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Nielsen Market Overview David Glennon. Forest of Arden Hotel 2010. Overview of Market performance 2009 How is the Convenience and Impulse sector performing? Market is responding to post recessionary shopper Impact on sustainability and ethical issues Outlook for 2010 and beyond.

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Nielsen Market Overview David Glennon


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    1. Nielsen Market OverviewDavid Glennon Forest of Arden Hotel 2010

    2. Overview of Market performance 2009 How is the Convenience and Impulse sector performing? Market is responding to post recessionary shopper Impact on sustainability and ethical issues Outlook for 2010 and beyond

    3. Understanding of food retailing from Nielsen What Is being bought Who Is buying it where Nielsen Scantrack EPOS sales transactions across 15,000 food and drink stores Nielsen Homescan 14,500 GB households Consumer Panel Grocery purchase transactions Nielsen On Line Online panels for tracking visits to e commerce sites and collection of CGM Why Are they buying it Nielsen Customised Research Attitudes & behaviour of consumers /shoppers

    4. Recession • House price deflation • Much tighter credit • Rising unemployment • Wage freezes so less spending power FALLING DEMAND Shoppers have remained cautious • Food prices • Fuel & travel costs • Cost of credit • Weakening currency INCREASED COSTS Global Outlook External forces impacted the UK shopper in 2009

    5. Source: Nielsen Growth Reporter (Grocery Multiples)

    6. In a continuous search for value shoppers shopped differently Shopping less often shopping MORE often 1. 1. Reduce Basket size Different Pack Sizes 2. 3. Switch Channels Switch Channels 3. 2. Inflation : the coping strategies Recession: different strategies

    7. Last year the convenience sector outperformed out of town stores Source: Nielsen Scantrack Growths :52 weeks to 20th March 2010 Channel sizes : £ per annum

    8. Out of Town store growth slowed as inflation slowed Source: Nielsen Scantrack Growths :12 weeks to 20th March 2010 Channel sizes : £ per annum

    9. Against low year ago comparatives, most categories are now showing positive unit growths. Source: Nielsen Scantrack Total Store Read Total GB

    10. Total Convenience Market is worth £28bn (+5.6% vs +0.5% prior year). +5.3% +1% +9.4 +4.7% +4.6 +6.7 +8.1 +5.4 +15.5 +11.8 +5.4 up +6.0 Source: Nielsen Scantrack – Convenience Stores Total Store Read52 w/e 20.03.2010 v year ago

    11. Slowing ambient food inflation and a cautious consumer is impacting growths in packaged grocery which is now seeing negative value growths for the first time ... in over 2 years Packaged Grocery 4 Weekly Growths 2009 2008 2010 *BRC-Nielsen SPI Feb10 Ambient Food Inflation +3.6% vs 7.1% Feb09 Source: Nielsen Scantrack Grocery Multiples

    12. Fresh categories continue to fuel growth in Convenience stores whilst their core categories BWS, GM and Tobacco are finding it tougher. Source: Nielsen Scantrack Total Store Read Convenience

    13. Promotional spend increased during 2009 and was a factor in driving footfall during the recessionthis trend looks set to continue in 2010 35% 2007 2008 2009 30% 28% 26% Source: Homescan Grocery Multiples 4 weeks ending periods to 20th March 2010 % Exp On Offer: Total FMCG /

    14. The Shopper Agenda now includes • Shopping at new retailers • Buying more on promotion • Spending relatively less on Own Label • Questioning “ethical” values and relevance

    15. We are buying different packs Smaller baskets(<5 items) are 50% of all visits (+6%) and 15% of spend(+10%) With more visits to buy less items And shopping more frequently A change in shopping behaviour …and different to Europe and USA Source: Nielsen Homescan – Total FMCG (excl Gen Merchandise and Tobacco) 52 w/e 26th December 2009 vs 2008

    16. How shoppers attitudes towards spending changed during the recession Making-do Managed absolute spend Good is Good Enough Used Value Retailers

    17. As food inflation slowed, retailers encouraged shoppers to buy more through Multibuys Food Inflation High Point Share of Spend On Offer annual average Source: Nielsen Homescan – Total FMCG 4 week ending periods to 26th December 2009 /

    18. Shoppers have been sticking with brands helped by the increased promotional support “As a result of the economic climate, I have changed the way I shop. .. I buy more own label products” % Respondents that AGREE Source: Nielsen Homescan Survey

    19. Shoppers still plan to make savings “…which of the following actions would you take in order to stay within your budget: ? ” Source: Nielsen – Global Online Survey December 2009 Consumer Confidence – GB results

    20. Although the proportion of shoppers who prefer to buy products that are ethically produced or kinder to the environment has not changed – the number who believe it is worth paying extra for these products has not improved since January 2009 giving further credence that some shoppers are being forced to compromise their ethical and environmental credentials % respondents who AGREE “I try to buy products that are ethically produced or kinder to the environment” “It is worth paying extra for products that are ethically produced or kinder to the environment” Source: Nielsen Homescan Survey (GB) January 2010, January 2009, October 2007 and October 2006

    21. Climate change and packaging waste continue to be the most important environmental issues for consumers. With increased global focus on our planet, this trend looks set to continue “Which of these environment and related issues concerns you the most?” % Respondents Source: Nielsen Homescan Survey (GB) January 2010, July 2008 vs July 2007

    22. For 1 in 4 shoppers “local” really does mean “local”, mileage is important, and an increasing proportion of shoppers are looking to support their local county “I consider a product to be local when/ it has been grown or made by a business situated ....” % respondents Source: Nielsen Homescan Survey (GB) January 2010 vs July 2008

    23. 2/3 of shoppers desire to help local farmers and local business with shoppers looking for evidence of provenance “I try and buy local products because...” % respondents Source: Nielsen Homescan Survey (GB) January 2010 vs July 2008

    24. How we shopped in the last 3 months …. • Sales growths for Total GB food and drink slowed to +2.4% . • Unit growths have increased in the last 4 weeks due to promotional activity. • Out of Town growths have slowed as food inflation continues to slow. • Fuel prices are rising again which attracted additional Out of Town spend over Easter * and we expect also for the Bank Holidays. • Growths in the wider Convenience channel have now stabilised after a strong end to 2009 and remain at +2.9%.

    25. The Economic Outlook 2010 will be different to 2009 • General Election and need for a second budget within 6 months (whoever wins and reaches a deal) • The subsequent reaction of the currency markets, and then sterling, and possibly (or inevitably) the cost of imported food/food stuffs. • Global Harvests, Oil and Commodity prices – upward pressures • The magnitude of household and national debt (and so the ongoing need to cut). • Uncertainty of the consumer and investor sentiment for when interest rates start to rise again (probably in the second half of the year). Source : Shore Capital , January 2010

    26. The Retailer Outlook 2010 will be a lower growth environment than 2009 • Low to moderate food inflation (3%) which indicates more stability. • Promotions may fall back as brand owners discretionary budgets are used to absorb cost price increases with retailers using more Own Label promotions to compensate • Own Label (and including Premium OL) growths could accelerate as retailers focus on reclaiming that point of difference in the ever more promotionally led and disloyal market.

    27. The Shopper Outlook Promiscuous shoppers and a battle for loyalty • More visits to more stores will continue to benefit convenience sector • Less frequency but with bigger baskets at out of town stores. • Discounters `keep` shoppers who had started to use their stores during the recession, adding a Discounter to their repertoire of food shops regularly used. • Loyalty schemes, Coupons, Extra Reward Points and Vouchers will be used more and by more retailers. • Fuel savings (e.g. 5p a litre after spending £50 on food) could be a tactic used more regularly by the TOP4.

    28. Looking ahead for the next 12 months • First quarter of 2010 has been be tough and slowing inflation hasn’t helped • Q2 will be another difficult quarter – versus inflationary growths in 2009 and a slow economic recovery. • Q3/Q4 ...shoppers start to feel the impact falling disposable income (rising fuel bills, some inflation, increased taxes). • Ethical and Health may return to the shopper agenda however affordable luxuries and convenience/snacking are already in the mindset of shopper. • Continue to plan for a lower growth environment in 2010 as the Post - Recession shopper remains cautious, savvy and is still looking to make savings.

    29. Thank You david.glennon@nielsen.com