GROCERY SHOPPING: WHAT’S NEXT? CHALLENGES AND OPPORTUNITIES FOR RETAILERS AND INDUSTRY

Janaina Roque Integration Consulting

The opportunity for growth… FMCGs present very different opportunities for

growth in developed and developing markets

IN RECENT YEARS, WE HAVE SEEN A VERY CLEAR GROWTH TREND IN THE FMCG FOOD MARKET…

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The opportunity for growth… FMCGs present very different opportunities for

growth in developed and developing markets

Data from Euromonitor (FMCG market size, including: soft drinks, alcoholic drinks and packaged food) and the World Bank (GDP)

THE FMCG (FOOD) MARKET Developed v developing countries

GDP CAGR: 2008-2013

FMCG (FOOD) CAGR: 2008-2013

BUBBLE SIZE: SIZE OF THE FMCG FOOD

MARKET (ALCOHOLIC DRINKS, SOFT DRINKS AND PACKAGED FOOD) IN MM

USD China

Vietnam

1.7%

Nigeria

Bolivia

Brazil

Russia

India

South Africa

Mexico

USA Japan

Germany

UK France

Spain Italy

Canada

Australia

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

-8% -3% 2% 7% 12% 17%

THERE IS A VERY CLEAR DIVIDE IN TERMS OF GROWTH OPPORTUNITIES:

MATURE MARKETS: Capture opportunities within the existing market

EMERGING MARKETS: Capture opportunities given by market growth

Two approaches for growth… Different strategies are required in

mature and developing markets.

MATURE MARKETS: Capture opportunities within the existing market

INNOVATE to capture the opportunities within the current market

EMERGING MARKETS: Capture opportunities given by market growth

BUILD to capture the opportunities of market growth

VS KEY POINTS:

CONSUMERS ARE CHANGING:

THEIR REQUIREMENTS ARE CHANGING:

Legacy of financial downturn More informed and ethical choices More sophistication Looking for the experience Small households, long working hours Connected and technological

Value for money Trusting the business Shopping accessibility

Trusting the business

SUPERIOR DIFFERENTIATION • Feel good • Be good • Taste good

Shopping accessibility

OFFERING CONVENIENCE

• Omnichannel • C-stores

Being innovative for growth… Innovation allows players to market share by

providing what existing consumers are looking for

INNOVATE… to capture the opportunities within the current market

…on the basis of consumers’ requirements:

Value for money

GROWTH OF HARD DISCOUNTERS

KEY TRENDS IN GROCERY

RETAIL

Being innovative for growth… Hard discounters are innovating very aggressively

now, thus achieving significant growth

HARD DISCOUNTERS

*Data from Euromonitor, 2014

Focus on wider concept of VALUE FOR MONEY rather than simply offering low prices:

Wider product range, with higher quality and including more premium offering

Wider range of services, new channels, better store environment

WHAT HAS DETERMINED THIS GROWTH?

-

2,000

4,000

6,000

8,000

10,000

12,000

£4.5bn

£10.6bn

Value of hard discounters in the UK (MM £*)

CAGR 2008-2018: +9%

Being innovative for growth… Providing a great customer experience todays often

means providing a good omnichannel strategy

CUSTOMER EXPERIENCE

*Data from Euromonitor, 2014

Providing a great CUSTOMER EXPERIENCE by focusing on guaranteeing speed, accessibility and reliability with a personalised approach through an OMNICHANNEL STRATEGY:

Wider selection of products and services available in all channels. More targeted mix in c-stores with focus on fresh.

Lowering prices and price matching to ensure competitiveness

WHAT HAS DETERMINED THIS GROWTH?

Value of convenience (grocery retailing) and online channels (food and drink) in MM £:

CAGR 2008-2018:

-

5,000

10,000

15,000

20,000

25,000

30,000

£16.8bn

£25.8bn

£5.8bn £2.9bn

+4% +7%

C-stores

Online channel

Being innovative for growth… Retailers focusing on their differentiated offer cannot

avoid competing on the other key trends too

SUPERIOR DIFFERENTIATION

*Euromonitor, 2012

Providing SIGNIFICANT CHOICE to consumers to meet the needs and interests of different segments willing to pay a premium (Health, Fairtrade, Premium quality)

Great customer experience to offer differentiated formats and buying options

Cheaper options also available to ensure competitiveness without foregoing higher quality factors

WHAT HAS DETERMINED THIS GROWTH?

0% 10% 20% 30% 40% 50% 60%

Natural

Organic

Locally sourced

Free range

Fair trade

Carbon neutral

% of people willing to pay a premium for a product that is….*

Being innovative for growth… Industry is as affected as retailers by these trends

INDUSTRY IS RESPONDING TO THESE TRENDS WITH INNOVATION

JUST LIKE RETAILERS

THESE TRENDS AFFECT INDUSTRY AS MUCH AS THEY AFFECT RETAILERS

Customer experience

Being innovative for growth… Manufacturers are just as affected as retailers by the

same trends, and they are also bringing innovation

Superior differentiation

A more premium offering

Acquisition of premium Tea manufacturer T2:

Launch of Magnum 5 Kisses (Rainforest Alliance Certified Ice Cream):

Adapting to the convenience

channel

Relaunched CATMAN website for C-store owners:

Connecting with consumers on a personal level

Share a Coke Initiative:

Value for money

Responding to the threat of

lower margins

United Biscuits cancelled a long-term contract with Aldi as private-label supplier

“The winners in grocery over

the past 20 years are all

struggling. […] The concern is

that supermarkets will now

lash out at manufacturers.

[…] there are plenty of

supermarkets that do stock our

brand, I couldn’t understand

why we were helping the one

that doesn’t. It was just the

wrong thing. So we cancelled

the contract. We should back

those that back our brand.”*

Martin Glenn, UB CEO (June 2014)

*http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10934571/Monday-Interview-Supermarket-wars-threaten-suppliers-too-says-boss-of-United-Biscuits.html

Being innovative for growth… As consumers change, both retailers and industry are

affected. Partnership is the way forward

RETAILERS AND INDUSTRY NEED TO BE IN THIS TOGETHER

COMPETITION IS BECOMING FIERCER WITH EVER-INCREASING NOISE ON THE MARKET

PARTNERSHIP AND JBP ARE THE WAY FORWARD TO CREATE WIN-WIN SITUATIONS