European Grocery Retailing
Change is the only constant
May 2014
planetretail.net
1
Kelly Tackett
Research Director
Agenda
1. Market Overview
2. Leading Retailers
3. Key Trends
4. Takeaways
2
1. Market Overview
Economic recovery is not universal…
GDP Real Growth 2013 (%)
+1.5%
Finland
+0.8%
Sweden
-1.4%
Norway
+0.8%
+4.2%
+1.3%
+3.1% Estonia
+0.4%
Russia
Latvia
Denmark
Ireland
United
Kingdom
-0.3%
+1.6%
Netherlands
+0.3%
Belgium
-0.8%
Belarus
+0.5%
Poland
Germany
Czech Rep
+0.4%
+0.3%
France
Switzerland
Italy
+1.1%
Slovakia
-1.9%
-1.4%
Ukraine
+3.5%
-0.9%
+0.0%
Hungary
Austria
Slovenia
Croatia
-1.1%
Spain
+8.9%
+0.9%
+2.0%
Portugal
+0.9%
Lithuania
+1.8%
+1.2%
+2.5%
Romania
Moldova
+3.2%
+3.1% +0.9%
Bosnia &
-1.0% Herzegovina Serbia
+0.7%
+3.2%
+5.8%
Bulgaria
Georgia
Macedonia
Albania
Armenia
Greece
Azerbaijan
-1.2%
-3.9%
Cyprus
Source: Planet Retail.
-1.0%
4
Spending power varies dramatically…
MGD Grocery Spend per Capita 2013 (€ ‘000)
6.0
5.3
5.0
5.0
4.2
4.0
3.0
3.8
3.7
3.6 3.5
3.4
3.3 3.2
2.8
2.6 2.5 2.5
2.4
2.1 2.1
2.0
1.0
1.9 1.8 1.8
1.6 1.6
1.5 1.5 1.5
1.4 1.4
1.3
1.1 1.1
1.0
0.9 0.8 0.8
0.6
0.5
0.3 0.3 0.2 0.2
0.2
Norway
Switzerland
Ireland
Denmark
Luxembourg
UK
Cyprus
Sweden
Finland
France
Austria
Germany
Netherlands
Belgium
Slovenia
Latvia
Iceland
Poland
Italy
Czech Republic
Spain
Estonia
Slovakia
Portugal
Croatia
Lithuania
Hungary
Bulgaria
Macedonia
Greece
Romania
Russia
Serbia
Bosnia and Herz.
Montenegro
Ukraine
Georgia
Azerbaijan
Armenia
Moldova
Belarus
0.0
MGD Grocery Spend defined as sales of total grocery products (edible grocery, household & petcare, health & beauty and foodservice) from modern grocery distribution retailers and wholesale enterprises (MGD) per capita.
Source: Planet Retail
5
Consumers are very different…
15 Groups
6
67 Types
Grocery retail markets have different heritages…
Grocery Market: Breakdown by Channel 2002 (%)
Positive retail sales do not necessarily reflect the full picture…
100%
90%
2.8%
1.5%
6.8%
6.6%
1.5%
Cash & Carries & Wholesale
clubs
80%
% of Grocery Sales
70%
39.1%
32.2%
Discount stores
60%
Supermarkets &
Neighbourhood stores
50%
40%
15.1%
27.8%
30%
20%
Superstores
Hypermarkets
32.1%
12.6%
10%
9.1%
0%
France
Germany
‘Other’ comprises Department & Variety Stores, Non-store Commerce, Other Grocery formats, Other Non-Food Formats, Catering and Wholesale..
Source: Planet Retail.
7
Convenience & Forecourt
stores
But ‘change’ is a common denominator…
Hectic work/home schedules
Two working
parents
Busy lifestyles
Smartphone/tablet
penetration
Increasing single
person households
Urban dwelling
Commuting
Changing
Demographics
Increasing
access to
technology
Tech-savvy generations
becoming key consumers
Shoppers becoming more informed
Ageing population
8
Home access to the internet
And grocery channels are changing around this…
Positive retail sales do not necessarily reflect the full picture…
9
Growth by channel – Western Europe…
Western Europe: Total Banner Sales by Channel, 2008-2018f (EUR bn)
450
400
350
Sales (EUR bn)
300
250
2008
2013
2018f
200
150
100
50
0
Note: f – forecast;
Source: Planet Retail
10
Hypermarkets & Supermarket &
Superstores Neighbourhood
Discount
Convenience &
Forecourt
Drugstores
Cash & Carries
Key Markets – Germany
Top 3 Grocery Players by Total Banner Sales
(2013e)
€50.2 bn
2.1%
3.2%
Grocery banner
retail sales CAGR
2013-2018F
GDP CAGR
2013-2018F
€36.9 bn
€34.1 bn
Germany: CAGR Growth by Channel, 20132018f (%)**
Drugstores
Top 3 Grocery Players
by Food Retail Format Market Share
(2013e)
25.7%
18.5%
Supermarkets
Discount stores
Convenience
Cash & Carries
Hypermarkets
0
16.0%
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
11
Note: f – forecast
Source: Planet Retail
2
4
CAGR (%)
6
8
Key Markets – France
Top 3 Grocery Players by Total Banner Sales
(2013e)
€45 bn
€42 bn
€31 bn
2.7%
3.0%
Grocery banner
retail sales CAGR
2013-2018F
GDP CAGR
2013-2018F
France: CAGR Growth by Channel, 20132018f (%)**
Convenience
Top 3 Grocery Players
by Food Retail Format Market Share
(2013e)
Cash & Carries
Drugstores
Discount stores
18.7%
Hypermarkets
Supermarkets
17.3%
12.5%
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
12
0
Note: f – forecast
Source: Planet Retail
2
CAGR (%)
4
6
Key Markets – UK
Top 3 Grocery Players by Total Banner Sales
(2013e)
€57.9 bn
4.0%
4.9%
Grocery banner
retail sales CAGR
2013-2018F
GDP CAGR
2013-2018F
€31.7 bn
€30.4 bn
Top 3 Grocery Players
by Food Retail Format Market Share
(2013e)
26.1%
14.9%
UK: CAGR Growth by Channel, 2013-2018f
(%)**
Discount stores
Convenience
Cash & Carries
Supermarket
Drugstores
14.0%
Hypermarkets
0
Note: f – forecast
Source: Planet Retail
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
13
2
4
6
CAGR (%)
8
10
12
Key Markets – Italy
Top 3 Grocery Players by
Total Banner Sales (2013e)
€13 bn
€10 bn
2.1%
2.4%
Grocery banner
retail sales CAGR
2013-2018F
GDP CAGR
2013-2018F
Italy: CAGR Growth by Channel, 2013-2018f
(%)**
€9 bn
Discount stores
Top 3 Grocery Players by Food
Retail Format Market Share
(2013e)
Drugstores
Hypermarkets
Supermarkets
8.0%
Convenience
Cash & Carries
6.4%
-1
5.6%
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
14
Note: f – forecast
Source: Planet Retail
* Based on food retail format market share.
0
1
2
CAGR (%)
3
4
5
Key Markets – Spain
Top 3 Grocery Players by Total Banner Sales
(2013e)
€20 bn
€16 bn
3.8%
1.9%
Grocery banner
retail sales CAGR
2013-2018F
GDP CAGR
2013-2018F
€9 bn
Spain: CAGR Growth by Channel, 2013-2018f
(%)**
Drugstores
Top 3 Grocery Players
by Food Retail Format Market Share
(2013e)
Convenience
Supermarkets
Cash & Carries
23.3%
Discount stores
Hypermarkets
14.3%
10.2%
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
15
* Based on food retail format market share.
0
Note: f – forecast
Source: Planet Retail
2
4
6
CAGR (%)
8
10
12
Key Markets – Portugal
Top 3 Grocery Players by Total Banner Sales
(2013e)
€5 bn
€5 bn
4.6%
3.0%
Grocery banner
retail sales CAGR
2013-2018F
GDP CAGR
2013-2018F
€2 bn
Portugal: CAGR Growth by Channel, 20132018f (%)**
Top 3 Grocery Players by Food Retail
Format Market Share
(2013e)
Drugstores
Discount stores
Supermarkets
Hypermarkets
20.3%
Cash & Carries
19.4%
8.1%
**Please note, hypermarkets includes superstores, convenience includes forecourts &
supermarket includes neighbourhood stores.
16
* Based on food retail format market share.
Convenience
-2
Note: f – forecast
Source: Planet Retail
0
2
4
CAGR (%)
6
8
10
2. Leading Retailers
Competitive Environment
Western Europe: Top 10 Grocery Players by Total Banner Sales,
2013e (EUR bn)
Retail Banner Sales (EUR bn)
70
64.6
61.0
60
51.6
50
40
30
20
10
0
e – estimate
Source: Planet Retail.
18
65.0
50.2
49.2
46.6
44.5
39.0
32.8
Competitive Environment
Western Europe: Top 10 Grocery Players by Total Banner Sales,
2018f (EUR bn)
Retail Banner Sales (EUR bn)
90
80
70
60
50
40
30
20
10
0
Note: f – forecast
Source: Planet Retail
19
Key Players – Carrefour
#1 Carrefour
Carrefour is focussing on revitalising
operations in core markets – with further
disposals of peripheral operations a possibility.
 Turn around ailing hypermarket format
 Improve its price image
 Expand smaller formats under the Carrefour Express,
City and Contact banners
Multi-channel is a key priority for Carrefour with the
expansion of the ‘Drive’ concept.
 Grow multi-channel via drive format
Carrefour is expanding it’s smaller format s such as
Carrefour City above.
20
Key Players – Schwarz Group
#2 Schwarz Group
Schwarz Group is one of the most aggressively
growing companies, with a presence in 25+
European markets.
 Aims to become the largest food retailer in Europe
 Working to propel Lidl past Aldi as largest
discounter in Europe
Schwarz Group’s Lidl banner is seeing continued
expansion albeit at a slower pace.
 Introducing minimum turnover per outlet
requirements
 Investing heavily on the instore experience
Lidl has been rolling out instore bakeries across
W Europe as it looks to attract a broader
spectrum of shoppers.
21
Key Players – Tesco
#3 Tesco
Tesco has unveiled the next phase in its UK
improvement plan with seven areas targeted EDLP, product innovation, service, GM, destination
stores, convenience, Clubcard and multi-channel.
 Strategic shifting to EDLP with incremental EUR 245
million investment
 Focusing on the refurbishment of big-box stores in
2014
Tesco has successfully launched the Clubcard
Fuel Saver programme.
 Expanding convenience formats – will open 150
Express per annum
 Will double the number of click & collect locations
Tesco is rapidly rolling out c-stores – Express and
One Stop.
22
Key Players – Metro
#4 Metro Group
For some time now, Metro Group has been battling
on all divisional fronts due to its portfolio of
structurally troubled formats.
 Exiting non-core markets to focus on core and key
emerging markets
 Refining cash & carry concept in saturated markets
of WE to boost attractiveness to business customers
The Casa dell’HoReCa features easier customer
navigation with colour-coded departments.
 Adapting to changing customer needs with diverse
formats
 Closing unprofitable hypermarkets
 Undertaking a series of long-overdue store
refurbishments
The Real remodels feature a higher-quality service
counter for fresh items, including bakery.
23
Key Players – Edeka
#5 Edeka
Edeka is reviving its co-operative roots as it
refocuses on the strengths of its regional set-up and
its thriving independent retailers.
 Diminish the diversity of banners and regional and
local idiosyncracies
 Support its independent shopkeepers with the
development of new supermarket concepts
The Für Dich (For You) ranged supplied by candy
manufacturer Katjes is available exclusively at Edeka.
 Reassess and reposition its Netto discount chain
 Strengthen national buying by bundling sourcing at
the Hamburg headquarters
Edeka’s Omega 3 sausages were developed in collaboration
with the Frauenhofer Institute.
24
3. Key Trends
Death of the hypermarket?
Increasingly restrictive
Apparent ‘saturation’
Positive retail sales
do
not
necessarily
reflect
full picture…
planning legislation
in somethe
markets
Difficulty in finding /
securing appropriate
sites
Lack of investment
Rising land and
development costs
Less ‘one-stop’
shopping / ‘format
fatigue’
Online migration (esp
in General
Merchandise)
26
Shifting consumer
trend towards
convenience
Countries most exposed to ‘Big Box’
Hypermarket (>5,000 sq m) Penetration of Grocery Market by Country (%)
35.0%
31%
30.0%
25.0%
30%
29%
24%
22% 21%
20%
20.0%
19% 19%
18% 18%
17%
15%
15.0%
10.0%
5.0%
14% 14%
10%
9%
8%
8%
8%
7%
7%
6%
6%
4%
4%
3%
1%
1%
0.0%
MGD Grocery Spend defined as sales of total grocery products (edible grocery, household & petcare, health & beauty and foodservice) from modern grocery distribution retailers and wholesale enterprises (MGD) per capita.
Source: Planet Retail
27
Some perspective…
 Hypermarkets are not dead, many will continue to prosper
 Huge variations by location, generalizations are dangerous:
– Country / market
– Site / catchment
 But we are likely to see an inevitable slowdown in development of new
hypermarket space in some countries
 Hypermarket sales will continue to grow, although at a slower rate than some
other channels (discount stores, c-stores, E-commerce)
 A large number of hypermarkets are very challenged and many have been
subject to under-investment
 A number are ‘over-spaced’ and are in need of a radical rethink…
28
Selected options for ‘over-spaced hypermarkets’…
No single ‘catch all’ cure, but a number of options – employed in
isolation or in unison, according to the needs of the individual
store and the catchment it serves….
29
Option 1
Downsize or sub-let surplus space to 3rd parties
Option 2
Re-allocate GM space to extend food offer
Option 3
Re-think product mix of GM space
Option 4
Improve in-store catering / foodservice
Option 1 – downsize or sublet…
Nando’s
Wembley Park.
Sports Direct
Three UK sites.
Xercise4Less
Stockton-on-Tees.
30
Option 2 – re-allocate GM to extend food offer…
31
Option 3 – rethink product mix of GM space…
32
Option 4 – improve in-store catering…
33
Flight to convenience…
Western Europe: Total Banner Sales by Channel, 2008-2018f (EUR bn)
450
2008
400
2013
2018f
350
Sales (EUR bn)
300
250
200
150
100
50
0
Note: f – forecast;
Source: Planet Retail
34
Hypermarkets &
Superstores
Supermarket &
Neighbourhood
Discount
Convenience &
Forecourt
Drugstores
Cash & Carries
C-stores – a pan-European perspective…
No. of C-stores and Forecourt Stores 2013 – Top 20 European Markets
30,000
25,442
25,000
20,000
15,000
11,940
10,000
8,286
6,585
5,000
4,023
3,034
0
Source: Planet Retail
35
2,370
1,931
1,907
1,808
1,340
1,308
1,187
1,178
1,161
1,071
980
921
781
696
C-stores – the recipe for success…
A new business model, different from supermarkets and big box
More strategic location planning
A higher cost model
Requiring a higher margin product mix
Focus on fresh foods and food-to-go
Greater emphasis on private labels
Catering for a wide range of shopping visits and occasions:
- ‘Top up’ shopping
- Breakfast and Lunch
- Evening meal solutions.
36
C-stores go hand-in-hand with e-commerce…
37
Discounters – the march continues (?)…
Western Europe: Total Banner Sales by Channel, 2008-2018f (EUR bn)
450
2008
400
2013
2018f
350
Sales (EUR bn)
300
250
200
150
100
50
0
Note: f – forecast;
Source: Planet Retail
38
Hypermarkets &
Superstores
Supermarket &
Neighbourhood
Discount
Convenience &
Forecourt
Drugstores
Cash & Carries
What exactly is a discounter?
Limited assortment, low prices and no services
“I am convinced that the two
principles, that of small ranges
and low prices, cannot be
separated.”
Karl Albrecht
Aldi Founder & Owner
(1953)
39
Discounters – the European Top 10…
Europe: Top 10 Discount Store Operators by Total Sales, 2007-2017f (EUR bn)
68.6
70
2007
65
2012
60
55
Banner Sales (EUR bn)
2017
53.8
53.4
50
46.2
45
40
37.5
38.1
35
30
25
20
13.7
15
15.4
11.9
13.6
9.4
10
13.3
8.2 8.3 9.3
7.3
5.3
5
2.6
6.6
8.3
3.6
5.6 5.7
7.1
2.6
4.2 5.2
2.8 3.3 3.7
0
Schwarz Group
40
Aldi
Edeka
Note: f – forecast; * part of Carrefour until 2011; ranked by 2012 sales.
Source: Planet Retail
Rewe Group
Dia*
Jerónimo
Martins
Reitan
Dansk
NorgesGruppen
Supermarked
Norma
A one-dimensional model is diversifying…
In the face of saturation and decelerating growth, discounters are
having to change tact and adapt their business models….
41
Tactic 1
Shift in product mix towards freshness
Tactic 2
Increased brand listings
Tactic 3
Move towards convenience formats
Shift towards freshness
Penny (Germany, Czech
Republic, Italy)
42
Dia Fresh
(Spain)
Instore bakery trial, Aldi
Süd’s Hofer (Austria)
Shift towards brand listings - Aldi
 Rationale behind the brand additions:




Revitalising sales in saturated markets
Attracting more/new shoppers
Increasing average spend
Countering the success of its main rival,
Schwarz Group’s Lidl
 Part of a strategy to become a one-stop
destination
Aldi: Brand listings of Top 10 FMCG brand companies
Sales
rank
FMCG brand
company
Brand listings
at Aldi*
Examples
1
Nestlé

Nescafé in Switzerland
2
P&G

Gillette in Austria
3
PepsiCo

Pepsi in Slovenia
4
Unilever

Lusso in Switzerland
5
Mondelez

Toblerone in Germany
6
Coca-Cola Co.

Römerquelle in Austria
7
ABInBev

Stella Artois in the UK
8
Philip Morris Intl.

Marlboro in Germany
9
L’Oréal

Garnier Fructis in Hungary
10
Japan Tobacco

Winston in Switzerland
Red:



Recently added permanent listings (ca. 2010-2013)
Broad brand portfolio, in most markets
Limited brand portfolio, in selective markets
Minor brand portfolio, in a small number of markets
Ranking: OC&C Analysis for 2011, excluding regional meat companies.
Source: Planet Retail.
43
Move towards convenience formats – Aldi and Lidl
44
Grocery E-commerce – fad or the future?…
Proportion of web shoppers who have made grocery purchases online.
11%
27%
10%
8%
10%
33%
7%
13%
7%
Source: Planet Retail’s Online Shopper Survey data.
45
31%
The great unknown…
“We don’t know where the online
train is going and how fast it is
running. I only know that we need
to be on board.”
ALAIN
CAPARROS
CEO Rewe Group
Indicative of how many European grocery retailers currently feel.
46
Still more questions than answers…
Can it ever be
profitable?
What’s the
impact on
bricks and
mortar stores?
Am I just
cannabilising
existing sales?
Which is the
best model –
store-picking or
dedicated DC?
Home delivery
or Click &
Collect?
How do
channels
interract?
What are the
geographic
implications?
Who are the
main key
customer
groups?
47
Am I just doing
it because
everyone else is
doing it?
Grocery E-commerce - ‘how not to do it’….
Grocery E-commerce may be high growth but it is not straightforward – it
needs to be high profile and executed skilfully.
48
Grocery E-commerce – drive format…
The Drive concept is a blend between pure e-commerce and
Click & collect, external to a store or as a free-standing unit.
traditional
bricks and mortar stores
49
Capital Expenditure
Drives – different business models….
Tesco operates “van
sheds” on store car
parks for shoppers to
collect their groceries
quickly by car.
Ahold in the US is
experimenting with
compact standalone
Drives by their stores.
Metro Group’s Real
integrated
infrastructure
alongside stores is the
most common form of
Drive to date.
Catalan retailer
Bonpreu has invested
heavily in a
standalone Drive
format, designed to
secure a catchment
area in its own right.
Order Capacity
50
4. Key takeaways
Channel convergence…
Big Box servicing
online home delivery,
Click & Collect, Drive
formats.
HYPERMARKETS
E-COMMERCE
DISCOUNTERS
C-stores deployed as Ecommerce fulfillment
outlets.
Discounters opening
more conveniencebased formats.
C-STORES
52
Hypermarkets opening
dedicated discount
areas and formats.
Change is the only constant…
• European retail markets are undergoing substantial change
• Suppliers need to evolve to move with retail change
• Polarity of maintaining volumes and driving margin
• Different strategies for different channels (and markets, retailers)
• Retailers will be looking to suppliers to help them through change
• Key watchwords – FLEXIBILTY AND COLLABORATION.
53
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