US Channel: Grocery Retailing Webinar
Change - Inside, Outside, and All Around
Presented by:
John Rand, Senior Vice President
Mike Paglia, Director of Retail Insights
Alida Destrempe, Senior Analyst
July 16, 2014
AGENDA
• The Who’s Who of Grocery
?
• The Changing Perimeter
© Copyright 2014 Kantar Retail
2
Leaders Dominant But Scale Not a Growth Driver
Ranks: % Sales Added (US Supermarket Sales – Supermarket Formats Only)
Retailer
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Kroger
Walmart*
Publix
Whole Foods
H-E-B
Top 5 Total
Ahold USA
Wegmans
Bi-Lo
Wakefern
Meijer**
Winco
Sprouts
Giant Eagle
Hy Vee
Tops Markets
Top 15 Total
Marsh
Supervalu
Fresh Market
Delhaize US
DeMoulas
Top 20 Total
Sales 2014E
(USD millions)
Sales 2019E
(USD millions)
Sales Added
2014E-2019E
% of Total Sales
Added 2014E-2019E
$93,704
9,495
29,807
13,528
19,494
$166,029
26,516
7,477
11,113
13,418
10,685
5,560
2,398
6,777
7,521
2,750
$260,242
1,113
10,945
1,642
16,541
2,631
$293,115
$118,391
31,978
37,109
19,828
24,719
$232,024
29,192
10,136
13,433
15,626
12,663
7,268
3,868
8,067
8,763
3,703
$344,744
1,999
11,819
2,178
17,074
3,143
$380,959
$24,687
22,483
7,302
6,299
5,225
$65,996
2,676
2,659
2,320
2,208
1,978
1,709
1,471
1,291
1,242
953
$84,502
886
874
536
533
512
$87,844
26.1%
23.7%
7.7%
6.7%
5.5%
69.7%
2.8%
2.8%
2.5%
2.3%
2.1%
1.8%
1.6%
1.4%
1.3%
1.0%
89.3%
0.9%
0.9%
0.6%
0.6%
0.5%
92.8%
*Walmart includes supermarket formats: Neighb orhoomd Market, Supermercado de Walmart, Walmart Express, other small 'test' stores
** Meijer includes grocery sales only
Source: Kantar Retail analysis; company reports
Top 20
supermarket
retailers
account for
92.8% of
sales added
from
2014E-2019E
Kantar tracks 72%
of the US
supermarket
channel
Data as of 5/28/2014
© Copyright 2014 Kantar Retail
3
Multiple Layers of Polarization
>8% of total supermarket sales growth will come from natural /
organic formats
65% of the growth in the channel will come from value oriented
operators – ~20% will come from retailers who position
themselves as premium
8 of the top 15 supermarket retailers run multiple formats
‘19E % to
Channel
‘14E-’19E
CAGR
Natural/Organic
5.0%
8.1%
Value
47.2%
6.0%
Premium
(ex. Nat/org)
20.8%
2.9%
Mainstream
26.1%
1.5%
Total Channel*
N/A
4.1%
Updated 7/14/14
Source: Kantar Retail analysis
*Channel includes supermarket sales only
(supermarket format only) and also includes
Walmart (supermarket formats only) as well
as Meijer (edible grocery sales only)
© Copyright 2014 Kantar Retail
4
What Drives Growth?
• Premium positioning or Value positioning
–What usually doesn’t work? “Mushy middle” traditional supermarket
• Natural / Organic – the “pure plays” report 8.1% CAGR but
natural offers within the regular grocery store often top 10%
• Reliable Pricing – both hybrid EDLP and pure EDLP significantly
out perform high-low promotional strategies
• Localization – both store variation and product variation to create
more effective offers that target shopper needs
• Experiential – good stores increasingly leverage the physical,
visual and tactile environment – if only because online is a top-ofmind threat
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
5
For Consideration, Some Examples:
Retailers Succeed in Different Ways
Price / Value
Walmart N.Mkt.
HEB
Kroger
Wakefern
Winco
Grocery Outlet
Product / Offer
Whole Foods
Sprouts
Meijer
Fresh Market
Chedraui
Source: Kantar Retail analysis
Where Does
Your
Customer Fit?
Undifferentiated
Delhaize
BiLo
Service / Premium
Publix
Wegmans
Harris Teeter
Mariano’s
Lund’s/Byerly
Local/Proximity
Ahold
Hy-Vee
Giant Eagle
Roundy’s
© Copyright 2014 Kantar Retail
6
An Emerging Framework for the Future Store
Where does your customer go?
HI
Convenient
(Limited)
LO
HI
Experiential
LO
Sources: Kantar Retail analysis
© Copyright 2014 Kantar Retail
7
Understanding the “Lo” and “High” Axis
Differences in Experience, Yet All Effective
The Experience:
“You feel you are
getting|
a good deal”
Source: Kantar Retail analysis; store visits
The Experience:
The Experience:
“Oh this
is
different”
© Copyright 2014 Kantar Retail
8
Chances for Success are Slim in the Middle
Either focused on price or premium (or something different)
Getting
squeezed
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
9
Grocery Outlook
Advanced, stable, pre-transitional
Advanced
•
•
•
•
•
Stable
•
•
•
PreTransitional
•
•
•
Source: Kantar Retail analysis
Expected to experience financial growth within the industry.
Retailers that have a clear brand message and strong
understanding of its shoppers.
Thought leaders and strong execution of strategies.
Example: Kroger, H-E-B
Retailers that are not at immediate risk, but there are gaps in
both execution and strategy.
Competent retailers that are relevant, but have a less clear
shopper base.
Steady outlook for growth.
Example: Ahold, Giant Eagle
Retailers that are troubled and are expected to have difficulty
sustaining growth without significant change. (minimal to low
growth)
Execute inconsistent strategies and lack shopper understanding.
Example: Safeway, Delhaize US
© Copyright 2014 Kantar Retail
10
Money $ and Time 
Critical calculations the RETAILER makes about SUPPLIERS
are similar
 Execution
 Predictability
 Reliability as trade
partner




Cost to Serve
Turns and Terms
Disruption at shelf
RISK
F

$*









Creative
Aligned
Contextual
Strategic
Transparency
Responsive
Fast
Effort
RISK
Are you functional to your customer?
What is the Time and Money equation for you compared to others?
Are you able to move past “F” to “E”
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
11
Money $ and Time 
From the Other side: the Critical calculations the SUPPLIER
makes about RETAILERS
 Service level
 Quality of product
 Consistency as a
trade partner





Cost : Absolute
Cost: Relative
Turns and Terms
Disruption at shelf
RISK
Source: Kantar Retail analysis
F

$*




Aligned
Strategic
Collaborative
Transparency




Responsive
Fast
Effort
RISK
© Copyright 2014 Kantar Retail
12
Aligning Beyond the Desk to a Mutual Shopper
The Supplier- Retailer Action Matrix
Capability
F
Wow
Retailer’s strategic focus on
in-store experience that
delights shoppers
Focus on the presentation in
the store
Now
A store environment that
enables immediate
fulfillment and saves time
Focus on shoppers’
efficiency of decision
Right
Retailers who create
convenience via a relevant
assortment for a wellunderstood shopper
Focus on assortment and
trend
Smart
A format that is easy to
navigate and access that
makes shoppers feel smart
by shopping
Focus on shopper
satisfaction

$*
F
Supplier Action

$*
F
Retailer Action

$*
F

$*
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
13
The Changing Perimeter
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
14
Perimeter Increasingly Popular Destination
How Shoppers Typically Shop Supermarket: Perimeter vs. Center Store
(past four-week supermarket shoppers)
Exclusively/
primarily shop
perimeter
2012 2014
Center Store
Exclusively/primarily
shop center store
33%
36%
Shop perimeter and
center store equally
2012
2014
2012
2014
15%
15%
46%
43%
Note: Arrows indicate significant year-to-year difference (95% confidence level)
Source: Kantar Retail ShopperScape®, February 2012 and 2014
© Copyright 2014 Kantar Retail
15
Let’s Walk Through…
Produce
Source: Kantar Retail analysis; store visits
Prepared
People
Price
© Copyright 2014 Kantar Retail
16
Produce
Highlights of Produce
Strongly executed and well merchandised
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
17
Produce
Innovative Produce Execution
The produce department is now a walk-in
"garden cooler," designed to keep food
fresher for longer.
Source: Kantar Retail analysis, RockTenn store visits
© Copyright 2014 Kantar Retail
18
Produce
It’s The Trip Driver
Being competitive here is a must
leaders
Large selection of nat/org produce items
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
19
Produce
Hannaford Discounts Produce
A cross-department promotion with produce not only builds awareness,
but ties back to an overall H&W theme.
Through the month of March, Hannaford was
offering USD10 off produce if shoppers signed
up for its Healthy Saver Plus program.
Launched March, 2014
Source: Kantar Retail analysis, Hannaford.com
© Copyright 2014 Kantar Retail
20
Produce
Fresh & Local Work Together
Read as: Among shoppers who say that a regional grocer is their primary grocery store, 21% said they had purchased a local food product at that store.
Note: Arrows indicate significant difference between regional grocers and national grocers (90% confidence level)
Source: Kantar Retail ShopperScape®, February and April
© Copyright 2014 Kantar Retail
21
Produce
Bringing Fresh into Dry Grocery
(or vice versa)
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
22
Speaking of Solutions…
Prepared
Meal solutions & services from the perimeter department
Leveraging
catering
department
Also highlighting online and in-store pick up
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
23
Prepared
Ramp Up in Deli & Catering Orders
A convenient offering
to-go
eat in
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
24
People
In-Store Restaurants Becoming the Next “Thing”
Enhancements include:
• Linen napkins
• Curtains (to separate
restaurant from store)
• Low tables for families
• New menu items
• Servers can now accept tips
A social
event &
opportunity
Source: Kantar Retail analysis, wegmanspub.com, hyveemarketgrill.com, company materials
© Copyright 2014 Kantar Retail
25
People
More Social with Service
Borrowing tactics from the warehouse club playbook
Demos throughout the store ranging from simple to elaborate
(almost theatrical).
Brings promotion campaign to life.
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
26
People
Stores as More Than Distribution Point for Goods
Targeted
Scaled
In store events serve multiple functions:
1. Create a new kind of trip driver
2. Change the fundamental role of store for the shopper
3. Community gathering space
Cooking
Connection
&
H-E-B
Showtime
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
27
Price
Where Does Price Come into Play
Think Wegmans! A Balancing Act
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
28
Price
What Are Other Retailer’s Doing?
Perimeter reflects center store
Projected dollar
growth
2014E-2019:
24.1% (CAGR 3.8%)
10.0% (CAGR 1.5%)
65.0% (CAGR 6.0%)
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
29
So Remember, The Next Time You Walk The
Perimeter.. Stop! And Look!
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
30
Implications
• Produce: Elements of the New Fresh
– Time and effort into displays, how can that be applied to center store?
– An increasingly aggressive position on product recalls, quality control, and ingredient issues has helped drive local sourcing
for transparency
– More cross merchandising will become popular where floor space allows as a way to overcome the margin and assortment
challenges. We are seeing more targeted off-shelf merchandising– solution oriented groupings beyond the traditional
temporary display.
• Prepared: Making the Solution Easy
– Integrating digital as a component of the larger convenience theme will become more important going forward
– Shoppers will increasingly demand time saving solutions that are also customizable to their specific needs
– Suppliers need to become more fluent in the new language of convenience
• People: Highlighting the Human Element
– Shoppers remember great service!
– Smart suppliers will figure out how to invest in exceptional service and tie it back to their brands
– As stores become community gathering spaces, their fundamental role in the shopper’s mind will change
• Price: The Bedrock
– Price will always be foundational, but it must be aligned to the store’s larger value proposition
– The common thread running through the perimeter and the center store
– A clear pricing message (either value- or premium- oriented) must be crystal clear in an age where everyone claims some sort
of price position
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
31
© Copyright 2014 Kantar Retail
Contact:
John Rand
Senior Vice President
john.rand@kantarretail.com
Mike Paglia
Director, Retail Insights
mike.paglia@kantarretail.com
T:+1 617-912-2860
M:+1 508-667-3321
www.kantarretail.com
T:+1 617-912-2855
www.kantarretail.com
Alida Destrempe
Senior Analyst – US Grocery
alida.destrempe@kantarretail.com
T:+1 614-355-4030
www.kantarretail.com
© Copyright 2014 Kantar Retail