April / 2012
Industry Outlook
Grocery Channel
/ Authors
John Rand
Senior Vice President
Mike Paglia
Senior Analyst
Alida Destrempe
Analyst
About Kantar Retail
Kantar Retail
Two Easton Oval
Suite 500
Columbus, OH 43219
USA
1.614.355.4000
Cannondale Associates, Glendinning Management Consultants, MVI and Retail
Forward combine to create Kantar Retail, the world’s leading retail insights and
consulting business. Kantar Retail (www.kantarretail.com) works with leading
retailers and branded manufacturers to transform the purchase behavior of
consumers, shoppers and retailers. The company solves client issues from
10th Floor
245 First Street
Cambridge, MA 02142
USA
1.617.4100
strategic to tactical and provides organizations with the skills and capabilities to
act. Kantar Retail offers clients better internal alignment and project efficiency,
from insight through strategy to activation, and across marketing through
category to sales. Kantar Retail has nearly 400 employees and offices in 15
markets around the globe. The company is headquartered in London and is part
6 More London Place
Tooley Street
London, England
SE12QY
UK
+44.207.031.0251
of the Kantar Group of WPP.
/ Table of Contents
• Macro Environment
6-14
• A Glimpse of Major Players and Performance
15-42
• A Look at “The Big Three”
43-64
• Shopper Loyalty is a Muddle
65-89
• The Supermarket Pricing War
• Key Channel Initiatives
90-119
120-161
3
/ A Glimpse of Major Players and Performance
• Channel Performance
16-20
– Forecast Snapshot by Channel
– Edible/Non-Edible Sales
• Changes in Rank – Scale Does Not Equal Success
21-32
– Retailer Rankings
– Channel Growth Comes from the Middle
• Market Share- Who is Winning and Losing?
33-42
4
US Sales by Format
Supermarkets Growing Share
Channel
$131
$167
2,000
Sales in Billions ($)
1,600
$100
$99
1,200
$364
800
$45
$109
$44
$130
400
$323
2006
1.0%
4.4%
Clubs
Clubs
5.2%
5.5%
Category
Specialist
Category
Specialist -0.1%
3.3%
$426
Convenience
Convenience
1.4%
2.9%
Department
Department
-2.2%
2.5%
$363
$56
$111
$94
Discounter
Discounter
7.8%
7.8%
Drug
Drug
5.0%
4.6%
$302
Supercenter
Supercenter
5.3%
3.1%
$259
$106
Mass
Merch
(no(no
SC)
Mass
Merch
SC) -3.1% -0.7%
$110
$113
$197
$364
$432
$48
$98
$64
$166
$208
NOTE: Data as of 11/17/2011
Apparel
Apparel
$105
$128
$201
$128
$72
CAGR
CAGR
'06-'11E '11E-'16E
2011E
Non-Store
Retail
Non-Store
Retail
9.5% 11.7%
Supermarket
Supermarket
2.4%
3.5%
KR Channel Totals
2.4%
4.2%
2016E
Source: Kantar Retail analysis; Company Reports
5
Where Else Do Conventional Grocery Shoppers Go?
If 100% of the sample shops grocery stores, the
following %’s also shop these channels:
(Past Four-Week Shoppers, January-December 2011)
Walmart/Walmart Supercenter
65%
Amazon.com
44%
Target/Super Target
43%
Walgreens
39%
CVS/pharmacy
35%
The Home Depot
31%
Kohl's
30%
JCPenney
29%
Lowe's
Dollar Tree
29%
26%
Best Buy
22%
Dollar General
22%
Source: Kantar Retail ShopperScape®,
January – December 2011
6
Non-Edible Grocery Sales %
100%
90%
80%
$706
$887
$1,086
0%
4%
1%
9%
1%
5%
1%
1%
6%
70%
17%
60%
5%
50%
15%
9%
5%
16%
7%
1%
10%
Non Store Retail
Discounter
Department
Cash and Carry
5%
Convenience
Drug
17%
Mass Merch Excluding Supercenter
USD Billions
Hypermarket
5%
20%
4%
19%
40%
Supermarkets have the
highest % of non-edible sales,
yet losing ground.
30%
20%
43%
Supermarket
38%
36%
10%
0%
2006
2011E
2016E
Note: %s are Kantar Retail estimates
Source: Kantar Retail analysis; Company Reports
7
Edible Sales % by Channel
Grocers Lose Share But Still Dominant
$445
$554
0%
1%
5%
90%
9%
10%
80%
6%
2%
2%
100%
70%
4%
17%
60%
$679
0%
1%
1%
6%
5%
3%
2%
21%
1%
11%
5%
3%
2%
Non Store Retail
Discounter
Department
Cash and Carry
Convenience
Drug
Mass Merch Excluding Supercenter
20%
Hypermarket
Supermarket
50%
40%
30%
58%
53%
51%
2011E
2016E
20%
10%
Supermarkets share
declines in edibles are
quite modest
compared to past
years.
0%
2006
Source: Kantar Retail analysis; Company Reports
8
/ A Glimpse of Major Players and Performance
• Channel Performance
16-20
– Forecast Snapshot by Channel
– Edible/Non-Edible Sales
• Changes in Rank – Scale Does Not Equal Success
21-32
– Retailer Rankings
– Channel Growth Comes from the Middle
• Market Share- Who is Winning and Losing?
33-42
9
Top 3 US Grocers Account for USD162 Billion by 2016E
(US Supermarket Sales)
Sales (USD billions)
KR Top Supermarket Retailers
Square Footage (millions)
US Rank
2011E
Sales
Retailer
1
Kroger
$
56.0 $
75.1 $
95.7
6.0%
2
Safeway
$
34.6 $
34.6 $
36.9
3
Supervalu*
$
34.2 $
29.2 $
4
Publix
$
21.5 $
5
Ahold
$
6
Delhaize
2006
2011E
Sales
2011E
Sq Ft
0.5%
19.4%
17%
0.2%
-0.1%
8.9%
10%
83.7
-2.3%
1.5%
7.6%
10%
49.3
55.9
3.9%
2.5%
7%
7%
36.9
38.7
40.2
0.9%
0.8%
6%
5%
1.4%
56.9
59.7
60.5
1.0%
0.3%
5%
8%
2.2%
3.2%
277.9
274.9
284.0
-0.2%
0.7%
36%
37%
241.2
2.5%
3.0%
412.5
422.6
440.7
0.5%
0.8%
54%
57%
179.0 $
226.9
3.0%
4.9%
336.1
322.4
391.9
-0.8%
4.0%
46%
43%
387.1 $
468.0
2.7%
3.9%
748.6
745.0
832.5
-0.1%
2.2%
100%
100%
2011E
2016E
CAGR
CAGR
('06-'11E) ('11E-'16E)
% of US Totals
CAGR
CAGR
('06-'11E) ('11E-'16E)
2006
2011E
2016E
5.0%
119.4
125.0
128.4
0.9%
0.0%
1.3%
71.5
72.3
71.9
29.7
-3.1%
0.3%
87.0
77.5
26.1 $
31.3
3.9%
3.7%
40.8
20.3 $
24.4 $
27.5
3.8%
2.4%
$
17.2 $
18.8 $
20.1
1.8%
Top 3 US Supermarket
$
124.8 $
138.9 $
162.3
Top 6 US Supermarket
$
183.9 $
208.1 $
All Other US Supermarket
$
154.6 $
Total KR US Supemarket
$
338.4 $
* Figures include Save-A-Lot. Does not include wholesale.
Kroger leads, Safeway follows, and Supervalu is just trying to stay in the race.
“All Other” grocers beyond the Top 6 continue to keep pace in growth
Source: Kantar Retail analysis; Company Reports
10
“Fifty-Fifty” for the Top 10 Grocers
National Retailers Ranked Top 5, Yet Remaining are Regional
Total Edible Grocery Sales Only
Rank
Rank
Expected
Retailer
2016E
2011E
Movement
1
1
Walmart
2
2
Kroger
3
3
Costco
4
4
Safeway
6
5
LOSS LEADER Supervalu
5
6
Up
Publix
(Total
Edible
Grocery
Sales
Only)
7
7
Ahold
9
8
Down
Delhaize
8
9
Up
Aldi/Trader Joes
10
10
H-E-B
Top 10 (Edible Grocery Only)
12
11
Down
Wakefern
11
12
Up
Target
Edible Grocery Sales (USD Millions)
% of US
CAGR
CAGR
Total ('11E) '06-'11E '11E-'16E
2006
2011E
2016E
$
87,902 $
131,364 $
161,325
23.5%
8.4%
4.2%
47,179
63,363
82,623
11.3%
6.1%
5.5%
22,612
33,476
46,634
6.0%
8.2%
6.9%
27,835
25,983
28,427
4.6%
-1.4%
1.8%
28,770
24,971
24,406
4.5%
-2.8%
-0.5%
17,544
21,610
25,509
3.9%
4.3%
3.4%
16,604
20,035
22,927
3.6%
3.8%
2.7%
13,909
15,804
17,517
2.8%
2.6%
2.1%
7,506
13,335
19,906
2.4%
12.2%
8.3%
9,067
12,082
14,653
2.2%
5.9%
3.9%
278,928
362,022
443,926
64.8%
5.4%
4.2%
8,024
11,031
14,343
2.0%
6.6%
5.4%
4,963
9,091
14,377
1.6%
12.9%
9.6%
Note: %’s are Kantar Retail estimates. Data as of 11/17/11
Source: Kantar Retail analysis; Company Reports
11
Growth No Longer Consolidated to a Few Large,
Efficient Players
Top 20 Supermarket Retailers Account for 90% of Sales Added from 2011-2016
Rank % Sales Added (US Supermarket Sales)
Retailer
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Kroger
Walmart (supermarkets only)
Whole Foods
Publix
Wakefern
Top 5 Total
H-E-B
Ahold
Wegmans
Safeway
Meijer*
Winco
Delhaize
Hy Vee
Sprouts
Giant Eagle
Top 15 Total
Tesco
Fresh Market
Ingles
DeCA
Harris Teeter
Top 20 Total
Sales 2011E
(USD millions)
$75,056
4,132
9,834
26,066
11,666
$126,753
15,933
24,392
6,240
34,563
10,372
4,619
18,782
6,792
1,139
6,357
$255,943
958
1,090
3,390
5,293
4,286
$270,959
Sales 2016E
(USD millions)
$95,716
13,239
15,620
31,295
15,095
$170,966
19,309
27,498
9,180
36,863
12,655
6,208
20,089
8,038
2,353
7,430
$320,590
1,964
1,694
3,960
5,856
4,830
$338,895
Sales Added
% of Total Sales
2011E-2016E Added 2011E-2016E
$20,661
27.5%
9,107
12.1%
5,787
7.7%
5,229
7.0%
3,429
4.6%
$44,213
58.9%
3,376
4.5%
3,106
4.1%
2,940
3.9%
2,300
3.1%
2,283
3.0%
1,589
2.1%
1,307
1.7%
1,246
1.7%
1,213
1.6%
1,074
1.4%
$64,647
86.2%
1,007
1.3%
603
0.8%
570
0.8%
563
0.8%
545
0.7%
$67,936
90.5%
*Total Grocery only. NOTE: All data as of 11/17/11
Source: Kantar Retail analysis; Company Reports
12
Growth From the Middle
Sales Growth as a % of Total Growth: ’11E – ’16E
Rank 36-50
2.8%
Rank 21-35
7.1%
Rank 10-20
16.0%
Rank 7-9
11.1%
Rank 4-6
2nd and 3rd tier grocers account
for roughly 30% of growth
through 2016E. Includes:
• Ahold
• Delhaize
• HEB
• Wakefern
• Winn Dixie
• Whole Foods
16.0%
Top 3
47.4%
0%
10%
NOTE: Data as of 11/17/2011
20%
30%
40%
50%
Source: Kantar Retail analysis; company reports
13
Total Square Footage Added By KR Chains
2006-2016E
175
Millions of Square Footage Added
(KR Chains)
157
156
150
125
100
71
75
62
62
63
64
63
2012E
2013E
2014E
2015E
2016E
48
50
34
27
25
2006
2007
2006–2007 Average:
156.5 MM SqFt
2008
2009
2010
2011E
2008 – 2011E:
Square footage added by only
most well-grounded chains
2012E –2016E Average:
63 MM SqFt
Source: Kantar Retail analysis; Company Reports
14
Stores Are Getting Smaller as Well
Median Total Store Size – Square Feet
Square Footage
50,000
40,000
30,000
Source: Kantar Retail analysis; Food Marketing Industry Speaks 1996 - 2011
15
Scale Doesn’t Always Equal Success:
Regional Retailers Doing Better
2011E Supermarket Sales
Growth Over PY
12.00%
8.00%
4.00%
Supervalu
Safeway
Delhaize
Supermarket
Giant Eagle
Publix
H-E-B
Kroger
Ahold
Winco
Wakefern
Wegmans
-4.00%
Whole Foods
0.00%
Source: Kantar Retail analysis; company reports
16
Regional Stores Perform Better
Average Sales Per Square Foot
Forecast
$1,200
$1,000
$800
KRO
$600
SWY
$400
SVU
KRO
$200
2008
Ahold
2009
Delhaize
2010
2011E
Giant Eagle
2012E
H-E-B
2013E
2014E
SWY 2015E
Publix
Kroger, Safeway, Supervalu
2016E
Wakefern
Wegmans
SVU
Source: Kantar Retail analysis; company reports
17
Regional Store Growth
Slight Growth Across all Banners
1650
1,627 1,649
2010
1450
2011E
1250
1,173
1050
1,216
850
650
751 768
450
250
50
384 403
299
312
197 197
273 291
76
79
Source: Kantar Retail analysis; company reports
18
Regional Performance Outlook
Above Industry Average
Retailer
Store '11E - '16E
CAGR
Sales '11E - '16E
CAGR
Ahold US
1.10%
2.80%
Delhaize US
0.80%
2.00%
Giant Eagle
2.30%
3.60%
H-E-B
2.40%
4.00%
Meijer
0.50%
4.00%
Publix
3.20%
3.90%
Wakefern
2.30%
5.40%
Wegmans
2.90%
8.00%
Supermarket Channel
1.40%
3.50%
Greater than industry
average
Source: Kantar Retail analysis; company reports
19
Implications:
• CPG companies have historically invested more with large-scale
retailers
– Unfortunately, scale alone is not a predictor of success
– It was before the recession
– But we’re in the post modern marketplace now
– Real dollar sales growth is coming from companies with
smaller scale
• Standard or all-channel approaches to customers aren’t very
well aligned to the unique circumstances of working with
regional retailers
Source: Kantar Retail analysis
20
/ A Glimpse of Major Players and Performance
• Channel Performance
16-20
– Forecast Snapshot by Channel
– Edible/Non-Edible Sales
• Changes in Rank – Scale Does Not Equal Success
21-32
– Retailer Rankings
– Channel Growth Comes from the Middle
• Market Share- Who is Winning and Losing?
33-42
21
Store Productivity vs. Market Share
A market level look at your retailer allows you to
target your resources more effectively
Hi Productivity / Low
Share
Invest and Grow or
Harvest
Low Share/Low
Productivity
Market exits /
Swaps
Hi Share/Hi
Productivity
Defend and Grow
High Share / Low
Productivity
Decline or Change
Share in Market
Source: Kantar Retail analysis
22
Before Going Further…Here’s the Key to
Understanding These Charts
Banner name
Sales per sq. ft
Directional
change of market
share (‘09-’11)
Store count
in market
Source: Kantar Retail analysis
23
Store Productivity vs. Market Share
Houston
$1,000
HEB
($949)
76
$600
Randall's
($469)
Houston belongs to H-E-B
110
Kroger
($629)
83
WMT
Superctr
($396)
35
33
Fiesta Mart
($366)
HEB is the one regional
chain whose market share
takes up nearly two-thirds
of the local supermarket
dollar in two Texas metro
areas. The retailer’s habit of
tailoring individual stores to
the specific needs of
neighborhoods has fueled
much of that growth and
strong market position.
$200
0.0
18.0
Share in Market
36.0
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
24
Store Productivity vs. Market Share
Atlanta
Regional and National
Grocery vs. Walmart:
$800
Kroger
$629
Publix
$528
Kroger has held its own and
even made strong gains while
competing with Walmart in
Atlanta, as it continues to
implement strategies such as
renovating stores as well as
improve areas where Walmart
doesn’t have its greatest
strengths.
148
156
$510
79
56
All American
$260 24
Ingles
$308
WalMart
$390
$220
0
18
Share in Market
36
Publix is also gaining share in
Atlanta which has come after
years of expansion, marketing,
and focus on quality and store
presentation. Publix also is
only in five Southern states,
which could give the company
a better handle on the
southeastern consumer.
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
25
Store Productivity vs. Market Share
Cincinnati
$750
Kroger
($629)
Cincinnati is Kroger
Territory
243
G.E.
($450)
WMT
Superctr
($396)
$500
29
Meijer
($386)
42
Kroger is the dominate
retailer in Cincinnati and has
either the number 1 or 2
market share position in all
markets of operation. Kroger
has been able to maintain and
grow its market share by
offering competitive low
prices and loyalty programs
that offer shoppers discounts.
117
14 Save-A-Lot
($321)
$250
-
25.0
Share in Market
50.0
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
26
Store Productivity vs. Market Share
Los Angeles
$750
Stater Bros.
($641)
West Coast is Safeway’s
Core Market, yet Kroger
Leads Share
Ralphs
($495)
167
Safeway’s core operating
market is in the West Coast.
Yet within the Los Angeles
market, Kroger banner Ralphs
stores are more productive
and are gaining share faster
than Safeway. Ralphs has the
potential to continue to gain
share profitability in the
future as the retailer recently
launched a new EDLP strategy
for its stores.
Vons
($434)
396
$500
272
Albertsons
(SVU)
($330)
$250
-
12.5
Share in Market
25.0
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
27
Store Productivity vs. Market Share
Philadelphia
$900
53
A&P
$845
SuperValu
$587
135
Ahold
Giant Food
$643
Philadelphia: A Market of
Regional Dominance
137
Regional supermarkets are
the key players that are
gaining store profitability on
top of share within
Philadelphia, where national
retailers such as Supervalu
and Walmart are losing their
dominate position.
$450
121
Weis
$345
61 Walmart
$390
$0
0
18
36
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
28
Store Productivity vs. Market Share
Miami
Florida is Publix Territory
$800
Publix continues to be the
dominate player within many
Florida markets as Florida is
the retailer’s primary
operating state and it
saturates the market. With its
strong brand and store
penetration, Publix continues
to gain share and beat
competitors by emphasizing
service and a family-friendly
image.
Publix
$528
235
WalMart
$390
$510
Target
$290
$220
0
28
91
10
31
Sedanos
$275
Winn-Dixie
$301
30
60
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
29
Retail Leadership Coming From One of Two Basic
Areas
Leaders are growing in one of two primary ways:
– Market Density – Maximize Market Share - Tailors
• Market density and saturation
• Format prototyping
• Store of the community
• “I know the markets I operate in”
– Consumer Segmentation – Expand Share of Wallet From a Chosen
Focused Consumer - Choosers
• Differentiated brands/stores/experiences
• New category introduction
• Loyalty card for 1:1 marketing
• Aggressive brand marketing
• “I know the person/people I’m selling to”
Source: Kantar Retail analysis
30
John Rand
Senior Vice President
John.Rand@kantarretail.com
617-588-4133
Mike Paglia
Senior Analyst
Mike.Paglia@kantarretail.com
617-588-4123
Alida Destrempe
Analyst
Alida.Destrempe@kantarretail.com
617-588-4133