The changing face of the UK grocery market and shopper - VANESSA HENRY #CoopConference17 - Co-operatives UK
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The changing face of the UK grocery market and
#CoopConference17 shopper
VANESSA HENRY
Today’s agenda
Forces of change shaping Check in: Where we are What channels and
our industry today formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
© IGD 2018 Page 2
Today’s agenda
Forces of change shaping Check in: Where we are What channels and
our industry today formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
© IGD 2018 Page 3
Key macro-level trends driving change
RESOURCE SOCIETAL SHIFTS
RESILIENCE Urbanisation and
personalisation
Skills gap and
demand planning
ALTERING TRANSFORMATIVE
AUTHORITIES TECHNOLOGY
De-globalization Automation and
and anti- connectivity
establishment
RETAIL CONFERENCE 2018 #CoopRetail
Source: IGD UK Grocery Channel Forecasts 2017
Significant lifestyle changes are underway
More single person Cities will expand as
households population increases
People will be working Living space will
longer as retirement become more of a
age rises premium
Societal
Shifts
Life expectancy will More dual income
continue to rise households
Health consciousness Technology will
will rise continue to impact the
everyday
RETAIL CONFERENCE 2018 #CoopRetail
We’re entering an age of interconnectivity
Vehicles Health
Including vehicle to Wearables, smart sleep.
vehicle and vehicle to diagnostic tools &
network services
communications
Home Living
Smart locks, energy Transformative
Transformative Ecommerce, robotics,
management, Tech AR, baby and kids,
connected appliances Tech education and training
Cities
Access to information Leisure
and services, and Gaming, sports and play
predictive alerts
RETAIL CONFERENCE 2018 #CoopRetail
However, fundamental shopper truths will remain
VALUE TIME QUALITY HEALTH
Help me Help me Help me get the Help me make
save money save time best quality healthy choices
RETAIL CONFERENCE 2018 #CoopRetail
‘Help me save money’
EDLP over special offers Price reductions over multi-buys
63% 63%
“There should be fewer offers and “I prefer price reductions
have EDLP instead” over multi-buys”
RETAIL CONFERENCE 2018 #CoopRetail
Simpler and clearer value communication
RETAIL CONFERENCE 2018 #CoopRetail
‘Help me save time’
6 TRIPS PER
WEEK
26 TRIPS PER
MONTH
RETAIL CONFERENCE 2018 #CoopRetailPay-and-go technology in action to speed up
shopping
RETAIL CONFERENCE 2018 #CoopRetail‘Help me get the best quality’
More
environmentally
Better friendly
appearance British / local
products Better
flavour
Freshly
products
prepared
products
Better
Healthier products ingredients
Ethical Brand
products
name
RETAIL CONFERENCE 2018 #CoopRetail
© IGD 2018 • Pag
eBe more local…sell products that tell stories
RETAIL CONFERENCE 2018 #CoopRetail…and ethical can translate to better quality
RETAIL CONFERENCE 2018 #CoopRetail‘Help me make healthier choices’
Solutions Advice Incentives?
RETAIL CONFERENCE 2018 #CoopRetailToday’s agenda
Forces of change shaping Check in: Where we are What channels and
our industry today formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
© IGD 2018 Page 16Signs of weakness in the UK economy
Overall economic growth slow Inflation returning to normal Real pay falling, esp in pub
sector
Concerns over household debt Shopper confidence weakening
Car sales slowing, house prices sluggish
RETAIL CONFERENCE 2018 #CoopRetailShopper confidence index
(higher = more confident)
-15
-10
-5
10
0
5
Aug-14
Feb-15
Aug-15
RETAIL CONFERENCE 2018
Feb-16
Aug-16
#CoopRetail
Feb-17
UK shopper confidence is challenging…
Aug-17Inflation has returned to the UK economy
14
12
10
8
6
Annual inflation, CPI (%)
4
2
0
-2
-4
-6
Jan-00
Jan-04
Jan-14
Jan-02
Jan-06
Jan-08
Jan-10
Jan-12
Jan-16
All items Food & drink
RETAIL CONFERENCE 2018 #CoopRetailShoppers are sensitised to inflation
Top personal economic concerns for the year ahead
Food prices
Energy bills
Petrol prices
No wage increase
Interest rates
Tax and benefit changes
Change in personal…
Job security
House prices
Other
0 20 40 60 80 100
Share of respondents (%)
RETAIL CONFERENCE 2018 #CoopRetailHousehold income growth has slowed
30,000
Median household disposable
25,000
income (£ per year)
20,000
15,000
10,000
1995-96
2000-01
2020-21
2005-06
2010-11
2015-16
1980
1985
1990
Previous 10 yrs Latest 10 yrs
RETAIL CONFERENCE 2018 #CoopRetailGrocery retail volumes were static in 2017
6
Growth, last 3m on same 3m
4
2
yr ago (%)
0
-2
Jan-15
Jan-16
Jan-17
Jul-16
Jul-15
Jul-17
Value sales Volume sales
RETAIL CONFERENCE 2018 #CoopRetailSome shoppers feeling the ‘Brexit Blues’
Shopper opinions of BREXIT impacts, all shoppers
I worry about the UK economy as BREXIT proceeds
I worry about my job security as BREXIT proceeds
I worry about my finances as BREXIT proceeds
I spend more carefully since the EU referendum
-100 -80 -60 -40 -20 0 20 40 60 80 100
Share of respondents (%)
Disagree slightly Disagree strongly Agree slightly Agree strongly
RETAIL CONFERENCE 2018 #CoopRetailBrexit preparation appears patchy
20
Q20: “On a scale of 0-100, how would you rate your
business’s overall readiness for Brexit?”
15 Average: 48
Respondents (n)
10
5
0
0-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100
Business readiness (higher is better)
RETAIL CONFERENCE 2018 #CoopRetailFew businesses seem to be talking about Brexit
35 Q14 and Q15: “How much guidance has your company received from / offered to supply chain partners
30 regarding the potential impact of Brexit?”
25
20
Respondents (n)
15
10
5
0
Lots Some None Don't know / declined
Level of guidance
Guidance received Guidance offered
RETAIL CONFERENCE 2018 #CoopRetailLeaving the UK could shock UK farming
140,000
120,000
100,000
UK farm business income (£
80,000
60,000
40,000
per-year)
20,000
0
-20,000
-40,000
All farms Small Medium Large Low perf Medium High perf
perf
Baseline / no change Scenario: evolution Scenario: unilateral liberalisation Scenario: fortress UK
RETAIL CONFERENCE 2018 #CoopRetailToday’s agenda
Forces of change shaping Check in: Where we are What channels and
our industry today formats will be best placed
to win?
RETAIL CONFERENCE 2018 #CoopRetail
© IGD 2018 Page 27Inflation will drive growth in UK grocery
250 10%
212.9 9%
201.8 207.7
189.6 195.7
200 184.5 8%
175.0 177.5 178.2 180.3
169.1
7%
Grocery retail market size (£bn)
150 6%
YOY Growh (%)
5%
100 3.5% 4%
3.2% 3.2% 3.1%
2.7% 2.9%
2.3% 2.5% 3%
50 1.4% 1.2% 2%
2.1% 2.2% 2.1%
0.4% 1.8% 1%
1.4%
0.6%
0 0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Market value (£bn) YOY % Change June 2016 forecast % Change
RETAIL CONFERENCE 2018 #CoopRetailLarge stores account for 50p in each £1 today…
60%
50%
40%
30%
20%
10%
0%
Hypermarkets Supermarkets Convenience Discount Online Other
RETAIL CONFERENCE 2018 #CoopRetail
Source: IGD UK Grocery Channel Forecasts 2017…but they’ll be challenged by other channels in
the next few years
60%
2017 2022
50%
40%
30%
20%
10%
0%
Hypermarkets Supermarkets Convenience Discount Online Other
RETAIL CONFERENCE 2018 #CoopRetail
Source: IGD UK Grocery Channel Forecasts 2017Top three growth channels to deliver +£23bn
sales
RETAIL CONFERENCE 2018 #CoopRetail
© IGD 2018 Source: IGD channel forecasts 2017 • Pag
eOnline set to continue to drive appeal
…of all British grocery
43% shoppers say they’ve
shopped online for some
60% …say it’s likely they will
be shopping online and
getting their groceries
part of their groceries in
delivered to their home
the last 4 weeks
in the next 2-3 years
RETAIL CONFERENCE 2018 #CoopRetailNew stores and quality driving food
discounters
Expanding store networks Improving in quality, staying Differentiating their offer
low on price
RETAIL CONFERENCE 2018 #CoopRetailConvenience retailing
at a glance
RETAIL CONFERENCE 2018 #CoopRetailC-stores appealing to shopper needs
Increasing participation from Speed of in-store experience Targeting more missions,
new generations of shoppers more effectively
RETAIL CONFERENCE 2018 #CoopRetailFood-for-now: a massive growth opportunity
UK Food-to-go market size - £bn £23.5bn
25 +6.2%
20 £17.4bn
15
10
5
0
2014 2015 2016 2017 2018 2019 2020 2021 2022
RETAIL CONFERENCE 2018 #CoopRetail
Source: IGD Research, Retail Analysis…and it will be a significant c-store growth driver
RETAIL CONFERENCE 2018 #CoopRetailLarge stores are having to evolve their offer
Re-thinking space Getting the range right Focus on fresh food: for now
and for later
RETAIL CONFERENCE 2018 #CoopRetailAdditional market developments
/
/
/
RETAIL CONFERENCE 2018 #CoopRetailOmnichannel will
become increasingly 28%
…say they are interested in using
voice activated devices to buy
groceries in the future
important 4.6
…say they will shop
online for ambient
but still go in-store
Average number of
for fresh
44%
channels claimed to
be used per month …say they are interested
50% getting personalised offers
to their phone in different
parts of a store
60%
…of British shoppers say they will shop
…of British shoppers say in
98%
online in the future (home delivery)
the next 2-3 years they will
be grocery shopping online
34% …of British shoppers claim
and using click and collect to have used a larger
services format store in the last
month
Source: IGD Shopper Vista Research
RETAIL CONFERENCE 2018 #CoopRetail• Forces of change are in motion, shaping how we live, and how
we shop
In summary…
• 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
RETAIL CONFERENCE 2018 #CoopRetailChecklist to engage your shoppers
4. There’s more
1. Be more than 2. Think ‘missions’ 3. Engage with the
than one way to
just a store to build baskets health trend
do ‘fresh’
7. Engage with and 8. Be local – sell
5. Give shoppers 6. Exceed
reward your products that tell
back time expectations
shoppers stories
10. Add
9. Be famous for
personality to
something
everything you do
RETAIL CONFERENCE 2018 #CoopRetailRETAIL CONFERENCE 2018 #CoopRetail © IGD 2017 Page 43
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