GROCERY INSIGHT UPDATE AUGUST 2012

Market growth drops back during July

The latest Kantar Worldpanel market share figures, covering the 12 weeks to 8th July 2012, show that the UK grocery retail market slowed significantly to 2.1% in this period; dropping back from +3.2% in the previous period to 10th June, which included the Jubilee celebrations. Inflation remains on a downward trend, dropping to 3.8% from 4.4%.
12 weeks to 10 12 weeks to 08 Sales growth July 2011 (% July 2012 (% (Y-o-Y %) share) share) Tesco Asda Netto Total Asda Sainsbury's Morrisons The Co-operative Somerfield Total The Co-operative Waitrose Lidl Aldi Iceland Farm Foods Other multiples Total symbols & independents 31.1 16.8 0.5 17.3 16.4 12.1 7 0 7 4.4 2.6 2.4 1.9 0.6 1.9 2.3 30.7 17.3 0 17.3 16.5 11.9 6.6 0 6.6 4.5 2.9 2.9 2 0.6 1.9 2.2 0.7 5.1 -100 2 3.1 0.2 -3.1 -99.3 -3.6 4.8 11.5 26.1 5.8 0.3 4.5 -1.2

Source: Kantar Worldpanel

Only discounters bucking the trend With just about every retailer slowing more or less in line with the market, discount operators Aldi and Lidl once again appear as the stand-out performers. Aldi in particular stepped up growth by over a percentage point on the previous period, registering +26.1%, while Lidl too accelerated to 11.5%. Asda remains at the front of the leading retailers Though slowing slightly faster than the market overall, Asda still sustained growth well above the average, achieving +5.1%, retaining its market share of 17.3%. Sainsbury's trajectory also remained solidly positive on +3.1% boosting its market share to 16.5%. Tesco and Morrisons still off the pace With growth dropping back to +0.7%, Tesco growth fell back very much in line with the market, and as yet its share shows little sign of recovering momentum, dropping to 30.7%. Morrisons, despite running at just 0.2%, actually marked up an improvement on flat zero in the previous period, though not enough to stop its market share falling to 11.9% (IGD).

TESCO INSIGHT UPDATE AUGUST 2012 Tesco offers petrol at 2008 prices
Motorists can save an incredible 50p per litre on the forecourt at Tesco. Britains biggest fuel retailer has launched an unbeatable promotion that offers motorists an incredible saving of up to 50p per litre on the forecourt. This means Tesco customers who take full advantage of the promotion can fill up their tank with petrol or diesel at prices not seen since 2008. The deal includes a number of kitchen cupboard staples and household essentials, such as Heinz Tomato Ketchup and Andrex toilet paper with customers receiving a 10ppl off voucher with each product purchase (Source: Tesco Weekly Newsletter). The products selected as part of the deal all look to drive increased volume but also should increase average basket size. All products in the deal have an extended shelf life so will enable shoppers to stock up in the short term and should help Tesco drive sales, especially in its largest Extra hypermarket stores which have struggled for growth in the past year (Source: IGD).

Tesco celebrates best of British with Love British Food 2012

With the eyes of the world now firmly on the UK, Tesco is gearing up for what promises to be a two week celebration of all things British by supporting Love British Food 2012. Over the next fortnight, shoppers will see special promotions in Tesco stores that will make it easy for them to spot and buy the best of British, with many British products sporting a Union Jack design. With over 4,000 local produce lines in store across the country and a network of 500 local suppliers, Tesco is the biggest retailer of locally sourced foods in the country, and British agricultures biggest customer (Source: Tesco Weekly Newsletter).

Tesco to trial clear shop floor

A trial is being heading up to return the shop floor to the customers as part of Tesco's 6 Point revival plan. The trial is to remove all FSDUs and stacks from around the stores involved, and to only amplify from the main fixture. Tesco Infirmary Road, Wicker Extra in Sheffield are part of a new trial classed as "upmarket", involving no FSDU's on the shop floor, no deviation from corporate plans, and no additional POS to be sited in store. The only opportunity to amplify is on the main fixture, but this has to remain as per planograms (Source: CPM).

ASDA INSIGHT UPDATE AUGUST 2012 Asda targeting school holiday opportunity online
Asda is advertising free delivery for online shops of over 99 under a campaign titled "Delivering Summer". Asda's move to offer free delivery on orders over 99 until 31 August shows focused intent to offer improved terms online to a core demographic of e-shoppers. Research shows that online over-indexes among young families; customers are more likely to be women; in addition 45% of online shoppers have children versus 32% of all shoppers. When it comes to triggers for shopping online, offers including free delivery are the second highest trigger behind saving time. Clearly, the school holiday, with children at home more, offers an opportunity to capture additional spend online. Research shows that delivery charges are a major barrier facing online grocery, with 56% of shoppers citing no delivery charge as the top trigger for increasing online shopping. Asda is not the only retailer innovating in the delivery area, with Tesco recently introducing a subscription delivery pass. Ocado was the first player to introduce subscription based delivery services, which have acted as key loyalty driver in the face of a promiscuous shopper (Source: IGD).

Asda launches its own credit card

UK's first supermarket to launch unlimited cash back credit card. Asda has come later to this area of financial services than some of its UK competitors; Sainsbury's and Tesco have already launched credit cards. Asda's card offers 1% cash back across all purchases in-store, including fuel, and 0.5% on shopping outside Asda. The difference with the Asda card is that cash back is redeemable on a monthly, rather than annual, basis. This could be a good time for Asda to boost its financial services offer, benefiting from reduced customer trust in established banks as negative media coverage of banking scandals continues. Other retailers are also developing and extending their own banking services: M&S will begin opening in-store bank branches this summer; Tesco is ramping up its offer this year and Sainsbury's is offering Nectar points on its banking products (Source: IGD).

SAINSBURYS INSIGHT UPDATE AUGUST 2012 Sainsbury's celebrating a summer of sport

Sainsbury's has focused its offer on the celebratory side of the summer's events, with offers on BBQ, picnic and summer drinks lines. The promotion includes a variety of price mechanics including 50% reductions, multi-buys and meal deals. With convenience a key growth channel for the retailer, this promotion is well suited to appeal to the convenience shopper and drive sales in the channel. As the official supermarket partner of the Paralympics, Sainsbury's is also offering the chance to win tickets for the games. Customers who spend 50 or more can enter their code online to enter the competition (Source: Sainsburys Newsletter).

Sainsbury's price sale delivers increase in basket spend

Store contacts have fed back that the current price sale' within stores has also seen an increase in basket spend this week. It is designed to Brand Match promotions to ensure that customers won't get shopping any cheaper at competitors - and if they do, Sainsbury's will refund the difference at the checkout. This has been described as a 'risk free' shopping experience (Source: CPM).

Sainsbury's stores reviewing top sales

Reports from some Sainsburys stores suggest that they access their Top 25 list each week for sales and see if there are any products that stand out. If the line is promotional the store may look to giving it additional space (Source: CPM).

Sainsbury's and partners roll out renewable energy to supermarkets

Sainsbury's has announced that it is working with key partners E.ON and Geothermal International to roll out the first phase of an innovative energy solution to up to 100 stores, tapping renewable energy from deep underground to provide energy efficient heating, hot water and cooling. Innovative energy solution reduces each supermarkets carbon emissions by up to 30% and energy consumption by around the same percentage (Source: Sainsburys Newsletter).

MORRISONS INSIGHT UPDATE AUGUST 2012 Morrisons launches winning bargainspromotion

Morrisons is offering customers offers on British products under the strapline 'our great British winning bargains'. The promotion is centred around an array of branded products as the retailer seeks to broaden its money saving focus. The offer is running in conjunction with its 'savers summer' campaign that highlights the ways it can help parents mitigate the seasonal increase in the family grocery bill (Source: IGD).

Morrisons Q1 strategy review

After a challenging first quarter in which LFL sales fell by 1.0%, how is Morrisons progressing the key elements of its strategy to enhance its proposition and build traction with shoppers?

Stronger focus on value

In a highly competitive market Morrisons has focused more on eye catching promotions to engage shoppers. Crucial here has been the return of its Great Fuel Britannia promotion, which has proved a particularly powerful driver of customer visits, given the very high proportion of Morrisons stores that sell fuel.

Own brand innovation

Morrisons three year programme to completely renew its private label offer took has taken another important step forward with the launch of NuMe healthy eating brand. The new range complements Morrisons enhanced fresh offer in-store and should strengthen Morrisons appeal with health conscious shoppers.

Preparing for online debut

Morrisons is progressing its planned online launch in a non-food category by the end of the year and prepares for a potential grocery launch in 2013.

Building experience in convenience

Fresh format rollout continues at pace

Morrisons continues to forge ahead with the rollout of its fresh format stores and expects to have 48 fresh format stores open by the end of H1 2012/13.

Morrisons continues to roll out the M Local convenience concept to new locations, flexing the format to fit catchment demographics. It intends to open 20 M Local stores in 2012 and build capacity to support a future network of 50 stores. To this end it is working with Costcutter owner Bibby Line to improve its logistics efficiency (Source IGD).

SO WHAT SHOULD WE DO? 1. Tescos clear floor policy that is being trialled in a number of stores should be monitored closely. Naturally focus within the trial stores themselves will need to change from driving incremental space to instead focusing on fixing availability issues on the Main Fixture. It may indeed be worth divesting callage from these stores during this trial period altogether unless they are particularly key sales stores for your client. Of course, if the trial is successful and Tesco decides to roll the policy out across a broader store base, in-store focus within Tesco will have to undergo a substantial overhaul and it may be worth having preliminary conversations with your clients as to how we would progress in such an eventuality. 2. Sainsburys have proven that they are reactive to sales data, with promotional space in store adjusted for lines which are performing strongly. Therefore we should be on the front foot in the store group, arming our field teams with sales and out-of-stock information wherever possible to enable us to have top-table discussions. 3. With a number of strong summer promotions running across the next month, we should be keeping a close eye on how these are affecting the sales of our clients products. Similarly, as a number of the store groups push their own label ranges we must again track the impact on our supported ranges. In any areas in which such drives have particularly affected our clients sales levels, we should look to make the worst impacted products a focus to defend share as much as possible. 4. The planned launch of Morrisons online grocery website will naturally have a detrimental impact on in-store sales and as such the opportunity for our teams within the store group will also diminish. It would be useful to investigate the impact that the launch of the other grocers online arms had upon in-store sales so we can begin postulating the potential effect on Morrisons. Doing so will allow us to plan for any necessary callfile changes (by replacing certain stores which might drop below a required sales level etc) well ahead of time. 5. With Sainsburys supporting the Paralympic games, it may be worth looking into any potential ways in which P&Gs affiliation with the games can be harnessed within the store group. With their summer of sport promotional activity and Paralympic ticket competition we should be seeing if there is any opportunity to integrate P&Gs products with any of these initiatives in the run-up to and during the games.