the changing face of the uk grocery market and shopper · source: igd uk grocery channel forecasts...
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The changing face of the UK grocery market and
shopper VANESSA HENRY
#CoopConference17
RETAIL CONFERENCE 2018 #CoopRetail
Forces of change shaping our industry
Today’s agenda
© IGD 2018 Page 2
Check in: Where we are today
What channels and formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
Forces of change shaping our industry
Today’s agenda
© IGD 2018 Page 3
Check in: Where we are today
What channels and formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
Key macro-level trends driving change
Source: IGD UK Grocery Channel Forecasts 2017
Skills gap and
demand planning
RESOURCE
RESILIENCE
De-globalization
and anti-
establishment
ALTERING
AUTHORITIES
Urbanisation and
personalisation
SOCIETAL SHIFTS
Automation and
connectivity
TRANSFORMATIVE
TECHNOLOGY
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Significant lifestyle changes are underway
People will be working longer as retirement
age rises
Life expectancy will continue to rise
Health consciousness will rise
More dual income households
More single person households
Cities will expand as population increases
Living space will become more of a
premium
Technology will continue to impact the
everyday
Societal
Shifts
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We’re entering an age of interconnectivity
Transformative
Tech
Health
Wearables, smart sleep.
diagnostic tools &
services
Living
Ecommerce, robotics,
AR, baby and kids,
education and training
Leisure
Gaming, sports and play
Vehicles
Including vehicle to
vehicle and vehicle to
network
communications
Home
Smart locks, energy
management,
connected appliances
Cities
Access to information
and services, and
predictive alerts
Transformative
Tech
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However, fundamental shopper truths will remain
Help me
save money
Help me
save time Help me get the
best quality
Help me make
healthy choices
VALUE TIME QUALITY HEALTH
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‘Help me save money’
EDLP over special offers Price reductions over multi-buys
“There should be fewer offers and have EDLP instead”
“I prefer price reductions over multi-buys”
63% 63%
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Simpler and clearer value communication
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‘Help me save time’
6 TRIPS PER
WEEK
26 TRIPS PER
MONTH
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Pay-and-go technology in action to speed up shopping
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‘Help me get the best quality’
© IGD 2018 • Page 12
Better flavour
products Freshly prepared products
British / local products
Better ingredients
Ethical products
More environmentally
friendly
Brand name
Healthier products
Better appearance
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Be more local…sell products that tell stories
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…and ethical can translate to better quality
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‘Help me make healthier choices’
Solutions Advice Incentives?
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Forces of change shaping our industry
Today’s agenda
© IGD 2018 Page 16
Check in: Where we are today
What channels and formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
Signs of weakness in the UK economy
Overall economic growth slow
Shopper confidence weakening Car sales slowing, house prices sluggish
Concerns over household debt
Inflation returning to normal Real pay falling, esp in pub sector
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UK shopper confidence is challenging…
-15
-10
-5
0
5
10
Au
g-1
4
Feb
-15
Au
g-1
5
Feb
-16
Au
g-1
6
Feb
-17
Au
g-1
7Sho
pp
er c
on
fid
ence
ind
ex
(hig
her
= m
ore
co
nfi
den
t)
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Inflation has returned to the UK economy
-6-4-202468
101214
Jan
-00
Jan
-02
Jan
-04
Jan
-06
Jan
-08
Jan
-10
Jan
-12
Jan
-14
Jan
-16
An
nu
al in
flat
ion
, CP
I (%
)
All items Food & drink
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Shoppers are sensitised to inflation
0 20 40 60 80 100
Other
House prices
Job security
Change in personal…
Tax and benefit changes
Interest rates
No wage increase
Petrol prices
Energy bills
Food prices
Share of respondents (%)
Top personal economic concerns for the year ahead
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Household income growth has slowed
10,000
15,000
20,000
25,000
30,0001
980
198
5
199
0
199
5-9
6
200
0-0
1
200
5-0
6
201
0-1
1
201
5-1
6
202
0-2
1
Med
ian
ho
use
ho
ld d
isp
osa
ble
in
com
e (£
per
yea
r)
Previous 10 yrs Latest 10 yrs
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Grocery retail volumes were static in 2017
-2
0
2
4
6
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Gro
wth
, la
st 3
m o
n s
ame
3m
yr
ago
(%
)
Value sales Volume sales
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Some shoppers feeling the ‘Brexit Blues’
-100 -80 -60 -40 -20 0 20 40 60 80 100
I spend more carefully since the EU referendum
I worry about my finances as BREXIT proceeds
I worry about my job security as BREXIT proceeds
I worry about the UK economy as BREXIT proceeds
Share of respondents (%)
Shopper opinions of BREXIT impacts, all shoppers
Disagree slightly Disagree strongly Agree slightly Agree strongly
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Brexit preparation appears patchy
0
5
10
15
20
0-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100
Res
po
nd
ents
(n
)
Business readiness (higher is better)
Q20: “On a scale of 0-100, how would you rate your business’s overall readiness for Brexit?”
Average: 48
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Few businesses seem to be talking about Brexit
0
5
10
15
20
25
30
35
Lots Some None Don't know / declined
Res
po
nd
ents
(n
)
Level of guidance
Q14 and Q15: “How much guidance has your company received from / offered to supply chain partners regarding the potential impact of Brexit?”
Guidance received Guidance offered
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Leaving the UK could shock UK farming
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
All farms Small Medium Large Low perf Mediumperf
High perf
UK
far
m b
usi
nes
s in
com
e (£
p
er-y
ear)
Baseline / no change Scenario: evolution Scenario: unilateral liberalisation Scenario: fortress UK
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Forces of change shaping our industry
Today’s agenda
© IGD 2018 Page 27
Check in: Where we are today
What channels and formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
Inflation will drive growth in UK grocery
169.1 175.0 177.5 178.2 180.3 184.5 189.6
195.7 201.8
207.7 212.9
3.2% 3.5%
1.4%
0.4%
1.2%
2.3% 2.7%
3.2% 3.1% 2.9% 2.5%
0.6% 1.4%
1.8% 2.1% 2.2% 2.1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
50
100
150
200
250
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
YO
Y G
row
h (
%)
Gro
ce
ry re
tail
ma
rke
t siz
e (
£bn)
Market value (£bn) YOY % Change June 2016 forecast % Change
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Large stores account for 50p in each £1 today…
0%
10%
20%
30%
40%
50%
60%
Hypermarkets Supermarkets Convenience Discount Online Other
Source: IGD UK Grocery Channel Forecasts 2017
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…but they’ll be challenged by other channels in the next few years
Source: IGD UK Grocery Channel Forecasts 2017
0%
10%
20%
30%
40%
50%
60%
Hypermarkets Supermarkets Convenience Discount Online Other
2017 2022
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Top three growth channels to deliver +£23bn sales
© IGD 2018 Source: IGD channel forecasts 2017 • Page 31
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Online set to continue to drive appeal
43% …of all British grocery shoppers say they’ve shopped online for some part of their groceries in the last 4 weeks
60% …say it’s likely they will be shopping online and getting their groceries delivered to their home in the next 2-3 years
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New stores and quality driving food discounters
Expanding store networks Improving in quality, staying low on price
Differentiating their offer
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Convenience retailing at a glance
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C-stores appealing to shopper needs
Increasing participation from new generations of shoppers
Speed of in-store experience Targeting more missions, more effectively
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Food-for-now: a massive growth opportunity
0
5
10
15
20
25
2014 2015 2016 2017 2018 2019 2020 2021 2022
UK Food-to-go market size - £bn
£17.4bn
£23.5bn +6.2%
Source: IGD Research, Retail Analysis
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…and it will be a significant c-store growth driver
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Large stores are having to evolve their offer
Re-thinking space Getting the range right
Focus on fresh food: for now and for later
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Additional market developments
/
/
/
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Omnichannel will become increasingly important 4.6
Average number of channels claimed to be used per month
60% …of British shoppers say they will shop
online in the future (home delivery)
50%
…say they will shop online for ambient but still go in-store
for fresh
98% …of British shoppers claim
to have used a larger format store in the last
month
28%
…say they are interested in using voice activated devices to buy groceries in the future
44%
…say they are interested getting personalised offers to their phone in different parts of a store
34% …of British shoppers say in the next 2-3 years they will be grocery shopping online and using click and collect
services
Source: IGD Shopper Vista Research
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In summary…
• Forces of change are in motion, shaping how we live, and how we shop
• But fundamental shopper truths remain: saving time and helping save money are particularly poignant
• Attracting and retaining shoppers is even more vital while volume growth remains challenging
• Aligning with customer missions and values will help retailers lead, rather than follow trends
• Discount, online and convenience are driving growth
• But remember – larger formats will still account for 50p in every £1
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Checklist to engage your shoppers
1. Be more than just a store
2. Think ‘missions’ to build baskets
3. Engage with the health trend
4. There’s more than one way to
do ‘fresh’
5. Give shoppers back time
6. Exceed expectations
7. Engage with and reward your
shoppers
8. Be local – sell products that tell
stories
9. Be famous for something
10. Add personality to
everything you do
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© IGD 2017 Page 43