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GROCERY INSIGHT UPDATE DECEMBER 2012

Market slows as Christmas approaches
New market share data from Kantar Worldpanel reveals a further slowdown in market growth for the 12 weeks to 25 November; the market grew by 3.2%, down from 3.6% for the previous 12 week period and 3.9% for the period before that. At the same time inflation has picked up to 3.5% indicating that volumes have turned negative. 12 weeks to 27 November 2011 (% share) 31 17.5 16.7 12.3 6.7 4.4 2.5 2.6 1.9 0.6 1.9 2.1 12 weeks to 25 November 2012 (% share) 30.7 17.3 16.9 11.7 6.5 4.5 3 2.8 2 0.5 1.8 2 Sales growth (Y-o-Y %) 2.2 2.5 4.7 -1.1 -0.5 7.5 27.3 11 9.2 -5.2 0.1 -0.4

Tesco Asda Sainsbury's Morrisons The Co-operative Waitrose Aldi Lidl Iceland Farm Foods Other multiples Total symbols & independents
Source: Kantar WorldPanel

Sainsbury's sets the pace for Big Four Among the Big Four only Sainsbury's outperformed the market with growth of 4.7%, nudging its market share upwards to 16.9%. Sainsbury's clearly has momentum entering the festive trading period and this position is likely to be sustained with further new space creating greater scale and strong communication of its value and quality credentials supporting like-for-likes. Uptick in Tesco's performance A day ahead of its Q2 trading results, Tesco's sales growth is marginally up on last month's 2.1% though the retailer will be counting on improvements to stores and service, combined with its new advertising campaign to feed through into stronger performance in the final weeks before Christmas. Disappointment for Morrisons Morrisons 1.1% fall in sales follows a "lower than expected" Q2 trading update last month. To enhance its performance Morrisons has already signalled a new emphasis on value through more engaging promotions and an overhaul of marketing to communicate its points of difference better. Netto fully consolidated in Asda numbers This month's Asda numbers are the first to include the annualisation of its all former Netto stores. They provide Asda with a solid base for growth as Christmas approaches when the retailer should benefit from investment through the year in strengthening its food focus and the quality of its own brand offer. Rapid growth for smaller retailers Once again growth is fastest in the discount and premium ends of the market. Aldi's growth is particularly striking at almost 30%, helped by effective TV advertising to broaden its appeal to a wider demographic. Waitrose is also thriving with growth of 7.5% more than twice of the market. (Source: IGD)
CPM UK Insight & Planning Prepared By: Mark Berry

Grocery special interest update
Retailers act to harmonise approach to promotions
The Office of Fair Trading (OFT) has published a new set of principles for promotions that have been agreed by a number of leading food retailers, designed to build customer confidence in value messaging.

New principles to enhance customer trust
The development follows an investigation by the OFT into the way food and drink prices are displayed, advertised and promoted. While the OFT found no evidence that retailers were engaged in misleading promotional practices, it has developed a new set of promotional practices developed in partnership with a number of major supermarket groups.

Boosting confidence in pricing
Four principles are outlined by the OFT (full text in attached document).  Prices should not be artificially inflated so that planned discounts appear more attractive when the later discount is in fact the normal selling price. If a discounted price prevails for longer than the previous higher selling price, retailers should be prepared to justify why the extended discount price is not in fact a normal selling price. References to previous selling prices should only be used where they "give a meaningful basis for comparison". Good examples in this respect include the immediate last selling price and the price of an identical product. "Better" or "Best" value claims need to be objectively accurate, with for instance no cheaper way of buying the same volume of a products through alternative pack sizes at the same store.

Adoption by eight retailers
To date the retailers agreeing to adopt the new practices are: Aldi, The Co-operative, Lidl, M&S, Morrisons, Sainsbury's, Tesco and Waitrose. The most notable omission is Asda… (Source: IGD)

CPM UK Insight & Planning

Prepared By: Mark Berry

TESCO INSIGHT UPDATE Tesco release Q3 results
Group sales grew by 2.9% overall (inc VAT exc. fuel) for the 13 weeks until 24 November 2012. Sales show progress in the UK and Asia, but challenges in Europe and the US. Progress in food in the UK. Food LFLs grew 1.2% in Q3, with the 'build a better Tesco' plan delivering enhancements across areas such as customer service, in-store environments and ranging. Weaker non-food held back performance. UK overall LFL sales (exc. VAT exc. fuel) fell by -0.6%, impacted by the shift in focus towards food but also by challenging trading conditions for non-food. Online food up 15%. Click & collect is growing across food and non-food, with the retailer reporting good growth in its Delivery Saver subscription service. Strategic review of Fresh & Easy. Against a backdrop of slowing US LFLs Philip Clarke said the business would not deliver acceptable shareholder value in its current form. Tesco is investigating options for the business including a potential sale, closure or partnership. (Source: IGD)

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Tesco open over 200k sq ft of new retail space in one day
(Source: IGD) Tesco has opened over 200,000 sq six areas retail UK plan: Tesco reported progress across the ft of new of thespace in one day. The retailer has opened three large scale regeneration schemes; one in Woolwich town centre in south east London, one in Trafford in Greater Manchester and one in Hednesford in Staffordshire. The schemes all form part of regenerations projects, with the development in Woolwich also providing investment in transport and community infrastructure, as well as 259 new homes, for completion by the end of 2013. With retailers typically trying to open as much new space before Christmas, the new sales area will help Tesco boost sales over the forthcoming festive period. (Source: IGD)

London 2012 British weightlifting record holder, Zoe Smith, cut the ribbon to open the new Tesco Extra store in Woolwich on Monday.

CPM UK Insight & Planning

Prepared By: Mark Berry

ASDA INSIGHT UPDATE Asda to open first forecourt stores
Asda is to boost access to its new Click & Collect grocery service with its first standalone forecourt store. Asda is to open a standalone forecourt store in Sale, Greater Manchester. While the store will sell a range of core convenience items, a more important function of the store in this busy location will be as a pick up point for online groceries. By year end of 2012 it expects 100 stores to feature grocery pick up points, including many Asda Living stores, providing coverage of 50% of UK postcodes. The retailer is aiming for full national coverage in 2013. Separately, Asda will also convert an Esso petrol station opposite Asda House in Leeds. Unlike Sale, this forecourt is primarily designed as a conventional fuel retailer for the convenience of Asda's 2,500 head office colleagues. Despite these initiatives Asda has no plans to roll out a new small format store. (Source: IGD)

Asda Q3 results 'solid'
Asda has announced its third quarter results with like-for-like (LFL) sales exc. fuel and VAT up 0.3%. Total sales grew 2.5%. Results for the 13 weeks to 29 September show a slowdown in performance with LFL and sales slowing from the respective 0.7% and 3.2% growth reported in Q2. (Source: IGD)

Asda outlines multichannel approach
Asda continues to increase its investment in multichannel, as it seeks to meet the needs of its core shopper group of mums, with two in every three Asda mums owning a smartphone. The retailer has improved its website, not least in general merchandise and George clothing, with offering next day delivery/collection from store a major focus. It has also started rolling out free wifi to all stores, while click & collect for groceries will be available from 100 locations by Christmas, with a further 100 to follow in 2013. Development of transactional apps, too, has been an important 2012 development for the retailer: 16% of Asda's online orders are now via mobile, vs zero 12 months ago. All this helped drive growth of 16.2% online vs the same quarter last year. (Source: IGD)

Asda’s final weekend of APG bonus promotion
Asda is counting on the final weekend of its £5 bonus off your next shop promotion for shoppers checking prices using the Asda Price Guarantee to drive footfall. Shoppers can only take advantage of the promotion until December 9th, but can redeem vouchers until December 31st. (Source: IGD)

CPM UK Insight & Planning

Prepared By: Mark Berry

SAINSBURY’S INSIGHT UPDATE Sainsburys new approach for festive advertising
Sainsbury's has taken a fresh approach to Christmas this year. Having ended its long standing partnership with Jamie Oliver, its new campaign focuses on simple family moments on the way to Christmas, building on the approach taken in the 'Live Well for Less' summer campaign. (Source: IGD)

Sainsburys advances in private label
Sainsbury's is nearing the end of its three year journey to relaunch its mid-tier own brand and with rollout almost complete, the range is being prominently marketed in-store with seasonal lines added for the festive season. (Source: IGD)

Sainsburys latest fuel deal
As part of the wider drive to boost seasonal sales Sainsbury's has launched a week-long offer, offering 10p/litre off in return for a minimum £60 in-store spend. (Source: IGD) (Source IGD)

Sainsbury's Local hits 500
Sainsbury's has opened its 500th Local convenience store at Southsea in Hampshire, reaching a key landmark in the development of national scale in the channel. The first Sainsbury's Local opened in 1998. Sainsbury's sees considerable potential for further expansion of its convenience format, and has announced it will create 10,000 new jobs through Local openings in the next three years. With sales growing at nearly 20% Sainsbury's convenience division is performing well ahead of the business overall, and it opened 49 Locals in the first half its financial year alone. As well as opening new stores Sainsbury's is also systematically revisiting existing stores and has initiated an on-going programme to upgrade its convenience units, up-weighting the focus on fresh above all; to leverage its capabilities in the category as a key differentiator in the channel. To date 12 stores have been refurbished producing a clear uplift in sales. (Source: IGD)

Sainsbury's reports strong first half
Sainsbury's has released upbeat interim results with good progress in terms of sales and profit for the 28 weeks ending 29 September 2012. Total sales for the period grew by 4.1% (ex fuel, ex VAT) while LFL sales were up by 1.7%, completing 31 quarters of consecutive growth. Key to this achievement has been Sainsbury's consistent focus on quality and value. Driving both parts of this strategy has been Sainsbury's continuing rollout of its own brand - now 85% complete - and effective communication of its value strengths through Brand Match. Underlying profit before tax for the period increased by 5.4%, helped by £60m of operational cost savings. (Source: IGD)

CPM UK Insight & Planning

Prepared By: Mark Berry

MORRISONS INSIGHT UPDATE Brand promotions crucial for Morrisons during the festive season
Following on from CEO Dalton Philips recent comments that the retailer needs to develop more engaging promotions, Morrisons is offering a variety of festive offers on popular products using a mix of round pound, multi-buy and half price mechanics. This year’s Christmas advertising campaign has Morrisons adopting a similar strategy to Sainsburys by dropping its celebrity led adverts and concentrating instead on the hard work and comedy moments that make Christmas special. (Source: IGD)

Morrisons launches discount card
Morrisons is trialling a new discount card offering selected shoppers 10% off purchases through to the end of the year. It is the latest in a series of initiatives designed to win over more customers at a time when sales have been squeezed by the high level of promotions across the sector. Morrisons is likely to use the card to reach new shoppers in catchments with newly upgraded Fresh Format stores. During the last quarter Morrisons opened 35 of the new style stores and they have performed strongly, outpacing a control group of stores by 4-6% in like-for-like terms. (Source: IGD)

Morrisons sales slip as commercial director departs
Morrisons has revealed that total and like-for-like sales fell in the 13 weeks to 28 October, and announced that its commercial director Richard Hodgson is leaving the business. Total ex fuel sales for the quarter fell by 0.4% (ex VAT and IFRIC 13 compliant) and like-for-like sales were down 2.1%, impacted by a worsening in consumer confidence and a heightened level of promotional activity following the boost the market received from the summer of events. This performance compares with turnover growth of +2.3% , -0.9% LFL in the first half. (Source: IGD)

Morrisons ranging to become more forensic
To support its future growth, Morrisons continues to invest in Evolve, its IT infrastructure project, with the introduction of a new supply chain management system. A key benefit this will bring is to enable store ranging to match local catchment demand more effectively. (Source: IGD)

CPM UK Insight & Planning

Prepared By: Mark Berry