UNITED KINGDOM'S ATTRACTIVENESS FOR SWEDISH FOOD SUPPLIERS - JANUARY 2018
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The UK offers a large market for London’s role as a leading global food suppliers, with consumers city and cultural capital attracting demanding both quality and visitors and investments from convenience. However, the retail around the world, London and the landscape is challenging and UK make excellent places to build highly competitive; hence it is brand awareness for expansion to important that companies looking additional markets. to enter the market understand This places increasing demand on fully what it takes to succeed as a both retailers and food suppliers, supplier in the UK. and further emphasises the Over the years, Business Sweden importance of knowing how to has supported many Swedish food attract the demanding and suppliers to enter and grow on the discerning UK consumer. Proper UK market, creating valuable preparation and in-depth market knowledge and a network among insight are key to success in the key actors and stakeholders. UK’s competitive retail environment. The large market, with customers In this report, we provide an open to innovative and international overview of the UK food retail products, is extremely interesting market, exploring both the grocery for food suppliers from all over the and foodservice sectors. We world. British consumers have analyse the market’s challenges become accustomed to a wide and opportunities in order to help variety of product choices and Swedish food suppliers reach their increasing convenience in how to full international potential on the UK shop. Furthermore, because of market. OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 2
THE UK FOOD RETAIL MARKET IS COMPLEX, OFFERING BOTH OPPORTUNITIES AND CHALLENGES Food & Grocery market Challenging Landscape Fragmented Foodservice Better Health, Less Waste £213 bn £57 bn vs. Market value in 2017, with 3 Market value forecast in 2020 years of steady growth However, stagnation due to challenges such as consumer Four large retailers dominate, 362,629 Four consumer trends affect selectivity, price-sensitivity, but are increasingly challenged Total UK outlets, indicating the entire food retailing market, currency fluctuations and Brexit by discount and online players significant fragmentation from grocery to foodservice Online = #1 Market Driver Private Label Success Strong Organic Segment An Insightful Approach £17.5 bn 52.5% Organic segment shows strong growth, with supermarkets as Food and drink e-commerce UK value share for private the largest sales channel Several areas to focus on to be market value forecast in 2023 label, highest in the EU attractive to food retailers 7.5% e-commerce Expected to be Food Business Days value share in 2017 major source of and Try Swedish (second only to growth for UK Fresh produce and dairy provide insight and South Korea) grocery market anchor the organic market sales opportunities OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 3
THE UK GROCERY MARKET IS LARGE BUT STAGNATING THE MARKET IS AFFECTED BY A NUMBER OF CHALLENGES GROCERY MARKET CHALLENGES MARKET VALUE OF GROCERY RETAIL UK (£BN) 73.7 The UK grocery market is growing, but has 70.8 stagnated in recent years; by 2020, the market is expected to be worth £213 bn 2013/2014 2018/2019 Consumers remain price-sensitive and focus on 49 seeking bargains, though they are increasingly selective in their choices 37.4 35.5 35.7 Currency fluctuations are expected to put additional pressure on grocery retailers, with those retailers who primarily source goods from 21.4 overseas possibly struggling to compete based on 16.9 price 10.8 9.4 9.3 7.7 Brexit, and the associated uncertainty, is likely to have a material impact on the sector Superstores & Convenience Small Discounters Online Other Supermarkets Supermarkets Retailers Despite a stagnating overall market, Swedish grocery exports to the UK have grown on a yearly basis from £270M in 2011 to £420M in 2017 SOURCE: STATISTA OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 4
THE “BIG FOUR” GROCERY RETAILERS DOMINATE THE MARKET REPRESENTING OVER 70% Tesco’s mission: “We make what matters better, together” Market leader in UK grocery sector for over 25 years, with sales of ₤51 bn in 2017-18 and 440,000 employees in the UK Despite positioning itself to lower prices and a competitive agenda, Tesco was the first UK supermarket to develop an online shopping presence Over 17 million active members for its UK loyalty card program Ocado , 1,1% Iceland, 2% Sainsbury’s mission: “We will make customers' lives easier, Others offering great quality and service at fair prices, serving our 3.4% customers whenever and wherever they want” Sainsbury’s has a middle-of-the-range positioning, offering a wide Tesco range of prices and products, from budget to premium, and 27.6% aiming to attract consumers from all income groups Sells numerous organic and environmentally friendly products Co-op 6.2% Asda’s mission: “To be Britain’s best retailer exceeding customer need everyday” Aldi Asda’s strap-line is “everyday low price” 7.6% Asda has focused on large stores and is predominately based in the North and South East of England Sainsbury's Morrisons 16.0% 10.5% Morrison’s mission: “To be the consumer’s first choice for food, delivering products of outstanding quality and great service at a Asda competitive cost through working faster, simpler and together” 15.0% With stores located throughout the UK, a typical Morrison’s store is aimed at the mid- to lower-end Approximately 55% of sales comes from private label range SOURCE: IBIS WORLD REPORT, KANTAR WORLD PANEL, COMPANY WEBSITES OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 5
SUPERMARKETS TO FACE COMPETITION FROM DISCOUNTERS, CONVENIENCE, ONLINE IN THE FUTURE UK FOOD AND GROCERY VALUE 2017 & FORECAST DIFFERING POSITIONS OF TOP GROCERY PLAYERS 2022 (£ BILLION) 91.1 86 47.1 PRICE 40 30.1 20,1 16,2 16.3 16 11,8 12.2 10,4 QUALITY SOURCE: IGD, BUSINESS SWEDEN ANALYSIS OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 6
THE FOODSERVICE* MARKET IS HIGHLY COMPETITIVE AND COMPLEX, BUT GROWING STEADILY THE WHOLESALE FOOD AND DRINK VALUE (IN £BN) FOODSERVICE AS AN INDUSTRY Worth a staggering £57bn, the UK foodservice industry is the 4th largest employer in the UK The foodservice industry has experienced 3 years of continuous and steady growth However, the industry remains highly fragmented, with a Contracted Industry & Hotels, Pubs & large number of companies operating across numerous Public Sector Restaurants subsectors £4.0 Total £5.0 wholesale food & drink value £13bn 164,915 81,642 116,122 Retail,Travel hotel, pub and retail, travel and contracted industry & Leisure restaurant outlets leisure outlets outlets £3.0 Approximately 362,629 total outlets in the UK THE FOODSERVICE INDUSTRY IS SIGNIFICANTLY MORE FRAGMENTED THAN THE RETAIL GROCERY MARKET SOURCE: FEDERATION OF WHOLESALE DISTRIBUTORS *ENCOMPASSES ALL BUSINESSES RESPONSIBLE FOR MEALS PREPARED OUTSIDE OF THE HOME OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 7
OF EUROPE’S TOP 10 FOODSERVICE GROUPS, 5 ORIGINATE FROM THE UK UNITED KINGDOM SWEDEN Rank 2 7 8 9 10 18 Company Sector Turnover £22.96 billion £2.15 billion £2.18 billion £3.3 billion £1.69 billion £38.8 billion* Quick Service Contracted Pubs Pubs Pubs In-Store Restaurant Main Brands SOURCE: ENDOLE *USING 02 JAN 2018 EXCHANGE OF 1 EUR = 0.900380 GBP OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 8
HOWEVER, THE ENTIRE UK RETAIL FOOD MARKET SUPPLY CHAIN IS TAPPING INTO CONSUMER TRENDS ‘Good for me, good for you’: A trend in which vegetables will become ‘the stars of the plates’ and in which underutilised normally more sustainable, species of fish and lesser known cuts of meat will form a bigger part of British diets. ‘Gourmet get together’: Where people will eat together more to make them feel comforted in this time of political uncertainty with Brexit. The Brits will choose to eat classic dishes that invoke nostalgia but that have been reimagined for the modern consumer. ‘Awaken my senses’: Comprising bright colours and experimental flavours as the proliferation of social media brings to life ‘playfulness and creativity’. ‘Telling a story’: Based on demand for seasonal produce, foraged food and artisan products that TEXT have a story behind them. THESE TRENDS WILL BE FELT ACROSS KEY INTERNATIONAL CUISINES - AMERICAN, MODERN EUROPEAN, ASIAN & MIDDLE EASTERN SOURCE: THE GROCER, BIDFOOD OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 9
THE UK E-COMMERCE MARKET FOR GROCERIES IS ONE OF THE WORLD’S LARGEST AND CONTINUES TO GROW THE ONLINE GROCERY MARKET SIZE IN BILLIONS FOOD AND DRINK* E-COMMERCE VALUE (£MN) 16000 11.5 14000 UK 17.5 CAGR 12000 7.7% 9.4 10000 France 13.6 8000 0.99 Germany 6000 2.9 4000 0.7 Spain 2000 1.6 0 2018 2023 2018 2023* SOURCE: KANTAR WORLDPANEL, IDG, MINTEL, EUROMONITOR, BUSINESS SWEDEN ANALYSIS *INCLUDES GROCERY AND ONLINE PLAYERS, DOES NOT INCLUDE FOODSERVICE OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 10
ONLINE IS THE MAIN DRIVER ON THE UK GROCERY RETAIL MARKET UK ONLINE GROCERY MARKET CHARACTERISTICS Largest players within online grocery in the UK are Tesco, Sainsbury’s and pure player Ocado, seeing strong competition from newcomer Amazon Fresh The core online grocery buyers are younger 50% £85 is the average UK consumers and consumers with high income of all Brits are current online basket, making it online grocery shoppers The average spend per purchase remains higher the largest in the world online than offline; this high online spend is a combination of shoppers choosing online primarily for large stock up trips and retailers requiring a minimum spend UK online grocery channel share is predicted to £11.5 grow from 6 to 7.9 percent over the next five years Consumers place increasing pressure on delivery 1 in 10 bn Brits do all of their times, which has become a competitive advantage grocery shopping online is the value of the UK among online retailers online grocery market (2018) SOURCE: EUROMONITOR, KANTAR WORLDPANEL, IDG OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 11
“THE UK HAS REACHED THE POINT WHEN ALL RETAILERS FOCUS HEAVILY ON ONLINE SALES BECAUSE THEY HAVE TO, THEIR CUSTOMERS EXPECT THEM TO. RETAILERS IN THE UK RELY ON DIGITAL SOLUTIONS TO MAINTAIN MARKET SHARE.” TIM BARRETT, SENIOR RESEARCH ANALYST RETAILING EUROMONITOR 12
DELIVERY WILL DRIVE GROWTH IN FOODSERVICE AS OPERATORS FACE CHANGING TECHNOLOGIES DELIVERY REACHES ALL MARKET PLAYERS BRITISH FOODSERVICE VISITS GROWTH (YEAR-ON- YEAR) 2015 TO 2019 While the foodservice industry as a whole is expected to continue growing, individual operators 1.4% 1,3% will face significant changes in terms of competition and industry roles 1.2% Leading fast food brands face increasing 1% competition from smaller boutique chains 1.0% Operators struggle with how to best appeal 0,8% to changing technologies and consumer 0.8% 0,7% trends affecting the entire supply chain Delivery has risen quickly to become a significant 0.6% 0,5% 0,5% catalyst in the British foodservice industry, driving 0,4% growth in foodservice visits year-on-year 0.4% Rapid rate of expansion looks set to continue as companies like Just Eat, UberEATS and Deliveroo 0.2% expand their reach across the country, encouraging more foodservice operators to adopt 0.0% delivery as a route to market 2015 2016 2017 2018 2019 Visits Forecast SOURCE: BHA MARKET REPORT 2016, NDA GROUP, THE CATERER *FORECASTED FIGURES OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 13
PRIVATE LABEL IS EXPECTED TO BE A MAJOR SOURCE OF GROWTH FOR THE UK GROCERY MARKET SHARE OF PRIVATE LABEL VALUE IN SELECTED EU PRIVATE LABEL GROWTH IN THE UK COUNTRIES (2018) UK 52.5% In 2018, private label made up 52.5% of UK value share Spain 42.6% Market share in the United Kingdom stayed above 45% and appears ready to resume growth as supermarkets expand their private label programs to Germany 40.1% combat the competitive challenge from discounters Private label’s share has remained above 40% in France 32.9% the UK since 1997 Private label is now at the forefront of European Netherlands 29.2% retailers’ communications, looking to increase shopper loyalty Italy 18.1% The price gap between private label and brand has closed to 29% on average, due in part to material costs increasing Greece 16.3% Value Market Share SOURCE: KANTAR WORLDPANEL, NIELSEN GLOBAL, PLMA YEARBOOK OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 14
A NUMBER OF PRIVATE LABEL CATEGORIES HAVE SHOWN STRONG GROWTH SINCE 2013 PRIVATE LABEL VALUE SHARE BY CATEGORY 90% +2,6% 80% 70% +3.7% +0.4% -0.2% 60% -8.9% 50% -0.6% -0.2% 40% +2.1% +1.8% -0.9% 30% 20% 10% 0% Delicatessen Bakery Dairy Frozen Dry grocery Household Non-alcoholic Health & Alcoholic Confectionary beverages Beauty Beverages 2013 2017 SOURCE: PLMA YEARBOOK 2017 OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 15
THE ORGANIC SEGMENT SHOWS STRONG GROWTH ACROSS THE UK FOOD RETAIL MARKET ORGANIC SALES ACROSS MARKET CHANNELS (£MN), 2017-2018 4.2% 1,600 Growth 1,400 1,500 1,439 1,200 1,000 9.7% 9.5% 800 Growth Growth 600 400 328 359 200 260 286 0 Supermarkets Box schemes and online Independents SUPERMARKETS ARE THE LEADING CHANNEL FOR ORGANIC FOOD BUT GROWTH IS HIGHER IN OTHER CHANNELS SOURCE: SOIL ASSOCIATION ORGANIC MARKET REPORT OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 16
THE 4 LEADING ORGANIC RETAILERS ARE SAINSBURY'S, TESCO, WAITROSE AND OCADO Importance Organic Market Grocery Market for PL Organic Organic Range Rank Retailer Share Share Corporate Brand (2015) (2016 estimate) Strategy 709 product lines 1 16.8% 28% High SO Organic (300 SO Organic) Tesco 2 28.6% 26% High 742 product lines Organic 778 product lines 3 5.4% 23% High Duchy (500 Duchy) Wholegood 4 0.5% 7% High 3344 product lines + Duchy ASDA 5 15.9% 4.5% Low 150 product lines Organic 6 11.1% 4.5% Low M Organic SOURCE: KANTAR WORLDPANEL AND MARKET ESTIMATES OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 17
THREE WELL-KNOWN INDEPENDENTS FOCUS SOLELY ON ORGANIC FOOD IN THE UK GROCERY MARKET About: While Whole Foods is not About: Planet Organic is an About: as nature intended is a exclusively organic, it has a strong independent retailer in London with London-based, exclusively organic loyalty to organic products within its a young customer base. Planet chain with stores in central range and stocks a majority of the Organic sells almost exclusively locations. It focuses mainly on main organic brands available organic food and drinks, as well as brands and offers a good elsewhere in the UK. Given that it many natural remedies and health ‘springboard’ for smaller, innovative is experienced in selling organic in and beauty products. Its newer organic brands. It prides itself on the US and is a key player there, stores focuses heavily on the ‘food working with passionate and much of the future UK strategy will to go’ offer. knowledgeable suppliers with likely follow a similar approach. quality products. No of stores: 7 No of stores: 7 No of stores: 6 URL: planetorganic.com URL: wholefoodsmarket.com URL: asnatureintended.uk.com SOURCE: BUSINESS SWEDEN INTERVIEWS, COMPANY WEBSITES OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 18
DURING THE LAST SIX YEARS, THE ORGANIC MARKET HAS GROWN STEADILY AND IS WORTH £2.2 BILLION 2003-2017 UK SALES OF ORGANIC PRODUCTS (£ MILLIONS) 2218 2078 2113 2029 1954 1900 1862 1840 1741 1789 1731 1667 1600 1200 1100 +10% +9% +33% +19% +9% +1,6% -13% -6% -3,7% +4,5% +2,7% +4% +4,9% +7% +6% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SOURCE: SOIL ASSOCIATION ORGANIC MARKET REPORT OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 19
THERE ARE MANY POSSIBLE ROUTES TO MARKET FOR THE UK RETAIL MARKET Producer/ Customer Exporter Agent/Sales Retailer/ Rep Distributor Convenience Stores Wholesaler Importer IT IS CRUCIAL TO HAVE KNOWLEDGE ABOUT THE MARKET IN ORDER TO CHOOSE THE MOST SUITABLE DISTRIBUTION MODEL OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 20
SIMILARLY, THERE ARE MANY POSSIBLE ENTRY ROUTES TO THE UK FOODSERVICE MARKET Producer/ Foodservice Retailer/ Operator Exporter Distributor Convenience Stores Cash & Carry Wholesaler OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 21
WHAT DO COMPANIES THAT SUCCEED IN THE UK FOOD AND BEVERAGE SECTOR DO? SUCCESS FACTORS COMMON MISTAKES Carry out thorough market research beforehand in order to approach retailers with appropriate insights and understanding Believing the consumer immediately understands Make necessary adjustments to products and packaging, such as image and your products and offering language, to suit the market Not making necessary Ensure a product has the necessary certifications, labelling and ingredient adjustments to the market in requirements terms of e.g. packaging, Create a marketing plan and allocate the necessary budget to build your brand storytelling and consumer awareness of your product; allocate budget for tastings, product Being chosen by a retailer samples, advertisement, campaigns, etc. rather than choosing which Understand your unique selling points, including what makes you different and retailer to work with how you add value, in order to tell a convincing story Not allocating sufficient time Set up the right logistics flow in order to be able to offer an attractive market and budget for the market price to your local partners and end consumers Not setting up a proper Understand what your target customers are looking for and how to reach them; logistical chain to reach an similarly, understand what buyers selling to your customer group are looking attractive price for the market for, and focus on the most promising segments and customers Not setting proper pricing and Be persistent and plan for the long-run: invest in and cooperate with local margins when working with partners to show commitment to the market retailers and/or distributors OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 22
THERE ARE SEVERAL INTERESTING FOOD INDUSTRY EVENTS IN THE UK TO EVALUATE FOR 2018 Casual Dining Show Imbibe Live Speciality & Fine Food Fair Food Matters Live Date: 27-28 Feb 2019 Date: 1-2 July 2019 Date: 1-3 Sep 2019 Date: 19-20 Nov 2019 Location: London Location: London Location: London Location: London Website | Register Website | Register Website | Register Website | Register Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Natural & Organic Products Europe London Food Tech Week The Lunch Show Date: 7-8 Apr 2019 Date: 20-27 May 2019 Date: 19-20 Sep 2019 Location: London Location: London Location: London Website | Register Website | Register Website | Register OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 23
THERE IS AN OPPORTUNITY FOR SWEDISH SUPPLIERS TO SELL AT THE TRY SWEDISH SHOP AT OCADO.COM THE TRY SWEDISH SHOP IS HIGHLY SUCCESSFULL A SUPPLIER RELATIONSHIP WITH OCADO IS THE FIRST AND CONTINUES TO GROW (SALES IN £MN) STEP TO ACCESSING THE GROCERY RETAIL MARKET 4 Since 2012, Business Sweden has introduced Ocado to Swedish grocery suppliers that have been listed in the Try Swedish shop 3.5 The close collaboration has resulted in the Try Swedish shop being one of Ocado’s best performing international shops, with an 3 increasing number of suppliers, products and sales figures for each year of operation 2.5 The shop offers a unique opportunity to establish sales and distribution on the UK market, reaching 70% of British households 2 Becoming a supplier to Ocado provides a shortcut to strategic expansion on the UK market, as well as a test and reference case 1.5 for selling on the UK market The first step to becoming a supplier to the shop in 2019 is a pre- 1 screening by Business Sweden followed by introduction to Ocado’s buying team 0.5 Interested in hearing more? Please contact: 0 edward.lindquist@business-sweden.se 2013 2014 2015 2016 2017 SOURCE: OCADO OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 24
TEAM BUSINESS SWEDEN FOOD LONDON Edward Lindquist Phone: +44 20 7258 5145 Email: edward.lindquist@business-sweden.se Samiksha Jalan Phone: +44 20 7258 5143 Email: samiksha.jalan@business-sweden.se For continuous @BusinessSwedenUK updates, please follow us on: http://www.business-sweden.se/Storbritannien OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 25
ABOUT BUSINESS SWEDEN Business Sweden supports Swedish companies via its 50+ offices around the world, providing strategy and operations advisory services across industry sectors In-depth local knowledge and access to a global network of internal and external experts allow our 500+ professional consultants to help our clients reach their full international potential GROWING SWEDEN OVERVIEW MARKET RETAILERS FOODSERVICE TRENDS ONLINE PRIVATE LABEL ORGANIC APPROACH BUSINESS SWEDEN 26
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