Loose Change:
What’s New in the Dollar Channel?
Presented by:
Mike Paglia- Director, Retail Insights
Subscription Webinar Series
14-March-2014
Value Discounter Workshop | April 22 – 23, 2014 | Nashville, TN
Key Questions This Workshop Will Answer:
• Where are Family Dollar and Dollar General growing? And how long
can they maintain their pace?
• How should suppliers approach smaller “opportunity accounts” like 99
Cents Only and Dollar Tree?
• What are the best practices suppliers need to win in this channel?
• How are tech-savvy Millennials shopping this space?
For more info on this event visit
http://www.kriq.com/Events/EventDetails.aspx?id=599125 Or contact
events@kantarretail.com
© Copyright 2014 Kantar Retail
Copyright © 2014 Kantar Retail. All Rights Reserved.
501 Boylston Street, Suite 6101, Boston, MA 02116
(617) 912- 2828
howard.zimmerman@kantarretail.com
No part of this material may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photography, recording, or any information storage and retrieval system now known
or to be invented, without the express written permission of Kantar Retail.
The printing of any copies for back up is also strictly prohibited.
Disclaimers
The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views
expressed do not necessarily reflect the views of the management of the retailer(s) under discussion.
This seminar is not endorsed or otherwise supported by the management of any of the companies covered
during the course of the workshop or within the following slides.
© Copyright 2014 Kantar Retail
Agenda
• What Does “Value” Mean Today?
• Lidl Coming to the US (?!)
• Understanding a Post-Bloom Family Dollar
© Copyright 2014 Kantar Retail
4
“Value” is a Nebulous Term
Even in the “value” channel
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
5
The idea of Value is More Like This
VALUE
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
6
Higher Income Households Gaining Share of Shopper Base
Low income remains as core
Income Profile of P4Wk Discounter Channel Shoppers
35%
2008
2013
30%
25%
20%
15%
10%
5%
0%
5 year
change
<$25k
$25k-$49.9k
$50k-$74.9k
-100 bps
-200 bps
-100 bps
Source: Kantar Retail ShopperScape®, Jan-Dec 2008, Jan-Dec 2013
$75k-$99.9k
+100 bps
$100k+
+200 bps
© Copyright 2014 Kantar Retail
7
New Shoppers Coming from Surprising Places
Grocers among the biggest donors
Percent of FDM Retailers' Past 4 Week Shoppers Who Also Shop DG or FD
2008-2013 PPD
Dollar General
Family
Dollar
5.7
3.6
4.5
4.3
4.5
3.4
4.3
3.0
3.3
2.7
3.0
2.9
0.5
2.6
Source: Kantar Retail ShopperScape®, Jan-Dec 2008, Jan-Dec 2013
© Copyright 2014 Kantar Retail
8
Clubs Seeing Their Cross Shopping Growing
Club Channel Cross Shopping Trend
Costco Cross Shopping Trend
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
Dollar Tree
Dollar General
Family Dollar
Aldi
Dollar Tree
BJ's Cross Shopping Trend
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
Family Dollar
Dollar General
Source: Kantar Retail ShopperScape®, December 2013
Dollar General
Aldi
Sam's Cross Shopping Trend
50%
Dollar Tree
Family Dollar
Aldi
Dollar Tree
Family Dollar
Dollar General
Aldi
© Copyright 2014 Kantar Retail
9
Discounter Shoppers Becoming More Value Focused
What Matters to Past Four-Week Discounter Channel Shoppers
(% ranking factor among top four most important when shopping)
Source: Kantar Retail ShopperScape®, January 2013
© Copyright 2014 Kantar Retail
10
Relevance to Shopper is Key
Revisit the definition of value
Core Shopper
Trade In Shopper
This is my world. I’m….
List driven
More flexible
Cash strained
“Investable” cash
Mission: spend less
Mission: get a “good deal”
When I’m in the store, I’m thinking….
Make this trip (or the next one) cheaper
Make this trip more productive
Focus on need based items
Open to discretionary categories
Don’t tempt me
Make it worth the extra money
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
11
As Discounters Gain Mainstream Appeal,
Balancing act between functional & emotional value prop
Absolute price value
Comparability to
brands
Source: Kantar Retail analysis, store visits
Low to premium brands
© Copyright 2014 Kantar Retail
Assortment Aligning to Value Statements
Unequivocal price points
Source: Kantar Retail analysis; store visits; company website
Value packs
© Copyright 2014 Kantar Retail
13
Promotions Require Nuanced Approach
“Value” manifests in different ways
Absolute value promotions
Source: Kantar Retail analysis; company materials; store visits
Relative value promotions
© Copyright 2014 Kantar Retail
14
Essential to Get the Message Right
Across media and platforms
Source: Kantar Retail analysis; company website and materials
© Copyright 2014 Kantar Retail
15
How Do I Get It Right?
• NOW
–Understanding the core shopper is the first step
• Build the foundation
–Incorporate insights on emerging groups
• The story is in the differences
• LONGER TERM
–Responsibility extends beyond the sales team
• Brand marketing
• Supply chain
• Manufacturing
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
16
Agenda
• What Does “Value” Mean Today?
• Lidl Coming to the US (?!): Who, What, When, Where, Why, How
• Understanding a Post-Bloom Family Dollar
© Copyright 2014 Kantar Retail
17
What and Why: Lidl Confirms US Entry
Source: Kantar Retail analysis; german-retail-blog.com
© Copyright 2014 Kantar Retail
18
Who is Lidl?
Growing at a CAGR of 4.4% (2012-17)
Sales
Stores
60.0
$57.1
12,500
$54.8
$52.6
12,241
$50.4
Sales EUR Billion
50.0
$48.2
$46.2
12,000
11,876
11,500
40.0
11,497
SALES CAGR 2012-17
1-4%
4-7%
11,000
11,107
7-12%
30.0
10,710
20.0
10,500
12%+
10,287
10,000
10.0
9,500
0.0
9,000
2012
2013
2014
Source: Kantar Retail analysis
2015
2016
2017
© Copyright 2014 Kantar Retail
19
Who is Lidl?
Tapping into convenience shopper missions
Convenience layout of Lidl
7 Tills – no conveyor belts
Shopping
carts £1) &
baskets that
roll (free)
Pick N
Mix
fruit/nu
ts and
candy
Chilled
single
units
Intl food specials (ES, Greek, American)
F
r
o
z
e
n
V
e
g
D
a
i
r
y
Nonfood
Bakery
Chilled
drinks/snacks/sandwich
branded coffee stations
es
Source: Kantar Retail analysis
Impulse:
single
units
candy &
snacks a
mix of
brands
and PL
Fresh meats –
beef and
chicken
B
r
e
a
d
s
Lidl has also rolled-out
contactless payment in
several markets to speed up
queuing times. This is
helping Lidl become more
convenient in terms of in
store shopping
© Copyright 2014 Kantar Retail
20
Who is Lidl?
Driving value via multiple promotional efforts
• Lidl is clearly relying more heavily on brands and promotions to
drive traffic and basket
• 20-30% of Lidl promotions are now on branded items (average)
• Main promotional mechanics being implemented by Lidl:
Source: Kantar Retail; Lidl promo
© Copyright 2014 Kantar Retail
21
How Does Lidl Work?
Brands are a key part of the value proposition
THE ROLE OF BRANDS
1. Acceptance
•
Drive shopper/household penetration through
helping to develop the discounters’ image as
an acceptable place to shop.
Lidl has historically showcased PL as its
key USP
2. Conversion and Penetration (and margin)
•
Leading brands help to convert discounter
shoppers to purchase in the category. Drive
penetration in existing categories or help
launch new categories.
3. Comparison
•
Provide a basis for comparison to private
label brands
Source: Kantar Retail analysis
Lidl is now drawing more attention to its
branded offer
© Copyright 2014 Kantar Retail
22
How Does Lidl Work?
Efficiency demanded throughout the whole demand chain
Distribution
Center
• Pallets throughout the
channel
• Desired inventory levels
are balanced with cost
Store
Shopper
• Pallets or Case Packs
• Desired look and category
determine merchandising
format
• Driving, walking, biking
or using public transport
Your role
Pallet Optimisation
Source: Kantar Retail analysis
Packaging appearance,
restocking and checkout
efficiency
Analysis and
identification of high
demand products
© Copyright 2014 Kantar Retail
23
How Does Lidl Work?
Comfortable with localization and differentiation
Lidl’s marketing efforts (1 now – 1 later
promotion and “better life” for livestock)
build value beyond price
Rounded price point promotions
help Lidl enhance ,differentiate in
markets where it competes with Aldi
Lidl’s promo strategy is
significantly deeper than its
discounter rivals in Germany,
constantly switching between
themes such as XXL week,
Brand Week, and Fresh
Mondays.
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
24
How Does Lidl Work?
Market specific strategy to assortment
UK
Category
Share
of total
SKUs
Share
of total
SKUs
Category
3.5%
Dairy
17.1% Dry grocery
2.8%
Dairy
8.5%
Dry grocery
2.8%
HBC
5.9% Frozen food
4.5%
HBC
4.5%
Frozen food
5.2%
n/a
Canned food*
5.5%
Confectionary
3.8%
Refrigerated
packaged food
9.0%
Fruit and
vegetables
5.5%
Bakery
2.1%
6.1% Dry grocery
2.1%
3.1% Canned food*
4.2%
Refrigerated
food
8.1%
Fruit and
vegetables
5.9% Bakery
2.1%
Meat
2.3% Tea/coffee
3.6%
Beverages
5.0% Impulse (till)
2.4%
Snacks
4.5% Cereals
2.1%
Biscuits
2.7% Spreads
1.7%
NON FOOD
Pet food
Household
TOTAL SKUs
Eggs, sugar,
8.4%
cake mix
1.7% Tissues
5.1% newspapers
1658
Source: Kantar Retail analysis
1.9%
0.6%
0.5%
Share of
total
SKUs
Condiments
Dairy
OTC drugs
Share of
total
SKUs
9.9%
Alcohol
5.9%
Category
Alcohol
2.9%
5.9% Frozen food
Share of
total
SKUs
3.5%
6.7% Condiments
HBC
Share
of total
SKUs
7.1% Condiments
Alcohol
Confectionary 4.6%
POLAND
FRANCE
OTC drugs
Confectionary
Fruit and
vegetables
Meat
n/a
Canned food*
4.2%
Refrigerated
4.1%
10.1%
packaged food
OTC drugs
4.7% Bakery
2.3%
1.5% Tea/coffee
1.7%
Meat
2.4%
Tea/coffee
3.8%
Beverages
3.5% Impulse (till)
1.4%
Beverages
5.2%
Impulse (till)
1.4%
Snacks
2.9% Cereals
1.2%
Snacks
2.4%
Cereals
2.1%
Biscuits
0.4%
Biscuits
2.8%
Spreads
0.3%
NON FOOD
7.6%
Eggs, sugar,
cake mix
2.9%
Pet food
3.4% Spreads
Eggs, sugar,
8.9%
cake mix
1.1% Tissues
Pet food
1.7%
Tissues
0.1%
Household
5.5% newspapers
0.3%
Household
6.9%
newspapers
0.3%
NON FOOD
TOTAL SKUs
1431
1.5%
0.2%
TOTAL SKUs
1444
© Copyright 2014 Kantar Retail
25
When and Where Will Lidl Enter?
Convenience
Discount
(40.2% of sales)
Discounters
17 retailers
22 banners
30,000+ stores
$74 billion
Closeout
(8.0% of sales)
Limited
Assortment
Grocery
Hard Discount
(33.9% of sales)
Soft Discount
(5.1% of sales)
Single Price
Point
(12.8% of sales)
Updated 5/24/13
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
26
When and Where Will Lidl Enter?
State
OH
NC
PA
FL
CT
GA
NJ
Source: Kantar Retail analysis; 2013 Grocery Industry Market Share Report
Aldi Store
Count
116
57
57
56
42
40
29
State
DE
TN
MD
SC
MA
VA
WV
Aldi Store
Count
24
22
17
17
12
4
3
© Copyright 2014 Kantar Retail
27
What Now?
• Absorb
• Get on a plane
• Learn the fundamentals
• Internalize
• Assess them against current customers
• Identify the opportunities
• Connect
• Talk to your peers in Europe
• Establish your Lidl relationship NOW
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
28
Agenda
• What Does “Value” Mean Today?
• Lidl Coming to the US (?!)
• Understanding a Post-Bloom Family Dollar
© Copyright 2014 Kantar Retail
29
Family Dollar’s Q1 2014 Dashboard
Operating profit takes a hit
34.1%
28.9%
5.2%
3.3%
∆ (bp)
14
57
-43
New Store Sales
14.8%
-19
6.1%
% Change
3.5%
4.1%
Source: Kantar Retail analysis, company reports
4.1%
4.5%
5.0%
4.5%
6.1%
6.6%
4.7%
2.9%
Q4 2012
3.4%
475
4.6%
Q3 2012
$ 1,592,068
7,566
Q2 2012
$ 1,645,676
8,041
Q1 2012
Inventory
Store base
Comp Store Sales
5.8%
6.0%
0.0%
-2.8%
Q1 2014
Net Income/Sales
34.3%
29.5%
4.8%
3.1%
Positive comps would have offset some of these
factors, but declining traffic and basket size at existing
stores exposed the impact of these factors and put
unsustainable pressure on newer stores to contribute
beyond capacity.
Q4 2013
Gross Profit/Sales
Operating Expenses/Sales
Operating Profit/Sales
Top line sales and profit showed solid growth, but
operating margin and net profit were adversely affected
by mix pressure, shrink, inventory productivity, store
manager turnover, and a highly promotional strategy.
2.9%
Q3 2013
Net Income
$ 2,499,691
1,642,850
856,841
736,522
120,319
78,027
11/24/2012 % Change
$ 2,421,688
3.2%
1,594,894
3.0%
826,794
3.6%
699,825
5.2%
126,969
-5.2%
80,279
-2.8%
Q1 2013
(USD thousands)
Net Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Operating Profit
11/30/2013
Q2 2013
Quarter Ended
© Copyright 2014 Kantar Retail
30
Operating Expense and Profit per Square Foot
Key measures of store level productivity
$12.00
$10.00
$8.00
OpEx/SqFt
$6.00
Op Profit/SqFt
$4.00
$2.00
$Q1' 12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14
Breaking down Family Dollar’s operating expenses and profitability to the square foot level sheds
new light on the retailer’s operational effectiveness. The trend would suggest that store level profitability
is decreasing. As the retailer transitions over to EDLP, this decline should continue
for the medium term, but will ultimately return to growth as new and more efficient practices
are implemented and become standard.
Source: Kantar Retail analysis, company reports
© Copyright 2014 Kantar Retail
31
Shopper Incidence Has Lagged
Despite promotional efforts to drive traffic
Comparing Shopper Penetration at Family Dollar &
Dollar General
140
120
30%
100
25%
80
20%
60
15%
40
10%
20
5%
0
0%
Family Dollar
Dollar General
Starting in 2012, Family Dollar
aggressively ramped up its
promotional efforts in an effort to drive
traffic. The retailer saw an immediate
but ultimately short lived increase in
traffic, demonstrating the ultimate
unsustainability of the approach and
reduced relevance to shoppers.
Source: Kantar Retail ShopperScape®, December 2011 - November 2013; ECRM MarketGate; store visits
© Copyright 2014 Kantar Retail
32
Item volume
Hi-Lo is Simply Renting Share
TIME
Source: Kantar Retail analysis
12-18 mos
© Copyright 2014 Kantar Retail
33
Comp Sales Struggle Under Bloom
Mike Bloom joins FD
Expect Family Dollar
to reevaluate current
strategies around:
One year
anniversary
8%
1.
2.
3.
4.
5.
6.6%
6%
4.1%
4%
2%
Promotion
Print ads
Assortment
Value messaging
Opex reduction
Comp Sales
0%
-2%
-4%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013
“My priorities are stabilizing the business, reenergizing our focus on providing
customers with exciting values and reaccelerating traffic into our stores.”
2 year
-2.8% anniversary
-Howard Levine, CEO 1.9.14
Note: Quarters represent calendar year, not retailer’s fiscal year
Source: Kantar Retail analysis, company reports
© Copyright 2014 Kantar Retail
34
The Path from Hi-Lo to EDLP
Hi-Lo
•
•
•
•
•
•
Hybrid
EDLP
•
•
•
•
•
•
$ towards promotional activity
High/low price on shelf
Weekly circulars / more promotions
Sales lift
Item velocity varies throughout year
Higher operational costs and more
complexity
$ towards COGS
Lower price on shelf
Monthly circulars / fewer promotions
Steadier sales
Increased item velocity
Lower operational costs and
complexity
US Discounter Pricing Model
Price Model
More Promo
Less Promo
EDLP
Total
Source: Kantar Retail analysis
2008
$
$
$
$
125
268
395
332
2013E
$
$
$
$
153
302
432
367
2018E
$
$
$
$
165
363
503
433
2013E-2018E
CAGR
1.5%
3.7%
3.1%
3.4%
© Copyright 2014 Kantar Retail
So How Will Growth be Affected?
$17,000
Before (Sales)
After (Sales)
Before (%)
After (%)
12%
10%
$15,000
8%
$14,000
6%
$13,000
4%
Percent Growth
USD millions
$16,000
$12,000
$11,000
2%
$10,000
0%
2014E
Source: Kantar Retail analysis
2015E
2016E
2017E
2018E
© Copyright 2014 Kantar Retail
Family Dollar’s Core Focus Going Forward
Fill in destination
Reaccelerate
consumables traffic
Reassert value
proposition
Pack Size.
Ensure that items and pack
sizes align to the trip
mission
Grow Trips.
Design and implement programs
that drive shopper attention to
relevant items and categories
EDLP Transition.
Anticipate turbulent comp
sales as shoppers reorient
to stable pricing
Source: Kantar Retail analysis
© Copyright 2014 Kantar Retail
37
Family Dollar’s Core Focus Going Forward
Enhance marketing
Value message.
Fewer circulars and a
greater focus on value
themes
Source: Kantar Retail analysis
Drive household
categories
Create occasions &
celebrations
Defend the Position.
Household categories are a
historical strength that FD will
leverage; Identify and implement
opportunities to partner here
Differentiation.
Incorporate themes around
family, events, party as FD
tries to carve out a niche
© Copyright 2014 Kantar Retail
38
Contact:
Mike Paglia
Director, Retail Insights
mike.paglia@kantarretail.com
T:+1 617 912 2855
M:+
www.kantarretailiQ.com
© Copyright 2014 Kantar Retail