Macroview weekly news update - 3rd may 2016

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

Stephen Hall

Friday 6th May

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

• Nisa announces sector leading social media presence• SPAR confirms tie-up with Holland & Barrett• Morrisons announces another round of price cuts• Sainsbury's delivers encouraging 2015/16 results • Grocery market growth stalls in April Kantar data• Whole Foods Market set to expand price and promotional investments • Reflecting on Asda's tie-up with James Martin • Morrisons delivers further LFL growth in Q1 • More brands on Aldi’s shelves in Europe• Price of some everyday groceries now 40% cheaper than a year ago

Weekly News Summary –3rd May 2016


Nisa Announces Sector Leading Social Media PresenceNisa Retail has announced that analysis of its recent Easter social media activity shows it tracked ahead of its competitors in this vital consumer engagement medium.

The recent emphasis Nisa has placed on social media, as it looks to capitalise on the growing influence of digital communication in the retail marketplace, resulted in Nisa’s content being shared, retweeted and repinned more than any other convenience retailer, while it also recorded greater activity levels across Twitter, Facebook and Pinterest than nearly all its sector rivals.

Furthermore, Nisa said it was the second biggest convenience retailer in terms of customer engagement on social media, with only Co-operative Food ranked higher in terms of activity and engagement.

Nisa’s Easter social media activity, which ran from 7 March to 27 March 2016, included a colouring competition, Cadbury’s Bunny Hunt and various promotion led posts under the seasonal themed design all designed to drive engagement with the brand.

“We’ve recognised there’s a growing number of independent retailers utilising online technology and an increased expectancy from the consumer to find what they need at the touch of a button through web and mobile apps,” said Ian Bishop, marketing director at Nisa.

“With that in mind, we’ve placed added emphasis on our social media strategy in a move we hope will create greater interaction between Nisa, its retailers and their customers.

“We feel this is an absolutely vital channel of communication in this technological age and we want to lead the market in this field to the greater benefit of our business and our members.”

The announcement follows recent reports on the relaunch of Nisa’s member facing website (OCS), fully optimised for mobile and tablet usage, experiencing a 31% increase in new visitors to the redesigned site, of which 40% are now using a mobile or tablet device to access the portal.

Nisa also recently launched its new delivery app which received 1,000 hits, from 250 unique users, in its first week live.

Source: NamNews 3rd May 2016


SPAR Confirms Tie-Up With Holland & BarrettFollowing on from reports last month, SPAR has confirmed that it is trialling a partnership with Holland & Barrett to capitalise on growing demand for health products.

Three SPAR outlets in Northern Ireland have been selling items from the Holland & Barrett range with this now being extended to a further 10 outlets in the region. A wide range of Holland & Barrett products, including skincare, vitamin, mineral and food supplements such protein shakes, are available as part of the three bay in-store display, along with Holland & Barrett promotions. Debbie Robinson, SPAR UK Managing Director, said: “We are very supportive of this exciting new initiative, which is an extension of our national strategy to work with new partners. “Health and wellbeing is on trend, and as the UKs leading symbol convenience group, we are constantly looking at ways to innovate and meet the needs of our consumers. This partnership with Holland & Barrett fits very well with our brand driving more health conscious consumers into our stores.” Robinson added: “Partnerships with new businesses are a key part of our Growing Together strategy. What’s more, Holland & Barrett is a great brand and one of the UK's largest retailers, making it a great fit for SPAR.” Paul Cobbin, from Holland & Barrett International, added: “We are pleased with the initial results and are working in partnership to extend and enhance this strategic trial.”



Morrisons Announces Another Round Of Price CutsMorrisons is stepping up its efforts to win back customers from the discounters, announcing another round of price cuts. .

As part of its ‘Price Crunch’ campaign, the supermarket group said today it was reducing the cost of 847 products, with an average cut of 20% on every day grocery items such as bags of sugar, rice, and cereals. Morrisons launched its ‘Price Crunch’ initiative back in February, cutting the price of more than 1,000 items.

Andy Atkinson, Morrisons’ Marketing and Customer Director, commented: “We continue to listen hard to customers who say they want lower prices on staples and everyday family essentials. We are continuing to cut every price we can, as we make Morrisons even more competitive and improve our customers’ shopping trip.”

Morrisons is due to release first quarter trading figures on Thursday. The group posted its first quarterly like-for-like sales growth in four years during the fourth quarter of its last financial year, edging up 0.1%. Analysts are expecting the chain to post broadly flat like-for-like sales this week with management highlighting the progress the business has been making in improving its offer and competitive position.



Sainsbury's delivers encouraging 2015/16 results In newly released full year results for the 52 weeks to 12 March 2016, Sainsbury's has delivered further progress against its Evolving to Win strategy with its focus on quality, fair prices and being more convenient for shoppers.

Volume and transaction growthTotal retail sales grew by 0.4% but LFL sales fell by 0.9%, reflecting Sainsbury's investments in price, driven in part by lower commodity prices and in part by the competitive pricing environment. However Sainsbury's increased focus on quality and on enabling shoppers to shop whenever and wherever they want has helped to drive volumes and transactions growth, particularly in the core food business. Investments in price are being recognised by customers, with Sainsbury's committed to phasing out the vast majority of multi-buys by this summer, while at the same time Brand Match has been ended to fund price investments on products that matter most to Sainsbury's customers. Investments in quality are feeding into Sainsbury's renewal of its private label range with 750 of its 3,000 strong range upgraded to date. Competing harder in these areas has had impact on Sainsbury's profits which fell 13.8% to £587m.

Multichannel successSainsbury's continues to evolve its store portfolio to meet shopper preferences as people increasingly favour online and small store shopping. Sainsbury's convenience sales grew by almost 9% through the year to reach £2.3bn with 69 new stores opened. Online grocery sales also grew by nearly 9%, helped by the development of click & collect. Encouraged by the success of this concept Sainsbury's now plans to double the number of click & collect locations to 200 by March 2017. Discount has been another investment focus for Sainsbury's with 15 Netto stores opened to date. It will now review progress and report in November on next steps for this trial. Sainsbury's is also committed to updating its core supermarkets offer with six new format stores under trial.

Success in non-foodNon-food was another highlight reflecting Sainsbury's strategy of focusing on priority categories and deploying relevant learnings from its food business. General merchandise sales grew by 3.5% and clothing sales by 8.5%. Sainsbury's Bank also recorded strong results with £65m underlying profits, performance that will support its plans to launch mortgage products.

Source: IGD 4th May 2016


Grocery market growth stalls in April Kantar data The latest data release from Kantar Worldpanel, covering the 12 weeks ending 24 April 2016 shows that GB grocery market growth has slowed to just 0.1% in this period. With inflation staying negative on -1.5%, prices have now been falling every month since September 2014, though overall market volume has risen by 1%, in line with growing population.

All four leading grocers seeing sales fallingWith the leading UK grocers still finding growth hard to come by, even Sainsbury's dropped negative in this latest period, with its sales declining by 0.4%, notably behind the market average. Meantime Tesco, Morrisons and above all Asda have remained well adrift of the overall market rate. Asda on -5.1% continues to suffer the fastest rate of decline of any national retailer, and its market share has fallen to 16.0%, down nearly a full percentage point versus a year ago. In comparison Sainsbury's more stable performance means its 16.5% now gives its a solid lead over Asda.

Discounters slowing, but still in double digitsBoth Aldi and Lidl saw their growth rates slowing relative to the market average in this latest period, but with +12.5% and +15.4% respectively they remain the star performers, with no other significant player close to them in the growth stakes. With a combined market share of 10.4% discounter growth is being driven primarily by their ability to go on attracting new shoppers. Over this latest 12 weeks Aldi shopper numbers increased by 732,000 and Lidl shopper numbers by 648,000.

Co-op continues a solid growth storyDespite the difficult market back-drop the Co-operative grew sales by 3.3%, boosting its market share to 6.2%. With store disposals now slowing, its focus on store refurbishment and range improvement is paying dividends, driving up shopper frequency and spend per trip.Source: IGD 4th May 2016


Whole Foods Market set to expand price and promotional investments We review the retailer’s performance at the halfway point of its financial year.

Sales and profits under pressureThe retailer’s total sales increased by 1.3% during the second quarter, although comparable store sales slipped 3.0%. This follows on from a decline of 1.8% in the first quarter, its third consecutive quarterly decline. Although the retailer has outlined a strategic plan to restore the business to growth, focused on emphasising its value credentials, boosting its marketing spend to emphasise its key points of difference, and launching digital initiatives, it will take some time to turnaround the business. Net income fell by 10.1% to $142m.

Price and promotional investments to growAt the heart of its challenges is a degree of self-imposed price deflation, driven by price investments. A lower increase in average price per item, which at less than one percent, was it lowest increase in five years. The retailer plans to expand its price investments and add weekly deep discount promotions in selected categories, which will be actively marketed nationwide.

Increasing competition from mainstream grocersSales cannibalisation driven by store expansion, and increased competition in the natural and organic sector from mainstream grocers also had an impact. Retailers including Kroger, Albertsons and Walmart have been building out their organic and natural ranges, especially their private brand offers. It is also seeing increased competition from more specialist retailers such as Trader Joe’s and Sprouts Farmers Market which have developed strong value based offers in the segment.

New smaller format concept launches this monthThe highly anticipated launch of its new smaller format store, 365 by Whole Foods Market, which will offer a curated range of products and operate with a lower cost and price structure, will launch later this month. This will be the first of three stores which are set to open in the current financial year. A further 16 stores are in the pipeline, including six which were announced this month. This includes three sites where the retailer originally planned to open core format stores, however given their smaller store size (c. 30,000 sq ft) and local market conditions, they will be better suited to the new format.

Opportunity to apply learnings back into the core format While it will take some time for this format to reach a material scale, it is expected to provide the company with learnings around operational efficiencies which can be applied to the core business. This will build on the progress which the retailer has made over recent quarters in terms of evolving its cost structure. The retailer is already putting a number of processes in place to improve store efficiencies including new backroom procedures, and testing a central kitchen concept at one of its stores which will help to reduce capital requirements and improve product quality.



Reflecting on Asda's tie-up with James Martin Asda's new venture with celebrity chef James Martin moves the discourse beyond low prices.

Cooking up a fresh approach to foodAsda's new partnership with James Martin will see the popular television chef feature in Asda advertising around key seasonal trading periods throughout 2016 and into 2017. The first multichannel campaign launches in June and a second burst will run throughout Christmas.The tie-up, according to Martin, aims to "offer inspiration to busy families looking to cook up simple, tasty meals on a budget while still having time to enjoy life."

Asda's value heritage under threatThe announcement is a significant shift in gear for Asda, whose heritage as the UK's leading value retailer has come under significant threat from the discounters and continued price investment amongst the other Big Four. Kantar Worldpanel data covering the 12 weeks ending 24 April 2016 shows that Asda sales have declined 5.1% on last year, with Asda's market share tumbling from 16.9% to 16%.In response, Asda committed the majority of its attention towards driving operational efficiencies and investing in lower everyday prices to reduce the price deficit to the discounters. This has been subsequently reflected in its customer marketing and the recent launch of 'Pocket More' to consolidate its price advantage vs. the remaining Big Four.

Focusing more on qualityThe new partnership shifts the emphasis of Asda's customer communication away from exclusively low prices and onto the delivery of quality food at everyday low prices. This is an important development at a time when the rise of the discounters and sharper market pricing has made better quality products more accessible and triggered an evolution in shoppers' quality expectations. Indeed 49% of our Shoppervista panellists claim they are now able to buy better quality goods for the same or less money than previously. Building strong quality perceptions across all product tiers is therefore important to remain competitive, differentiate and encourage increased spend.

Boosting fresh participationThe tie-up also forms part of Asda's ongoing work to boost fresh participation, with recent in-store merchandising improvements including prominent quality and provenance signage, spotlighting and lower angled shelving to better showcase fresh produce. Asda's McGee's butchery concession is another important step forward, operating in 19 stores in Northern Ireland and a further 5 on the mainland, including Mount Pleasant in Hull. The third party operation has national potential and serves as a striking in-store landmark; providing focus and theatre and projecting quality and expertise. The presence of dedicated McGee's staff proactively engaging with potential shoppers is great to see and suggests a greater focus on selling actively and inspiring shoppers through direct customer contact within key categories. Asda's work with James Martin is now building those quality connotations outside of the store and it will be fascinating to see how Asda balances its predominant focus on functional, low-cost stores with the need to continue to develop the in-store experience to maximise the campaign's impact at the point of sale.


http://retailanalysis.igd.com/Hub.aspx?id=23&tid=3&nid=15240&app=10




Morrisons delivers further LFL growth in Q1 In newly released results for the 13 weeks to 1 May 2016, Morrisons has delivered ex-fuel growth of 0.7%, lifted by strong volume and transactions growth. Improving the shopping trip and driving LFL volumes will remain the key priorities for the retailer.

Second quarter of growthThis is the second quarter of LFL growth for Britain's fourth largest grocer and builds on Q1 growth of 0.1%. Total ex-fuel sales were down 1.8%, reflecting the impact of supermarket closures and the disposal of the M local chain. Interestingly, LFL sales inc. fuel were up 1.2%, despite fuel deflation of 1.2%, suggesting a growing 'go to' status for Morrisons as a low priced fuel retailer. Online sales contributed 1% to LFL during the period, in line with their contribution to full year 2015/16 results.

Targeted price investments benefiting volumesDuring this period Morrisons has been helped by its Price Crunch campaign, a rolling programme of targeted price cuts, concentrated on key everyday lines, the latest of which landed this week. The LFL number of transactions was up 3.1% in the quarter and volume growth was also reported as strong.

Encouraging response to range and store investmentsThe quarter also saw the launch of "Morrisons Makes It" programme to better communicate its unique manufacturing capabilities. This occurred as Morrisons continued to overhaul categories in-store, building on from the BWS relaunch before Christmas. The new food-to-go range which includes many new and improved products achieved sales y-o-y growth of 17% and the relaunched Free From range delivered growth of 70%. Further relaunches will follow with Morrisons looking to build sales in categories where it underindexes competitors by rethinking the structure of the range to create greater authority

Delivering against strategic prioritiesCommenting on the results, CEO David Pottts said:"We are encouraged by progress across our six priorities. There is still much to do and our colleagues are working very hard to improve the shopping trip and save customers every penny we can. Customers are responding and satisfaction levels remain ahead of last year. We are of course pleased with a second consecutive quarter of positive LFL sales, which demonstrates our aim to stabilise trade is taking effect."



More brands on Aldi’s shelves in EuropeDiscounters across Europe including Aldi Sud, Aldi Nord and Biedronka are opening doors to branded manufacturers and listing more of their brands, while branded manufacturers are increasingly willing to list their product on discounters’ shelves. Why is that?

Nestle, P&G and Unilever at AldiNestle and P&G in Germany have cooperated with Aldi Sud for a while, however, the number of SKUs listed on the discounter’s shelves has increased in the last 12 months. Today, Nestle offers Nesquik, Smarties and Wagner-Pizza, while P&G lists Blend-a-med, Lenor, Pampers, Ariel, Always and most recently Head & Shoulders at Aldi Sud. It has also expanded its offer at Aldi Nord with listings of Ariel, Head & Shoulders und Pampers.Unilever, which was reluctant in the past to list its brands at discounters has changed its strategy last week and listed Knorr, Langnese-Magnum and Duschdas at Aldi Sud and Aldi Nord. With this strategic change Unilever will be competing for the first time ever with its rivals like Nivea at discounters shelves, but it also indicates a radical development in the grocery retail market.

Shopper centric discountersTo sustain their growth, discounters are adapting their store concepts to shoppers’ needs and expectations. Lidl has been rolling out its new store concept across Europe (Lidl future store UK store report), while Aldi Sud is testing a new concept in Germany (Aldi Sud store report) and Aldi Nord in Spain (store report). Meanwhile Jeronimo Martins looks to convenience at its Biedronka stores in Poland (A day with Biedronka report). In addition, they are adapting their product ranges and offer to provide what shoppers want to see on the shelves – branded products.

Branded manufacturers taking the riskManufacturers realise the power of the changing discount channel and cannot risk missing the opportunity to grow. At the same time, not being listed with discounters provides an opportunity to another branded manufacturer or even worse, help the discounter to boost its private label product offer. Being under that pressure, branded manufacturers are increasingly willing to take higher risks than ever and list their brands at discounters. This can be a winning strategy as proved by Haribo and Ferrero, but it also exposes manufacturers to price spirals, price erosion and deteriorating relationships with other retailers.As we saw in Germany last year, Red Bull’s price of a can of Red Bull dropped by 36% within a couple of weeks after it was listed by Aldi Sud, while Metro Group’s Real hypermarkets delisted the product. Similarly, Nestle’s listing of Wagner Pizza by Aldi Sud this year led to a downward price spiral as Lidl and Kaufland reacted immediately to the listing at Aldi Sud and decreased Aldi’s EUR2.29 price point by EUR0.30 which was EUR0.60 less than the initial Lidl price and EUR0.70 less than the initial Kaufland price.

Who is the winner?The new branded product listings at discounters have caused turmoil in the German grocery retail market, while it is too early to say who has benefited from the entire situation. The ability of manufacturers to differentiate their products and the pace in which they can do it may determine the winner. What we could foresee, however, is that similar developments could happen in other markets where Aldi and Lid compete with each other also.


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http://retailanalysis.igd.com/Hub.aspx?id=20&tid=2&cid=170&prid=1741





Price Of Some Everyday Groceries Now 40% Cheaper Than A Year AgoThe falling price of everyday groceries has again been highlighted in latest research from MySupermarket.co.uk.

The price comparison website found that some popular food items have dropped in price by as much as 40% compared with a year ago. The cost of a basket of 35 everyday products was £82.78 last month, compared with £86.69 in April 2015.

The cost of fresh fruit and veg foods was the main driver with the price of broccoli now 39% cheaper than a year ago, whilst onions were 18% lower, bananas 15% cheaper, and fresh peppers 16% down.

Prices were also down from the month before with onions 12% cheaper, fresh peppers down 7% and both broccoli and deli bacon and ham 6% cheaper. The only product to rise higher than a few percentage points compared with March was baked beans (up 4%).

Kim Ludlow, MySupermarket’s managing director, said the supermarket price war continued to keep prices competitive across retailers. She added: “We’re also seeing supermarkets committing to slashing prices on own brand or everyday items. Shoppers should enjoy the low prices as we head into summer – but always remain vigilant as prices can change daily."

Source: NamNews 5th May 2016


Latest short term like-for-likes

+0.7%

+0.1% -1.4% -5.8%

13 weeks to 01.05.16

13 weeks to 01.01.169 weeks to 12.03.16 6 weeks to 02.01.16

Source: Companies, LFL data is latest available and dates are not consistent across companiesLFL data excludes fuel for all retailers, and VAT except for Sainsbury’s, The Co-operative and Waitrose

+0.9%13 weeks to 27.02.1652 weeks to 02.01.16

+1.6%


Last full year like-for-likes

52 weeks to 31.01.1652 weeks to 30.01.16 52 weeks to 31.12.15

-1.3%

52 weeks to 27.02.1652 weeks to 02.01.16-0.9%

52 weeks to 12.03.16-0.4%+1.6%

-2.0% -4.7%


Big Four quarterly LFLs over time

Source: Retailers

%

Note: Trading periods vary in their length and dates.

2013 Q1

2013 Q2

2013 Q3

2013 Q4

2014 Q1

2014 Q2

2014 Q3

2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

Asda

Morrisons

Sainsbury's

Tesco

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

Friday 6th May