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How Britain Shops for Food A look at the post-recession landscape

How Britain Shops for Food A look at the post-recession landscape. Today’s agenda What we’ll talk about. the economy. food shopping behaviour. food retail strategies. the economy recovery on the way?. . . . lack of money I can’t spend. lack of will I won’t spend.

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How Britain Shops for Food A look at the post-recession landscape

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  1. How Britain Shops for Food A look at the post-recession landscape

  2. Today’s agenda What we’ll talk about the economy food shopping behaviour food retail strategies

  3. the economy recovery on the way?

  4.   lack of money I can’t spend lack of will I won’t spend lack of spontaneity I think, then spend The economy The recession mindset

  5. Income (-1.4%) Credit (-6.9%) Costs (-1.8%) Saving (+31%) The economy The household budget Changes in position since H2, 2009 Total change (-2.7%)

  6. The economy Higher debt servicing costs Debt payments as a proportion of income 6% rate 5% rate 3% rate 11.2% 10.7% 10.5% 9.5% 7.1% 2008 2009 2010/11 2010/11 2010/11

  7. The economy Taxation and statutory spend income tax national insurance value added tax council tax pension costs

  8. The economy Erosion of discretionary income Percentage of income that is discretionary % 42.1% 44 42 40 38 38.4% 36 34 38.4% £13,260 35.1% 32 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

  9. The economy Spending decisions will be different Lower priority Higher priority Retail Savings Household Health services Automotive Leisure

  10. food shopping behaviour what does this mean for the consumer?

  11. Food shopping behaviour Inflation 2006/07 2008/09 +2.5% +5.5%

  12. 42 41 40 39 38 37 36 35 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Food shopping behaviour Food spending dynamics Food retail spend as a proportion of all retail spend % 41.7% 40.0% 37.7%

  13. 48 47 47.1 46.8 46 45 44 43 42.6 42 42.1 41 40 39 2005 2006 2007 2008 2009 Food shopping behaviour Consumer reaction Importance of price in driving store selection %

  14. 49 48 48.2 47 47.1 46.8 46 45 44 43 42.6 42 42.1 41 40 39 2005 2006 2007 2008 2009 Food shopping behaviour Consumer reaction Importance of price in driving store selection %

  15. In 2008 on average customers visited their main store and… In 2009 on average customers visited their main store and… 1.9 2.4 …other grocery retailers …other grocery retailers Food shopping behaviour Shopping around

  16. +0.6% pts 9.0% 8.4% 2008 2009 Food shopping behaviour Use of discount grocers +7.9% pts +3.2% pts +0.7% pts 15.8% 13.0% 9.8% 7.9% 4.3% 3.6% 2008 2009 2008 2009 2008 2009

  17. Food shopping behaviour Eating out Percentage change in dining out expenditure (year-on-year) 2007 2008 2009 2010 2011 +3.4% +2.3% -3.1% -0.1% +1.9%

  18. Food shopping behaviour What it means for food and grocery Year on year change in all food and grocery expenditure +5.5% +4.0% +4.0% +3.5% +3.5% +3.2% +3.1% 2007 2008 2009 2010 2011 2012 2013

  19. Food shopping behaviour Summary Grocery will remain the most buoyant major retail sector Inflation will remain in the market, but not at 2008 levels Achieving volume growth will be challenging Value and price will remain more important But there will be solid pockets of growth

  20. food retail strategies responses of the food and grocery sector

  21. Food retail strategies Four considerations Fragmentation Demand is becoming more fragmented Proliferation of product There is more choice than ever before Stores Consumers have more stores to pick from Reach Shoppers want to buy in a variety of ways

  22. Food retail strategies Consideration 1: fragmentation 20% of Waitrose shoppers are C2DE 18% of Aldi shoppers are AB

  23. Food retail strategies Solution 1: segmentation Fragmentation Demand is becoming more fragmented Segmentation A segmented approach is required to grow

  24. GOOD BETTER BEST High volume Low price Low margin Competitive entry prices Core product Core offer Basis of positioning Standard margin Low volume Highest price points Higher margins Premium offer Food retail strategies Solution 1: segmentation

  25. Food retail strategies Consideration 2: proliferation of product Change from 1999 in consumer views on range +6.9% pts -5.4% pts Important to provide an edited range of what I want Important to have a wide range with lots of choice

  26. Food retail strategies Solution 2: clarity and edited choice Proliferation of product There is more choice than ever before Edited choice Less will become more

  27. Food retail strategies Solution 2: clarity and edited choice Eating in treats Cooking from scratch Everyday basics Indulgent

  28. Food retail strategies Consideration 3: choice Average number of grocery stores consumers have easy access to 1970s 1980s 1990s 2000s 4 3 4 6

  29. Food retail strategies Solution 3: added value Stores Consumers have more stores to pick from Added value and differentiation Stand out from the crowd

  30. personal service niche brand marketing differentiation experience / environment fashionability Food retail strategies Solution 3: added value Watchwords for adding value and differentiation

  31. Food retail strategies Consideration 4: customer reach Sources of growth in food and grocery retail (2009-13)

  32. Food retail strategies Solution 4: multi-format Reach Shoppers want to buy in a variety of ways Multi-format Use multiple touch points

  33. Food retail strategies Solution 4: multi-format Meeting multiple customer needs

  34. Slowing sales growth, rising cost growth Must drive market share – must add value Consumer wallets are under pressure Need to stimulate wants Consumers and shopping trips becoming more segmented Segment stores/channels/ranges Competition intensifies  space saturation  product proliferation  message overload Clarity of offer  focused propositions, clearly identified/branded  clear price/range architecture  less is more Food retail strategies How it all fits together

  35. The end Thanks for listening

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