Bakery Category Presentation A closer look at the key trends - PowerPoint PPT Presentation

Bakery Category Presentation A closer look at the key trends impacting Bakery Matthew Verity Thursday 18 th October 2018

Kantar Worldpanel Service & Methodology The largest shopper panel in Great Britain Geographically and demographically representative of the population of GB 30,000 Households in GB

Is all as it seems… Slow Future prospects Price competition behaviour change

Yet confidence seemingly has no direct bearing on FMCG market growth +3.8% Food & Drink Growth 0% Consumer Confidence -1% -9% May Sep 2016 2018 Source: Kantar Worldpanel/ Trading Economics.com (GfK)

Food and drink increasing in importance for UK households 100% Miscellaneous Goods + Services 90% 8.5 9.0 Restaurants + Hotels 9.9 9.9 9.8 9.6 9.5 8.4 10.0 9.0 10.8 10.7 10.6 10.6 10.6 10.2 10.1 10.4 80% Education 70% Recreation + Culture 60% Communication Transport 50% Health 40% Furnishing + Equipment + Maintenance 30% Housing + Utilities 20% 5.6 5.7 5.8 5.8 5.9 6.0 5.8 5.7 5.6 5.8 6.8 5.7 5.6 5.6 4.4 5.5 5.4 4.5 Clothing + Footwear 10% 10.7 10.5 9.4 9.3 9.1 8.9 8.8 8.7 8.6 8.9 9.2 9.1 9.1 9.3 9.3 8.5 8.5 8.5 Alcohol + Tobacco 0% Food + Non-alcoholic Beverages 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: ONS

The GB market relies on inflation for growth with inflation now standing at +2.0% 10% 8% 6% % change Grocery Growth 4% 2% Grocery Inflation 0% -2% -4% O D J MM J S N D F A J A O N J MM J A O D F AM J S N J MM J A O D F AM J S N J MA J A O D F MM J S N J MA J A O D J MM J S N J F A J A O D J MM J S 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Kantar Worldpanel – Total Grocery (RST) Growth vs. Inflation – 12 we

Source: Kantar Worldpanel – Total Grocery (RST) Contribution to Value Change – 12 we Inflation key to growth though recent warm weather boosts an increase in trips Contribution to Growth (%) -4 -2 0 2 4 6 8 07-Dec-14 04-Jan-15 01-Feb-15 01-Mar-15 29-Mar-15 26-Apr-15 24-May-15 21-Jun-15 19-Jul-15 16-Aug-15 13-Sep-15 11-Oct-15 Frequency 08-Nov-15 06-Dec-15 03-Jan-16 31-Jan-16 28-Feb-16 Basket Size 27-Mar-16 24-Apr-16 22-May-16 19-Jun-16 Shoppers 17-Jul-16 14-Aug-16 11-Sep-16 09-Oct-16 06-Nov-16 LFL Inflation Rate 04-Dec-16 01-Jan-17 29-Jan-17 26-Feb-17 26-Mar-17 23-Apr-17 Price Mix 21-May-17 18-Jun-17 16-Jul-17 13-Aug-17 Growth 10-Sep-17 08-Oct-17 05-Nov-17 03-Dec-17 31-Dec-17 28-Jan-18 25-Feb-18 25-Mar-18 22-Apr-18 20-May-18 17-Jun-18 15-Jul-18 12-Aug-18 09-Sep-18 7

Not consistently positive across the market, some areas in negative territory Ambient Cooking Butter Sauces +15% -3% Fresh Poultry Milk -2% +5% Washing Detergent Bread -1% +4.7% Source: Kantar Worldpanel

All key retailers showing growth with the Big 4 share continuing to shrink whilst Aldi post their fastest growth of the year Share of Till Roll Grocers £% YoY % Growth Total Grocers Total Grocers 3.2% 28.0% Tesco Tesco 27.4% 0.9% 15.8% Sainsbury's Sainsbury's 0.6% 15.4% 15.5% Asda Asda 2.4% 15.3% 10.3% Morrisons Morrisons 2.4% 10.3% 6.8% Aldi Aldi 15.1% 7.6% 6.2% Co-op Co-op 7.0% 6.4% 5.2% Lidl Lidl 10.0% 5.6% 5.3% Waitrose Waitrose 0.1% 5.2% 2.1% Iceland Iceland 4.8% 2.1% 1.1% Ocado 7.5% Ocado 1.2% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 12 Weeks to 08/10/17 12 Weeks to 07/10/18 Till Roll. Kantar Worldpanel Latest 12 weeks to 7th October 2018 9

12 Weeks 2007 2018 65% 4.3% 13.1% of population

Rapid de-escalation of promotions has continued with promotions at a new low with 68% of sales going through at full price in the past 12 weeks 45 40 On promotion 35 % spend on deal 30 25 32% 20 15 of spend is on deal in 10 past 12 weeks 5 0 30.1 30.2 30.9 33.2 37.3 38.3 39.8 38.7 39.6 39.4 37.4 34.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2006-2008 numbers realigned consistent with 11 improved post 2009 promotional read. Best fit calendar years. 52w/e 31 Dec 2017

Online Grocery growth slowing to under 0.5%pts per annum 8 % FMCG spend 7 6 Online 5 7.5% 4 3 Online Share of 2 Grocery 1 0 4.4 5.1 6.1 6.8 7.3 7.5 2012 2013 2014 2015 2016 2017 12 RST (Grocery). KWP 2017 13. 52w/e 31 Dec17

Many retailers all looking for growth in the same place….though signs this is starting to change Top up Own Label Premium Fresh Out of Home shopping

In August brands grew faster than own label for the first time in 3 years Own label is for everyone 10 8 % spend growth Store 6 differentiation 4 Brands 2 Guides Own label store choice 0 -2 -4 Cheaper MM J S ND F A J AON J MM J S ND F AM J S N J MM J AOD F AM J S N J MA J AOD FMM J S N J MA J AOD J MM J S N J F A J AOD J MM J S options 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 within a store Source: Kantar Worldpanel – Total Grocery (RST) – 12 we 15 RT43 (Grocery). 2018 09. 12 w/e 9 Aug 18

Own Label - shopper choices save money, but also potentially trading up Value Standard Premium Own Own Own Brands Label Label Label -1% +4% +6% +4% 16 RT43 (Grocery). 2018 08. 12 w/e 12 Aug 18

Fresh sales contribute a third of £ growth to retailers Alcohol, ambient, frozen, healthcare, household and toiletries collectively grew +£2.4bn All grew faster than +3% fresh & chilled +£0.6bn +£1.2bn +£0.3bn +£0.1bn +£0.1bn +£0.0bn +£1.3bn RT43 (Grocery). KWP 2018 08. 52w/e 12 Aug 18

Changing shopper missions – Top Up has become more important over past decade 100.0 15 16 15 16 16 17 17 17 90.0 80.0 Specific Journey 70.0 36 37 36 37 37 37 37 38 60.0 Replenishment % spend 50.0 8 8 8 8 8 8 9 8 40.0 For Tonight 30.0 41 40 40 39 38 20.0 38 38 37 10.0 Main Shop 0.0 2010 2011 2012 2013 2014 2015 2016 2017* Source: Kantar Worldpanel – Total Grocery (RST) – 52 we 31 Dec 17 18 RT43 (Grocery). Full years to KWP 2017 13. 52w/e 31 Dec 17

Take Home +3% Out of Home +6%

1. Naturalness

Almost 1 in every 3 food items chosen for health reasons Health 33 % food servings chosen for Health 32.5 32 31.5 31 Servings of food 30.5 chosen for health have grown 5% vs. last year 30 and are now worth 29.5 £20bn p.a. 29 A M J J A S O N D J F M M A M J J A S O N D J J F M A M J J A S O N D J J F M A M J J A S O N D D J F M A M J J 2014 2015 2016 2017 2018 Source: Kantar Worldpanel Usage – 52 w/e June 2018 21 Total In Home/Carried Out food. Includes dishes/ingredients

Growth across all key health drivers. More natural grows the strongest with concern increasingly about ‘what is in rather than just what is not in my food’ Lower in fat/salt/sugar 8.7 More natural/less processed 15.0 To get portion of fruit or veg 2.6 Hlth benefits(fibre/vitamins) 6.9 Source: Kantar Worldpanel

How many ‘health’ benefits can you spot? 23

2. Fragmentation

We are increasingly seeing a fragmentation of the meal occasion Household occasions | Number of people present 6.8 4.1 10.2 1980 44.7 33% 34.2 1 person 2 people 3 people 4 people 5+ people KWP USAGE HOUSEHOLD OCCASIONS 25 52 w/e December 2017

Cutting a course : 312 million fewer dessert courses in the past 2 years (-3%)

Classic grocery options – seven outlets within a mile ‘Over half of us don’t decide what we’re having for dinner until lunchtime, 1 in 10 of us will decide just before we eat.’ Waitrose Food & Drink Report

3.‘Low effort’ to ‘Treat’

The average evening meal takes 34 minutes to prepare. Down from an hour 30 years ago Flat in recent years

Ease of preparation has become more important than speed 9.2 Total Consumption – Practicality Needs Servings Vert % 9 8.8 Easy to prepare 8.6 8.4 Quick to prepare 8.2 8 7.8 7.6 D M J S D M J S D M J S D M J S D 2014 2015 2016 2017 Source: Kantar Worldpanel Usage – 52 w/e December 2017 Total In Home/Carried Out consumption

Some moments are worth more than others £3.24 CELEBRATION £1.64 TOGETHER TIME £2.42 SPECIAL £1.88 Value per occasion (per capita) £1.26 ROMANTIC £1.31 SOCIAL IN FRONT OF THE TV £1.33 TREAT £1.21 CUPBOARD STOCK £1.00 FUEL £0.81 £0.80 IN FRONT OF PC A QUICK BITE £0.72 GRABBED £0.68 Level of emotional engagement ON THE GO KWP USAGE ROLLING 52 W/E OCTOBER 2017

90 Trips £3.9bn +2.5% £146

Bakery has returned to slight growth in the latest year with Wrapped outperforming ISB. However over 5 years the category has grown just 1.4% compared to the 6.6% growth Grocery has experienced £3.99bn £3.94bn 20.8 22.9 21.7 23.3 23.0 In Store Bakery 79.2 78.3 76.1 76.7 77.0 Wrapped 2014 2015 2016 2017 2018 Source: Kantar Worldpanel – Total Ambient Bakery – Value Share – 52 we Sep 2018