Struct ctural l ch chang nges in in fo food od an and d gr - - PowerPoint PPT Presentation

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Struct ctural l ch chang nges in in fo food od an and d gr - - PowerPoint PPT Presentation

Nov 01, 2022 157 likes •458 views

Struct ctural l ch chang nges in in fo food od an and d gr groc ocery y mar arket an and d the pot otent ntia ial l im impact ct of of Brexi xit Richard Lim, CEO, Retail Economics There was significant growth in the number

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Struct ctural l ch chang nges in in fo food

  • d

an and d gr groc

  • cery

y mar arket an and d the pot

  • tent

ntia ial l im impact ct of

  • f Brexi

xit

Richard Lim, CEO, Retail Economics

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There was significant growth in the number of food stores throughout the UK…

Source: Retail Economics, Company reports 3.8% 5.4% 5.0% 9.2% 7.6% 9.2% 6.4% 9.0% 5.4%
  • 2.3%
0.1% 0.3%
  • 4.0%
  • 2.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % change year-on-year
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A reduction in household disposable income put a focus on value…

Source: Company reports
  • 6.0
  • 4.0
  • 2.0
0.0 2.0 4.0 6.0 8.0 10.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 % growth - year-on-year
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Consumer-driven structural changes

Structural Change

Physical channel shift Digital channel shift Discounters Lifestyle Experience economy
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Physical channel shift

62.9% 55.4% 21.0% 21.7% 6.2% 10.8% 4.4% 5.6% 5.4% 6.4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2014 2017 Supermarket Convenience Discount Online Other Source: IGD
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Higher frequency of shopping has reduced average basket values…

Source: Nielsen Homescan 157 179 130 140 150 160 170 180 190 2013 2018

Annual food shopping trips per buyer

£21.18 £19.45 £18.00 £19.00 £20.00 £21.00 £22.00 2013 2018

Average basket value (£ - volumes)

  • 8.2%
average basket value +14.3% more shopping trips
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Online food sales have more than doubled from 2010 to 2017…

Source: Retail Economics 4,416 6,103 10,032 3.5% 4.4% 6.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
  • 1,000
1,000 3,000 5,000 7,000 9,000 11,000 13,000 15,000 2010 2013 2017 % of food sales online Online food sales (£m) Online Food (£m) LHS Penetration online food (%) RHS
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Comparisons of market share shift – Big Four versus Discounters

Source: Kantar Worldpanel 64 66 68 70 72 74 76 78 2 4 6 8 10 12 14 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Market Share of Big Four (%) Market Share of discounters (%) Aldi and Lidl Big Four
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A period of strategic transformation..

Strategic transformation Reshaping cost base New markets and new strategic partnerships Accelerating convenience and ecommerce Differentiated proposition
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The convenience market has become much more competitive as multiples grow market share...

Source: Retail Economics, ACS 18,826 17,816 13,538 12,378 8,377 8,593 3,756 4,940 2,277 2,535 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 2013 2018 Number of stores Independent Symbol Group Forecourt Multiple Co-Operative
  • 7%
  • 9%
+3% +32% +11%

32%

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Own-label versus brands…

Source: The Grocer

55% 45% 45% 33% 26% 45% 55% 55% 67% 74%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Chilled food Frozen food Dairy Canned food Ambient food Own label Brands
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T esco, Sainsbury’s and Morrisons have reduced their workforce for the last three years…

Source: Company reports, Retail Economics analysis 2.6% 2.0% 1.8% 1.8% 1.6% 2.0% 1.1% 0.9%
  • 0.4%
  • 0.5%
  • 2.4%
  • 3.0%
  • 2.0%
  • 1.0%
0.0% 1.0% 2.0% 3.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % change year-on-year
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Driven by concerns over Brexit…

Source: Retail Economics

6% 6% 5% 14% 8% 12% 49% 6% 4% 6% 9% 11% 16% 49% Rising inflation Rising interest rates Weaker job security Weaker economy Repayment of debts and loans Lack of savings Brexit

April 2019 January 2019
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Food and drink imports into the UK…

Source: Retail Economics

£48 billion

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Most food imports are from the EU…

£34 billion EU £14 billion Non-EU

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EU is by far the largest import market for the UK…

Top

  • p 10

10 Wor

  • rldwide

ldwide Mark rkets ts

US 3% South Africa 2% Thailand 2% New Zealand 2% China 1% Brazil 1% Chile 1% India 1% Rest of World 15% Netherlands 12% France 10% Germany 10% Irish Republic 9% Spain 7% Italy 6% Belgium 5% Poland 4% Denmark 3% Other EU 5%

EU EU 72% 72%

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UK food retailers will face the highest new tariffs from the EU…

4% 10% 11% 27% 0% 5% 10% 15% 20% 25% 30% Non-Food Cars Apparel Food and Drink Average weighted tariff

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Cost of sourcing food from EU in event of no-deal rises by:

Source: Retail Economics

£9.3 billion

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Hard Brexit would have a significant impact

  • n the UK economy…

Unemployment forecast Inflation forecast

Source: Bank of England
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Cost of sourcing food from EU in event of no-deal rises by…

Source: Retail Economics

£1 billion

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UK no-deal tariff rates and TRQs

UK no-deal ta tariff rate rates an and TRQ RQs fo for r sele lected ite items

Tar ariff iff cod

  • de

Product EU MFN rate UK MFN rate UK TRQ 02012020 Fresh beef quarters 12.8% + 176euro/tonne 6.8% + 93 euro/tonne 125,000 tonnes (for all fresh/ chilled beef products 04 04051011 Naturel butter in packs 189.6 euro/100kg 60.5 euro/100kg N/A 04 04069021 Cheddar cheese 167.1 euro/100kg 22.1 euro/100kg N/A

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What should we focus on…

  • 1. Tariffs rates need to change following a ‘no-deal’ Brexit to combat price rises [Bank of

England projections]

  • 2. The government is proposing to scrap most tariffs at least for a temporary period
  • 3. Tariff reductions will reduce the cost of importing from outside the EU
  • 4. Large non-EU agricultural producers will benefit from significant reductions in food and

drink tariffs

  • 5. EU meat and dairy suppliers will face new duties
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Are retailers prepared for a no-deal scenario?

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Are retailers prepared?...

36%

Little to no preparation Very under prepared

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Retailers’ biggest concerns are…

64% 56% 52% 44% Supply chain management Labour (availability and cost) Tariff costs Continuity of supply

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Final thoughts…

  • Outcome of Brexit remains uncertain but retailers’ attentions focused on

their core business

  • Priorities are on:
  • Fewer stores and repurposing space
  • Driving efficiency through simpler business models
  • Scale though partnerships and acquisition (maybe?)
  • Store-in-store concept to drive footfall
  • Fewer workers and utilising technology
  • Driving online convenience – Uber Eats, Deliveroo, Just Eat
  • Pivoting business models to more sustainable footing
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Get in touch

richard.lim@retaileconomics.co.uk +44(0)20 3633 3698 www.retaileconomics.co.uk