124.19m, although this was mainly due to Mother's Day falling a week earlier this year. The group said combined sales for the last two weeks increased by 3.4%.

With just over a week to go until the Easter weekend, Waitrose said customers were picking up seasonal products with hot cross bun sales up 20%, contributing to a 1.6% increase in the bakery, hospitality and food to go category. Easter staples, including confectionery and eggs, jumped 102%

Meanwhile, a weekend major football and rugby events lifted sales of convenience foods with prepared meals up 3.5% and pizza up 15%.

Waitrose.com also continued to show good growth, with total orders up 7.5% on last year.

At sister chain John Lewis, performance was also affected by the timing of Mother’s Day with sales 4.3% to £71.48m. Electricals and home technology sales edged down 0.2%, whilst fashion sales slipped 9.6%.



Boots to clear checkouts of confectionaryBoots has become the latest high street retailer to commit to removing confectionery from its checkouts.

Following the example of grocers Lidl, Aldi, Tesco and Waitrose, the health and beauty giant will remove sugary snacks from its checkout aisles, denying customers the opportunity to make ‘impulse purchases’.

“At Boots we know we have a vital role in supporting our customers to make healthy choices, and recognise the huge challenge that a busy lifestyle presents for them,” said a Boots spokesperson.

The Nottingham-headquartered chain aims to have the initiative completed across its 2,500 stores by the middle of April.“Every week our colleagues provide care and advice to millions of customers and patients, and help them get the information, products, services and support they need to make the best choices they can,” the spokesperson continued.

“In the wake of this, one way forward for confectionery manufacturers could be to reduce their reliance on impulse categories such as countlines and bagged softlines and divert more resources to tablets and boxed assortments,” Euromonitor Analyst Pinar Hosagci told Confectionery News.

According to Hosagci customers are still buying confectionery but are now planning trips to dedicated confectionery aisles, leading to surprising growth figures in the sale of premium chocolate confectionery in Western markets.

Source: Retail Gazette 16th March 2016


Online Market Continues Strong GrowthLatest figures from the IMRG Capgemini eRetail Sales Index show the strong sales experienced at the start of the year have continued, with online sales in February recording an 18% annual growth; representing £8.9bn spent. While the increase was building on a disappointing February in 2015 (when growth was just 8%), the results reveal an impressive performance none-the-less, recording the highest year-on-year (YoY) increase announced since June 2015.

Much of the growth recorded in February was driven by an especially strong month for online clothing sales, which saw a significant YoY spike of 22%; its largest annual growth since June 2013. The clothing sub-sectors enjoyed an equally solid result, with the sale of menswear and accessories increasing 31% and 35% respectively. The colder weather may have had an impact on sales here, with shoppers spending on winter-wear following the unseasonably warm final quarter of 2015.

Valentine’s Day helped give the index a further push with romantics splashing out on presents for their loved ones, resulting in a strong performance in the lingerie sector, with sales up 20% year-on-year. Although the gifts sector fared less well (+6% YoY), sales peaked in the week leading up to Valentine’s Day, in line with historical trends.

However, despite a welcome return to double digit growth (15%) in January, following a tough 2015 for this sector, the sale of electrical items was disappointing in February. Online sales dropped 17% month-on-month and recorded an annual increase of just 6%.

Tina Spooner, chief information officer, IMRG said: “Following a strong performance in January, UK e-retail sales continued to accelerate last month, resulting in overall year-on-year growth of 16%, year-to-date. Although this is on the back of a relatively weak performance in Q1 2015, the latest results are impressive and are well ahead of our 11% growth forecast for 2016.

“It is evident the shift towards mobile devices continues, with smartphones accounting for over a third (34%) of mobile commerce sales during February. This is up from 24% in the same month last year, and reveals that smartphones have taken an additional 10% share of UK m-retail sales over the past year.”



Waitrose Launches Mobile Self-Scan TrialWaitrose has begun trialling a 'scan as you shop' mobile app in three of its stores, enabling members of its myWaitrose scheme to scan product barcodes on their phones as they place goods in their basket.

The trial, which complements the chain’s existing handset-based Quick Check service, is taking place in Waitrose shops in Clapham Common, Meanwood and Milngavie, with a view to rolling out the service to all Waitrose branches this year if successful.

The retailer said that all myWaitrose customers’ are now automatically registered for Quick Check and can try the mobile self-scan service in the trial branches by downloading the android or iOS app and registering their myWaitrose card.

Matt Clifton, Waitrose Head of Retail Change, said: “We are always looking at ways for technology to make our customers' lives easier. The ease and choice of checkout options is becoming increasingly important to customers as the trend for shopping little and often continues to grow. Making Quick Check available to myWaitrose customers and exploring the opportunity for them to shop with us on their mobiles in-store means we continue to deliver that convenience.”



Asda to axe several hundred jobsBritain's third largest supermarket is to slash 500 jobs in stores and 250 at its Leeds-based head office as the grocer attempts to stay on top of profits.

According to The Guardian, Asda will close staff canteens in all stores and cut shop floor services such as photo processing and pizza-making as part of a turnaround plan known as Project Renewal.

In January, the big four grocer began consulting with 5,000 shop floor workers and around 1,000 head office personnel over possible changes to their roles. On Wednesday, Asda said the majority of those staff had been redeployed but 200 store staff had already opted redundancy and up to a further 300 were likely to leave. Approximately 250 jobs will be going at head office.

The supermarket chain said that after consultation with staff about canteen closures, free tea and coffee will be offered in all stores and staff will receive an extra 10% discount on takeaway food, such as sandwiches, on top of their regular 10% staff discount.

The job cuts come as Asda struggles in the wake of intense grocery competition from value retailer Aldi and Lidl. Chief Exec Andy Clarke is aiming to halve the price cap with both discounters by 2018.



Industry Attacks Government’s Sugar Tax PlanShares in the leading soft drink makers fell heavily yesterday following the announcement by Chancellor George Osborne that the government plans to introduce a tax on sugary drinks to help curb childhood obesity. Whilst health campaigners applauded the moves, industry representatives said it would do little to combat the problem and will penalise firms that are already making significant progress in reducing sugar in their products.

The plan, due to come into effect in two years, will see soft drinks companies pay a levy on drinks with added sugar from April 2018, which is likely to be passed onto consumers. This will apply to drinks with total sugar content above 5 grams per 100 millilitres, with a higher rate for more than 8 grams per 100 millilitres. It won’t apply on milk-based drinks or fruit juices.

The delay in introducing the tax is aimed at allowing soft drinks manufacturers time to prepare for the new legislation by reformulating their products. The Treasury expects the levy to raise over £500m in the first year which will be spent on doubling funding for sport in primary schools.

Osborne said the move will “help tackle childhood obesity by incentivising companies to reduce the sugar in the drinks they sell”, adding: “I’m not prepared to look back at my time here in this parliament, doing this job, and say to my children’s generation ‘I’m sorry. We knew there was a problem with sugary drinks, we knew it caused disease, but we ducked the difficult decisions and we did nothing.”

However, industry representatives criticised the government’s plans with Gavin Partington, Director General at the British Soft Drinks Association saying: “We are extremely disappointed by the Government’s decision to hit the only category in the food and drink sector which has consistently reduced sugar intake in recent years - down 13.6% since 2012.

“We are the only category with an ambitious plan for the years ahead – in 2015 we agreed a calorie reduction goal of 20% by 2020. By contrast sugar and calorie intake from all other major take home food categories is increasing – which makes the targeting of soft drinks simply absurd.”

Ian Wright, Director General of the Food and Drink Federation, commented: "We are extremely disappointed by today's announcement of a new tax on some of the UK's most successful and innovative companies. For nearly a year we have waited for an holistic strategy to tackle obesity. What we've got today instead is a piece of political theatre.

“The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs. Nor will it make a difference to obesity. Many of those singled out today by the Chancellor have been at the forefront of efforts to provide consumers with healthy choices. The industry will now ask whether such efforts are still affordable."

Meanwhile, David McCorquodale, UK Head of Retail at KPMG, said: “With the estimated cost of obesity to the UK economy standing at £27bn, taking steps towards reducing sugar consumption in young people is clearly a priority for the Government. However, for retailers the introduction of a new ‘sugar tax’ will mean increases in costs which they then may choose to pass on to consumers.

“It is unclear whether education, regulation or a tax will be the cure for obesity, but for retailers, the introduction of a levy may seem heavy handed when there are various other options to explore. Regulation, for example, could be a step in the right direction, with quotas imposed on soft drinks to not exceed a certain level of sugar/ calories. Many in the retail industry may therefore feel announcing a tax on sugary drinks before further consultation, could be perceived as premature.” Source: NamNews 17th March 2016


Waitrose launches gardening magazine for customersWaitrose is launching its first gardening magazine for customers as it looks to build its share of the horticulture market.

The 132 page magazine, called Waitrose Garden, is the first issue in a seasonal series, with issue two following later this year. The magazine will be available for free to all myWaitrose members.

Waitrose said the magazine has been designed to be both inspirational and practical. The main section focuses on different types of “magnificent” gardens with each garden accompanied by a shopping spread for customers to recreate the look themselves, with recommendations from waitrosegarden.com.

This section also features advice and recommendations from popular writers, editors and presenters, which in the first issue includes Simon Calder, Julia Bradbury and Waitrose Good Food Guide Editor, Liz Carter.

The second part of the magazine is a smaller 24 page pull-out edited by Alan Titchmarsh which offers expert tips, advice and step-by-step projects for customers to try at home.

Rupert Thomas, Waitrose marketing director, said: “We know that gardening is the second most popular pastime for our customers after cooking, so this represents a real opportunity for our brand. Waitrose Garden is full of varied and captivating content, so whether the reader is new to gardening or a long-term enthusiast, we hope that it is a magazine they will enjoy.”

As well as the new gardening title, Waitrose also produces Waitrose Weekend, a free newspaper with a weekly circulation of nearly 400,000 readers; Waitrose Food, the supermarket's monthly food magazine; and Waitrose TV, the brand's online television portal.Waitrose has seen a 13% growth in outdoor plants in the past year, with perennials up 40% and bedding plants up 24%.

Source: Retail Bulletin 18th March 2016


Loyalty scheme launched for ‘Lidlers’Lidl has launched a new loyalty scheme, both to provide the best content for its ‘Lidlers’ and to differentiate itself from rivals.

Loyalty schemes are common among Britain’s supermarket chains, though Lidl is seeking to set its new ‘My Lidl’ service apart by giving it a cooking content focus. Users will be able to rate and discuss products in a dedicated Lidl forum, incentivised by exclusive content from Kevin Love, a former Lidl store manager and a Michelin Star winning chef.

“We’re extremely excited about the launch of our new online community ‘My Lidl’ to the public and welcome new members to join,” a Lidl spokesperson said. “The platform is dedicated to our loyal ‘Lidlers’ allowing them to chat, leave product reviews and stay up-to-date with the latest news from the business.”

This scheme is a sign of the progress Lidl has made in the UK supermarket industry. Lidl and Aldi have consistently taken ground from more well established competitors, and now account for 10% of the UK’s supermarket sales.


Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 18th March