European Grocery Retailing - Change is the only constant Kelly Tackett - Planet Retail
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European Grocery Retailing
Change is the only constant
May 2014 Kelly Tackett
planetretail.net
1 Research Director
Agenda
1. Market Overview
2. Leading Retailers
3. Key Trends
4. Takeaways
2
1. Market Overview
Economic recovery is not universal…
GDP Real Growth 2013 (%)
+1.5% Finland
+0.8%
Sweden
-1.4%
Norway
+0.8%
+4.2% +1.3%
+3.1% Estonia
+0.4% Russia
Latvia
Denmark
Lithuania +0.9%
+1.8% +1.6%
Belarus
Ireland Netherlands +0.5%
United +0.3% Poland
Kingdom +8.9%
-0.3% -0.8% Germany +0.9%
Belgium Czech Rep
+2.0% +1.1% +3.5% Ukraine
+0.4% Slovakia
+0.3% -0.9% +0.0%
Austria Hungary
France Switzerland
+2.5% Romania Moldova
Slovenia +1.2%
Croatia
Italy +3.1% +0.9% +3.2%
-1.1% Bosnia &
-1.0% Herzegovina Serbia +3.2%
Bulgaria +5.8%
-1.9% +0.7%
Macedonia Georgia
Portugal
Spain Albania Armenia
Greece
-1.4% Azerbaijan
-1.2%
-3.9%
Cyprus
Source: Planet Retail.
-1.0%
4
Spending power varies dramatically…
MGD Grocery Spend per Capita 2013 (€ ‘000)
6.0
5.3
5.0
5.0
4.2
4.0 3.8
3.7
3.6 3.5
3.4
3.3 3.2
3.0 2.8
2.6 2.5 2.5
2.4
2.1 2.1
2.0 1.9 1.8 1.8
1.6 1.6
1.5 1.5 1.5
1.4 1.4
1.3
1.1 1.1
1.0
1.0 0.9 0.8 0.8
0.6
0.5
0.3 0.3 0.2 0.2
0.2
0.0
Bulgaria
Ukraine
UK
Spain
Russia
Switzerland
Luxembourg
Germany
Czech Republic
Slovenia
Georgia
Hungary
Moldova
Latvia
Poland
Greece
Serbia
Bosnia and Herz.
Belgium
Italy
Ireland
Finland
Slovakia
Montenegro
Norway
Denmark
France
Netherlands
Estonia
Armenia
Croatia
Lithuania
Cyprus
Sweden
Iceland
Macedonia
Romania
Azerbaijan
Belarus
Austria
Portugal
MGD Grocery Spend defined as sales of total grocery products (edible grocery, household & petcare, health & beauty and foodservice) from modern grocery distribution retailers and wholesale enterprises (MGD) per capita.
Source: Planet Retail
5
Consumers are very different…
15 Groups 67 Types
6
Grocery retail markets have different heritages…
Grocery Market: Breakdown by Channel 2002 (%)
Positive retail sales do not necessarily reflect the full picture…
100%
2.8%
1.5% 6.8%
90% 6.6% 1.5%
Cash & Carries & Wholesale
clubs
80%
Convenience & Forecourt
32.2% stores
70%
39.1%
Discount stores
% of Grocery Sales
60%
50% Supermarkets &
Neighbourhood stores
40% 15.1% 27.8% Superstores
30%
Hypermarkets
20%
32.1% 12.6%
10%
9.1%
0%
France Germany
‘Other’ comprises Department & Variety Stores, Non-store Commerce, Other Grocery formats, Other Non-Food Formats, Catering and Wholesale..
Source: Planet Retail.
7
But ‘change’ is a common denominator…
Hectic work/home schedules
Two working
parents
Commuting
Busy lifestyles
Smartphone/tablet
penetration
Increasing single
person households
Tech-savvy generations
Increasing becoming key consumers
Urban dwelling Changing
access to
Demographics
technology
Shoppers becoming more informed
Ageing population Home access to the internet
8
And grocery channels are changing around this…
Positive retail sales do not necessarily reflect the full picture…
9
Growth by channel – Western Europe…
Western Europe: Total Banner Sales by Channel, 2008-2018f (EUR bn)
450
400
350
300
Sales (EUR bn)
250 2008
2013
200 2018f
150
100
50
0
Hypermarkets & Supermarket & Discount Convenience & Drugstores Cash & Carries
Note: f – forecast;
Source: Planet Retail Superstores Neighbourhood Forecourt
10Key Markets – Germany
Top 3 Grocery Players by Total Banner Sales
(2013e) 3.2% 2.1%
GDP CAGR Grocery banner
2013-2018F retail sales CAGR
€50.2 bn 2013-2018F
€36.9 bn
€34.1 bn Germany: CAGR Growth by Channel, 2013-
2018f (%)**
Drugstores
Top 3 Grocery Players Supermarkets
by Food Retail Format Market Share
Discount stores
(2013e)
Convenience
25.7% Cash & Carries
18.5% Hypermarkets
0 2 4 6 8
16.0% CAGR (%)
Note: f – forecast
Source: Planet Retail
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
11Key Markets – France
Top 3 Grocery Players by Total Banner Sales
(2013e)
3.0% 2.7%
GDP CAGR Grocery banner
2013-2018F retail sales CAGR
€45 bn 2013-2018F
€42 bn
France: CAGR Growth by Channel, 2013-
€31 bn 2018f (%)**
Convenience
Top 3 Grocery Players Cash & Carries
by Food Retail Format Market Share
(2013e) Drugstores
Discount stores
Hypermarkets
18.7%
Supermarkets
17.3% 0 2 4 6
CAGR (%)
12.5% Note: f – forecast
Source: Planet Retail
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
12Key Markets – UK
Top 3 Grocery Players by Total Banner Sales
(2013e) 4.9% 4.0%
GDP CAGR Grocery banner
2013-2018F retail sales CAGR
€57.9 bn 2013-2018F
€31.7 bn
€30.4 bn
UK: CAGR Growth by Channel, 2013-2018f
Top 3 Grocery Players (%)**
by Food Retail Format Market Share Discount stores
(2013e)
Convenience
26.1% Cash & Carries
Supermarket
14.9%
Drugstores
14.0% Hypermarkets
0 2 4 6 8 10 12
CAGR (%)
Note: f – forecast
Source: Planet Retail
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
13Key Markets – Italy
Top 3 Grocery Players by
Total Banner Sales (2013e)
2.4% 2.1%
GDP CAGR Grocery banner
2013-2018F retail sales CAGR
€13 bn 2013-2018F
€10 bn
Italy: CAGR Growth by Channel, 2013-2018f
€9 bn (%)**
Discount stores
Top 3 Grocery Players by Food Drugstores
Retail Format Market Share
(2013e) Hypermarkets
Supermarkets
Convenience
8.0% Cash & Carries
6.4% -1 0 1 2 3 4 5
CAGR (%)
5.6% Note: f – forecast
Source: Planet Retail
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores. * Based on food retail format market share.
14Key Markets – Spain
Top 3 Grocery Players by Total Banner Sales
(2013e)
1.9% 3.8%
GDP CAGR Grocery banner
2013-2018F retail sales CAGR
€20 bn 2013-2018F
€16 bn
€9 bn Spain: CAGR Growth by Channel, 2013-2018f
(%)**
Drugstores
Top 3 Grocery Players
Convenience
by Food Retail Format Market Share
(2013e) Supermarkets
Cash & Carries
Discount stores
23.3%
Hypermarkets
14.3% 0 2 4 6 8 10 12
CAGR (%)
10.2% Note: f – forecast
Source: Planet Retail
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores. * Based on food retail format market share.
15Key Markets – Portugal
Top 3 Grocery Players by Total Banner Sales
(2013e)
3.0% 4.6%
GDP CAGR Grocery banner
2013-2018F retail sales CAGR
€5 bn 2013-2018F
€5 bn
€2 bn Portugal: CAGR Growth by Channel, 2013-
2018f (%)**
Drugstores
Top 3 Grocery Players by Food Retail
Discount stores
Format Market Share
(2013e) Supermarkets
Hypermarkets
20.3% Cash & Carries
Convenience
19.4% -2 0 2 4 6 8 10
CAGR (%)
8.1% Note: f – forecast
Source: Planet Retail
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores. * Based on food retail format market share.
162. Leading Retailers
Competitive Environment
Western Europe: Top 10 Grocery Players by Total Banner Sales,
2013e (EUR bn)
70 65.0 64.6
61.0
Retail Banner Sales (EUR bn)
60
51.6 50.2 49.2
50 46.6
44.5
39.0
40
32.8
30
20
10
0
e – estimate
Source: Planet Retail.
18Competitive Environment
Western Europe: Top 10 Grocery Players by Total Banner Sales,
2018f (EUR bn)
90
Retail Banner Sales (EUR bn)
80
70
60
50
40
30
20
10
0
Note: f – forecast
Source: Planet Retail
19Key Players – Carrefour
#1 Carrefour
Carrefour is focussing on revitalising
operations in core markets – with further
disposals of peripheral operations a possibility.
Turn around ailing hypermarket format
Improve its price image
Multi-channel is a key priority for Carrefour with the
Expand smaller formats under the Carrefour Express,
expansion of the ‘Drive’ concept.
City and Contact banners
Grow multi-channel via drive format
Carrefour is expanding it’s smaller format s such as
Carrefour City above.
20Key Players – Schwarz Group
#2 Schwarz Group
Schwarz Group is one of the most aggressively
growing companies, with a presence in 25+
European markets.
Aims to become the largest food retailer in Europe
Schwarz Group’s Lidl banner is seeing continued
expansion albeit at a slower pace.
Working to propel Lidl past Aldi as largest
discounter in Europe
Introducing minimum turnover per outlet
requirements
Investing heavily on the instore experience
Lidl has been rolling out instore bakeries across
W Europe as it looks to attract a broader
spectrum of shoppers.
21Key Players – Tesco
#3 Tesco
Tesco has unveiled the next phase in its UK
improvement plan with seven areas targeted -
EDLP, product innovation, service, GM, destination
stores, convenience, Clubcard and multi-channel.
Strategic shifting to EDLP with incremental EUR 245
million investment
Focusing on the refurbishment of big-box stores in Tesco has successfully launched the Clubcard
Fuel Saver programme.
2014
Expanding convenience formats – will open 150
Express per annum
Will double the number of click & collect locations
Tesco is rapidly rolling out c-stores – Express and
One Stop.
22Key Players – Metro
#4 Metro Group
For some time now, Metro Group has been battling
on all divisional fronts due to its portfolio of
structurally troubled formats.
Exiting non-core markets to focus on core and key
emerging markets
Refining cash & carry concept in saturated markets The Casa dell’HoReCa features easier customer
of WE to boost attractiveness to business customers navigation with colour-coded departments.
Adapting to changing customer needs with diverse
formats
Closing unprofitable hypermarkets
Undertaking a series of long-overdue store
refurbishments
The Real remodels feature a higher-quality service
counter for fresh items, including bakery.
23Key Players – Edeka
#5 Edeka
Edeka is reviving its co-operative roots as it
refocuses on the strengths of its regional set-up and
its thriving independent retailers.
Diminish the diversity of banners and regional and
local idiosyncracies
The Für Dich (For You) ranged supplied by candy
manufacturer Katjes is available exclusively at Edeka.
Support its independent shopkeepers with the
development of new supermarket concepts
Reassess and reposition its Netto discount chain
Strengthen national buying by bundling sourcing at
the Hamburg headquarters
Edeka’s Omega 3 sausages were developed in collaboration
with the Frauenhofer Institute.
243. Key Trends
Death of the hypermarket?
Increasingly restrictive Apparent ‘saturation’
Positive retail sales do not necessarily
planning legislation reflect
in somethe full picture…
markets
Difficulty in finding /
securing appropriate Lack of investment
sites
Rising land and Less ‘one-stop’
development costs shopping / ‘format
fatigue’
Online migration (esp Shifting consumer
in General trend towards
Merchandise) convenience
26Countries most exposed to ‘Big Box’
Hypermarket (>5,000 sq m) Penetration of Grocery Market by Country (%)
35.0%
31%
30%
30.0% 29%
25.0% 24%
22% 21%
20%
20.0% 19% 19%
18% 18%
17%
15%
15.0% 14% 14%
10% 9%
10.0%
8% 8% 8%
7%
7% 6% 6%
5.0% 4%
4%
3%
1% 1%
0.0%
MGD Grocery Spend defined as sales of total grocery products (edible grocery, household & petcare, health & beauty and foodservice) from modern grocery distribution retailers and wholesale enterprises (MGD) per capita.
Source: Planet Retail
27Some perspective…
Hypermarkets are not dead, many will continue to prosper
Huge variations by location, generalizations are dangerous:
– Country / market
– Site / catchment
But we are likely to see an inevitable slowdown in development of new
hypermarket space in some countries
Hypermarket sales will continue to grow, although at a slower rate than some
other channels (discount stores, c-stores, E-commerce)
A large number of hypermarkets are very challenged and many have been
subject to under-investment
A number are ‘over-spaced’ and are in need of a radical rethink…
28Selected options for ‘over-spaced hypermarkets’…
No single ‘catch all’ cure, but a number of options – employed in
isolation or in unison, according to the needs of the individual
store and the catchment it serves….
Option 1 Downsize or sub-let surplus space to 3rd parties
Option 2 Re-allocate GM space to extend food offer
Option 3 Re-think product mix of GM space
Option 4 Improve in-store catering / foodservice
29Option 1 – downsize or sublet…
Nando’s
Wembley Park.
Sports Direct
Three UK sites.
Xercise4Less
Stockton-on-Tees.
30Option 2 – re-allocate GM to extend food offer… 31
Option 3 – rethink product mix of GM space… 32
Option 4 – improve in-store catering… 33
Flight to convenience…
Western Europe: Total Banner Sales by Channel, 2008-2018f (EUR bn)
450
400 2008
2013
350 2018f
300
Sales (EUR bn)
250
200
150
100
50
0
Note: f – forecast;
Hypermarkets & Supermarket & Discount Convenience & Drugstores Cash & Carries
Source: Planet Retail Superstores Neighbourhood Forecourt
34C-stores – a pan-European perspective…
No. of C-stores and Forecourt Stores 2013 – Top 20 European Markets
30,000
25,442
25,000
20,000
15,000
11,940
10,000
8,286
6,585
5,000 4,023
3,034
2,370
1,931 1,907 1,808
1,340 1,308 1,187 1,178 1,161 1,071 980 921 781 696
0
Source: Planet Retail
35C-stores – the recipe for success…
A new business model, different from supermarkets and big box
More strategic location planning
A higher cost model
Requiring a higher margin product mix
Focus on fresh foods and food-to-go
Greater emphasis on private labels
Catering for a wide range of shopping visits and occasions:
- ‘Top up’ shopping
- Breakfast and Lunch
- Evening meal solutions.
36C-stores go hand-in-hand with e-commerce… 37
Discounters – the march continues (?)…
Western Europe: Total Banner Sales by Channel, 2008-2018f (EUR bn)
450
400 2008
2013
350 2018f
300
Sales (EUR bn)
250
200
150
100
50
0
Note: f – forecast;
Hypermarkets & Supermarket & Discount Convenience & Drugstores Cash & Carries
Source: Planet Retail Superstores Neighbourhood Forecourt
38What exactly is a discounter?
Limited assortment, low prices and no services
“I am convinced that the two
principles, that of small ranges
and low prices, cannot be
separated.”
Karl Albrecht
Aldi Founder & Owner
(1953)
39Discounters – the European Top 10…
Europe: Top 10 Discount Store Operators by Total Sales, 2007-2017f (EUR bn)
68.6
70
2007
65
2012
60
2017
53.8 53.4
55
Banner Sales (EUR bn)
50 46.2
45
40 37.5 38.1
35
30
25
20
15.4
13.7 13.6 13.3
15 11.9
9.4
10 8.2 8.3 9.3 7.3 8.3
6.6 7.1
5.3 5.6 5.7
4.2 5.2
5 2.6 3.6 2.6 2.8 3.3 3.7
0
Schwarz Group Aldi Edeka Rewe Group Dia* Jerónimo Reitan Dansk NorgesGruppen Norma
Martins Supermarked
Note: f – forecast; * part of Carrefour until 2011; ranked by 2012 sales.
Source: Planet Retail
40A one-dimensional model is diversifying…
In the face of saturation and decelerating growth, discounters are
having to change tact and adapt their business models….
Tactic 1 Shift in product mix towards freshness
Tactic 2 Increased brand listings
Tactic 3 Move towards convenience formats
41Shift towards freshness
Penny (Germany, Czech Dia Fresh Instore bakery trial, Aldi
Republic, Italy) (Spain) Süd’s Hofer (Austria)
42Shift towards brand listings - Aldi
Aldi: Brand listings of Top 10 FMCG brand companies
Rationale behind the brand additions:
Sales FMCG brand Brand listings
Revitalising sales in saturated markets rank company at Aldi*
Examples
Attracting more/new shoppers 1 Nestlé Nescafé in Switzerland
Increasing average spend 2 P&G Gillette in Austria
Countering the success of its main rival, 3 PepsiCo Pepsi in Slovenia
Schwarz Group’s Lidl 4 Unilever Lusso in Switzerland
Part of a strategy to become a one-stop 5 Mondelez Toblerone in Germany
destination 6 Coca-Cola Co. Römerquelle in Austria
7 ABInBev Stella Artois in the UK
8 Philip Morris Intl. Marlboro in Germany
9 L’Oréal Garnier Fructis in Hungary
10 Japan Tobacco Winston in Switzerland
Red: Recently added permanent listings (ca. 2010-2013)
Broad brand portfolio, in most markets
Limited brand portfolio, in selective markets
Minor brand portfolio, in a small number of markets
Ranking: OC&C Analysis for 2011, excluding regional meat companies.
Source: Planet Retail.
43Move towards convenience formats – Aldi and Lidl 44
Grocery E-commerce – fad or the future?…
Proportion of web shoppers who have made grocery purchases online.
27% 8%
11% 10%
10% 33%
7%
31%
13%
7%
Source: Planet Retail’s Online Shopper Survey data.
45The great unknown…
“We don’t know where the online
train is going and how fast it is
running. I only know that we need
to be on board.”
ALAIN
CAPARROS
CEO Rewe Group
Indicative of how many European grocery retailers currently feel.
46Still more questions than answers…
Can it ever be
profitable?
Home delivery
What’s the Which is the or Click &
Am I just
impact on best model – Collect?
cannabilising
bricks and store-picking or
existing sales?
mortar stores? dedicated DC?
How do
channels
interract?
What are the
geographic
implications?
Am I just doing
it because
everyone else is
Who are the doing it?
main key
customer
groups?
47Grocery E-commerce - ‘how not to do it’….
Grocery E-commerce may be high growth but it is not straightforward – it
needs to be high profile and executed skilfully.
48Grocery E-commerce – drive format…
The Drive concept is a blend between pure e-commerce and
Click & collect, external to a store or as a free-standing unit.
traditional bricks and mortar stores
49Drives – different business models….
Metro Group’s Real
integrated
infrastructure
alongside stores is the
Capital Expenditure
Ahold in the US is most common form of
experimenting with Drive to date.
Tesco operates “van
compact standalone
sheds” on store car
Drives by their stores.
parks for shoppers to
collect their groceries
quickly by car.
Catalan retailer
Bonpreu has invested
heavily in a
standalone Drive
format, designed to
secure a catchment
area in its own right.
Order Capacity
504. Key takeaways
Channel convergence…
HYPERMARKETS
Big Box servicing Hypermarkets opening
online home delivery, dedicated discount
Click & Collect, Drive areas and formats.
formats.
E-COMMERCE DISCOUNTERS
C-stores deployed as E- Discounters opening
commerce fulfillment more convenience-
outlets. based formats.
C-STORES
52Change is the only constant…
• European retail markets are undergoing substantial change
• Suppliers need to evolve to move with retail change
• Polarity of maintaining volumes and driving margin
• Different strategies for different channels (and markets, retailers)
• Retailers will be looking to suppliers to help them through change
• Key watchwords – FLEXIBILTY AND COLLABORATION.
53Thank You
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