iri's weekly fmcg news update - w/c 23rd january 2017

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

Stephen Hall

Friday 27th January

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

• P&G net sales remain flat at $16.9bn in Q2 2017• Tesco most improved supermarket in customer satisfaction survey• Product Of The Year Winners provide insights on key shopper trends for 2017• Cadbury agrees sponsorship deal with Premier League• Travel division drives growth at WH Smith but high street stores struggle• UK toy market rose by more than 6% in 2016• Inflation hits 30-month high to squeeze spending power, Asda Income Tracker says• Unilever’s Q4 figures come in below estimates and warns of further tough times

ahead• Tesco agrees £3.7bn deal to acquire Booker• Consumer confidence rises at quickest rate since August• Consumers’ preference for new experiences over new products will drive

technology growth in packaging

Weekly News Summary – 23rd January 2017


P&G net sales remain flat at $16.9bn in Q2 2017Beauty brand sale to Coty resulted in a 157% increase in diluted net earnings per share, totalling $2.88

P&G has shared its Q2 2017 results showing net sales of $16.9bn, flat compared with the year before.

Organic sales and volume, however, did increase across all five of P&G’s business segments, despite a “difficult” operating environment, said Chairman, President and CEO David Taylor.

In beauty, organic sales grew 3% compared with the year before, in the Hair Care and Skin & Personal Care divisions.

Premium brand SK-II was a strong performer in the quarter, with “continued growth” contributing to the sales increase.

Meanwhile, in hair care, innovation and marketing support on the Pantene and Head & Shoulders brands also helped boost numbers.

In grooming, organic sales grew by 1% due to growth in both the Shave Care and Appliances divisions, which benefited from innovation.

Overall, P&G is raising its guidance for organic sales growth to a range of 2-3% for fiscal 2017.

Source: Cosmetics Business 23rd January 2017


Tesco Most Improved Supermarket In Customer Satisfaction SurveyTesco is the most improved UK supermarket in terms customer satisfaction, whilst Amazon leads the way overall.

After a year of improved trading figures, the UK Customer Satisfaction Index (UKCSI) published by The Institute of Customer Service, reveals that during that time, Tesco has also recorded the sector’s largest year-on-year increase in customer satisfaction, up 1.2 points to 80.1 (on a 100 point Index). Tesco’s biggest areas of improvement were for measures of complaint handling and the proportion of customers who reported staff got things ‘right first time’ (85%).

Asked whether they trust the retailer, consumers scored 7.7 (out of 10) this year – up from 7.5 in January 2016. The data suggests that this improvement is because customers have been impressed with the attitude demonstrated by Tesco’s staff (scoring 6.6 compared to 5.8 out of ten last year). The result is that customers score 8.5 out of ten when asked if they are likely to repurchase from the retailer.

Meanwhile, Amazon (87.3) was number 1 for customer satisfaction a the wider survey covering a host of consumer-facing organisations, closely followed by ASOS on 85.8.Jo Causon, CEO of The Institute of Customer Service, said: “It has been widely acknowledged that customer trust in Tesco suffered during the 2014 accounting scandal which saw the company lose touch with loyal patrons. This loss in trust saw record losses of £6.4bn during 2014/15 but a renewed focus on service excellence has finally got customers back on side – this can be seen in the 2017 UKCSI, and, as shown by the company’s recently announced full year results, has paid dividends.”

The impact of customer satisfaction on sales growth can be seen across the sector. Retail (food) companies with a UKCSI score of at least one point higher than the sector average achieved average year on year sales growth of 7.2%, compared to –0.2% for those at least one point below the sector average. Iceland, which now ranks 9th out of all organisations in the UKCSI, reported that sales increased 8.3%. Aldi, which ranks in the top 20 this year and was one of the standout success stories from the July 2016 UKCSI reported record sales at the end of last year.

Despite the overall increase in customer satisfaction, there has been an increase in the score for customer effort – in other words, customers said they had to expend more energy dealing with organisations than they did a year ago. For example, 51% of people say that it has taken them more than two attempts to get a problem fixed.

Causon continued: “The importance of the customer cannot be ignored when it comes to business success for UK supermarkets. Traditional supermarkets have felt the pinch this year with the perfect storm of competition from new entrants to the online arena, fluctuations in exchange rates and rising costs in the shape of prices and raw ingredients. With the smallest gap in customer satisfaction between the highest and lowest performing businesses out of any sector, a sustained focus on customer satisfaction will be key for business success in 2017. There is everything to play for and UK supermarkets cannot take their eye of the ball.”

Source: NamNews 23rd January 2017


Cadbury Agrees Sponsorship Deal With Premier LeagueCadbury has agreed a three-year sponsorship deal with the Premier League.The confectionery brand said the partnership will kick off from the start of the 2017/18 football season. The agreement includes Cadbury securing a range of rights relating to player milestones – including the Premier League’s Golden Boot and Golden Glove awards.

Cadbury will also join forces with the Premier League on initiatives to promote healthier lifestyles for young people.

Richard Masters, Premier League Managing Director and Francesco Vitrano, Cadbury Brand DirectorCommenting the deal, Francesco Vitrano, Cadbury Brand Director, said: “For over a hundred years Cadbury has been about bringing little moments of joy to people’s lives, something that fits well with the joy created by Premier League football every day – whether it’s a moment of magic that turns a match, watching a game together with loved ones or just debating the weekend’s goals with friends.

“This partnership opens up fantastic opportunities to bring those moments of joy to life in new and different ways – in-store, on our packaging, in the community and other ways we hope will surprise and delight our customers. This is an incredibly exciting chance to bring together the Cadbury brand with the unmistakable Premier League brand, and a chance to be part of moments such as the Golden Boot and Golden Glove awards, and we can’t wait to start this journey with the Premier League.”

Source: NamNews 25th January 2017


Travel Division Drives Growth At WH Smith But High Street Stores StruggleWH Smith has revealed that its group like-for-like sales rose 1% during the 21 weeks to 21 January, buoyed by strong performance in its travel division.

The company’s travel business, which includes stores at airports and railway stations, saw like-for-like sales climb 5% with total sales up 10%, of which 3% related to currency benefits from its growing international operations. The group said that it continued to see good sales growth across all of its key channels with gross margin growth driven by category mix management.

Meanwhile, its High Street division continued to struggle with like-for-like sales down 3% and total sales falling 4%. The group said that good sales of spoof humour books were offset by the annualisation of last year’s strong trade in ‘colour therapy’ titles. It added that gross margin was up year on year and its cost efficiency programme remained on track.

WH Smith said its store opening programme was on track both in the UK and overseas. It opened an additional 32 Post Offices in its High Street stores during the period, taking the total to 145. A further 23 Post Offices are due to open during the remainder of the year.

The group’s Chief Executive Stephen Clarke commented: “In Travel, we have delivered good sales growth across all our key channels in the period. This was driven by ongoing investment in the business and continued growth in passenger numbers – particularly in our airport stores over the Christmas holiday period. In High Street, we saw another good performance with sales in line with expectations driven by our new seasonal stationery ranges and spoof humour books.“As a result of the performance in Travel we expect Group profit growth for the year to be slightly ahead of plan.

“Looking ahead, 2017 is a significant year for us as we celebrate the 225th anniversary of our first store opening in 1792. While there is some uncertainty in the broader economic environment, we remain confident that the Group is well positioned for the year ahead as we continue to focus on profitable growth, cash generation and investing in new opportunities.”Source: NamNews 25th January 2017


UK toy market rose by more than 6% in 2016According to The NPD Group, who have released the figures in partnership with the British Toy and Hobby Association, the growth equates to a gain of more than £200 million year-on-year with 415 million units sold in 2016. Th figures reveal that the UK is now the largest market in Europe and fourth largest in the world. Jon Diver, chairman of the British Toy and Hobby Association, said: “Naturally we are delighted to see the UK toy industry returning significant growth despite the political uncertainty last year.

“We were pleased to hear Prime Minister May confirm last week that the government is set to provide clarity to the Brexit process which was concerning many of our members. Our industry is innovative and creative and to sustain growth we look forward to more clarity on the process of Brexit, particularly the relationship with Europe on free trade agreements, customs union access and favourable tariffs with WTO members.”

A survey of British Toy and Hobby Association members has revealed that the industry is positive about the year ahead despite concerns over Brexit. The biggest worries were found to be the devaluation of the Sterling against the Dollar leading to price increases, a lack of decision or clarity on Brexit, and anxiety over the uncertainty regarding exporting to, and trade deals with, Europe as the industry’s largest export market.

Despite this, companies were found to be confident in their ability to produce innovative toys and games. The industry introduced 63,400 brand new toy lines to the market in 2016.

The figures show that on average, £350 was spent on each child aged 0-9 in 2016 with an average price of £8.35. This was largely driven by growth in the collectables market in the UK. This increased by 44% year-on-year and accounted for almost one in four toys sold.

Frederique Tutt, global industry analyst for the NPD Group added: “It has been a good year for the UK toy market. £3.5 billion makes the UK the fourth largest market in the world and 2016’s growth has surpassed the USA at 4.7% and France at 1%. As well as collectables, the games and puzzles sector has driven growth with a year-on-year increase of 21%.”Some 36% of sales were conducted online which was an increase of 4% year-on-year.

Source: Retail Bulletin 25th January 2017


Inflation hits 30-month high to squeeze spending power, Asda Income Tracker saysInflation reached its highest level for two-and-a-half years in December as rising prices put a squeeze on consumer spending power.

According to the latest Asda Income Tracker, inflation hit 1.6% last month, the highest it has been since July 2014.

The weakened pound and rising oil prices drove the rate of inflation, with petrol prices surging 10% compared to last year, the tracker said.

Despite inflation hitting a 30-month peak, food prices fell 1.1% in December compared to the same month in 2015.

However, grocery prices were up 0.8% in December on a month-on-month basis.Discretionary income for the average UK household continued to rise in December, climbing 4.4% year-on-year to £202, as a 2.3% increase in net income went some way towards offsetting price rises for consumers.

“The question in 2017 will be whether wage growth can keep up with rising inflation.”

In the three months to November 2016, regular earnings growth was up 2.7%, while the rate of unemployment remained steady at 4.8%, according to the tracker.London households remained at the top of the spending power list, with £275 of discretionary income in December, £73 more than the UK average.In contrast, Northern Ireland recorded the weakest average spending power of £105 per household.

An Asda spokesman said: “As we begin 2017, it is clear to see that prices are at the top of customers’ minds, across a range of different categories.

“It is pleasing to see that families across the UK are still seeing growth in their spending power, despite the pressure customer price inflation is putting on the price of essential items.”

Cebr economist Kay Neufeld added: “Rising inflation is clearly weighing on the growth in spending power now. Price increases in most product categories – from meals in restaurants to air fares – reduce the spending power of UK households.“In the last months of 2016 we have seen an uptick in wage growth due low unemployment and the lagged effects of the national living wage.

“The question in 2017 will be whether wage growth can keep up with rising inflation.”

Source: Retail Week 25th January 2017

https://www.retail-week.com/companies/asda


Unilever’s Q4 Figures Come In Below Estimates; Warns Of Further Tough Times AheadUnilever has reported lower-than-expected fourth-quarter figures amid challenging market conditions that it warned are likely to continue in the first half of this year.The consumer goods giant saw its underlying sales edge up 2.2% in the 13 weeks to 31 December, although volumes slipped 0.4%. The company said volumes in a number of countries had been weak as consumers and retailers adjusted to devaluation-led cost increases. Meanwhile, the economic crisis in Brazil and demonetisation in India also impacted sales.

For the full year, underlying sales grew 3.7% with volumes increasing 0.9%. Its Personal Care unit saw sales rise 4.2%, whilst sales in its Foods division rose 2.1% despite volumes slipping 0.5%. The group said its Home Care and Refreshment units improved margins with sales up 4.9% and 3.5% respectively.

Underlying sales in emerging markets grew 6.5%, mainly driven by volume growth in Asia and price growth in Latin America. Developed markets declined by 0.2% with volume growth in North America offset by price deflation in Europe.The group added that gross margin improved by 50bps to 42.7% driven by “margin-accretive innovations” and acquisitions, as well as cost saving programmes.

Chief Executive Paul Polman commented: “We have delivered another good all-round performance despite severe economic disruptions, particularly in India and Brazil, two of our largest markets. This further demonstrates the progress we have made in transforming Unilever into a more resilient business. We have again grown ahead of our markets, driven by strong innovations that support our category strategies. At the same time, we have accelerated our margin expansion even after absorbing the higher restructuring costs associated with the implementation of ‘Connected 4 Growth’, the next stage in our transformation.

“At a time of unprecedented global change, ‘Connected 4 Growth’ will make Unilever simpler, faster and more connected with our consumers and customers, and we are already starting to see positive results. We are also making further progress in reshaping our portfolio, adding businesses in fast-growing segments with the acquisitions of Dollar Shave Club, Blue Air, Seventh Generation and Living Proof. “

He added: “Our priorities for 2017 continue to be volume growth ahead of our markets, a further increase in core operating margin and strong cash flow. The tough market conditions which made the end of the year particularly challenging are likely to continue in the first half of 2017. Against this background, we expect a slow start with growth improving as the year progresses.”



Tesco Agrees £3.7bn Deal To Acquire BookerTesco and Booker have reached an agreement to merge, creating a combined group that spans a wide range of retailing and wholesaling activities. The agreement values Booker at £3.7bn, or 205.3p per share.

In a joint statement, Tesco and Booker outlined a number of proposed benefits and objectives for the merger:

• Better serve the fast growing ‘out of home’ food market

• Help independent retailers, caterers and small businesses by improving choice, price and service, with enhanced digital and delivery service options

• Present a broader market opportunity for our suppliers, with strong growth prospects and a clear opportunity to develop better own brand and fresh ranges

• Cut food waste and increase efficiency by creating a broader, multi-channel partner who can work with producers across their full agricultural crop

• Create significant opportunities for synergies whilst retaining market-leading retail and wholesale expertise

• Create attractive innovation opportunities to serve customers and consumers better in a rapidly evolving market place.

Tesco chief executive Dave Lewis is quoted by BBC News as saying "This merger with Booker will further enhance Tesco's growth prospects by creating the UK's leading food business with combined expertise in retail, wholesale, supply chain and digital.

The BBC also quote Booker chief executive Charles Wilson "Booker is committed to improving choice, prices and service for the independent retailers, caterers and small businesses that we are proud to serve. We believe that joining forces with Tesco offers the potential to bring major benefits to end-consumers, our customers, suppliers, colleagues and shareholders."

Source: IGD 27th January 2017


Consumer confidence rises at quickest rate since AugustConsumer confidence has grown at its quickest rate since August, as shopper sentiment continues to rally following the shock of the Brexit vote. The index reached its highest level since last September

According to YouGov and CEBR, the Consumer Confidence Index jumped two points in January to 100.3 – the biggest month-on-month increase for five months.

The strong month-on-month growth meant the index reached its highest level since last September, when it stood at 111.5.

However, YouGov/CEBR said consumer confidence remained “notably below” the level it was prior to the EU referendum last June.

Shopper sentiment improved in seven of the eight measures used to evaluate confidence, with consumers most confident about house values over the next year, business activity in the workplace over the past 30 days and expected business activity over the coming year.

CEBR director Scott Corfe hailed the economy for defying “the gloomy predictions of the Treasury since the Brexit vote,” but he warned there may be “a sting in the tail”.

“Inflation is picking up and the rising cost of living could start to erode consumer confidence, particularly if pay growth stays subdued,” he cautioned.

Stephen Harmston, Head of YouGov Reports, added: “While the improvement in confidence is good news for the economy and reflects a resilience, when it comes to the consumer impact of Brexit we are still very much in the early stages.

“However, at the moment, things look good.”

Source: Retail Week 27th January 2017


Consumers’ Preference For New Experiences Over New Products Will Drive Technology Growth In PackagingAccording to a Global Survey from Q1 2016 produced by consumer insight firm Canadean, 60% of consumers find new experiences more exciting than new products, and are starting to seek products offering more than mere functionality.

The report states that packaging’s role in catching the consumer’s eye is vital, as it not only forms their first impression of the product, but can enhance its functionality and consumption experience, helping the item to stand out among competition. In this way, new packaging technologies are set to grow in popularity.

Veronika Zhupanova, Analyst at Canadean, said: “Competitive new technologies offering creative ways of targeting consumer needs will become increasingly important. Take, for example, Japanese Rescue Rice. It comes in an aluminium can with a plastic lid containing modified and dried Japanese rice filled without oxygen to prevent the rice from oxidation. The product can be cooked in a can in 20 minutes by adding boiled water and, despite its foundation in the emergency market, will also appeal to those looking for novel experiences.”

Canadean believes that technologies allowing packaging personalization will be popular for special and gifting occasions. For example, Medea Vodka produces bottles with programmable LED displays with which consumers can display personal messages sent via Bluetooth from their gadgets.

Zhupanova added: “Packaging requiring this level of consumer involvement must ensure the process is uncomplicated. Simple actions such as scanning QR codes or typing messages into an app are key to a product’s success”.

Finally, fun packaging that capitalises on consumer social media use, such as a beer bottle which takes pictures of consumers and uploads them online, will create a buzz, enhance brand image, and increase brand awareness.


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

Stephen Hall

Friday 27th January