Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Management Ventures, Inc....

Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI

Management Ventures, Inc.Management Ventures, Inc.

Keeping pace with the rapidly changing European retail market

•Presented by Ethan S. Sinick•MVI

•November 2008

2 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI

European retail growth is slowingEuropean retail growth is slowing

• Current MVI forecasts, excluding the effect of currency changes, indicate that the European* retail** market will see growth decline from 5.9% in 2008 to 4.1% in 2009

• Excluding Russia, MVI projects the European retail market to slow from 4.7% growth in 2008 to 2.8% growth in 2009

• MVI expects the first half of 2009 to see market contraction with some recovery in the second half on the back of weak comparative numbers

*Geographic Europe including all of Russia** Excluding automobilesSource: MVI analysis


Discounters will grow to 17% of MVI Discounters will grow to 17% of MVI measured grocery salesmeasured grocery sales

7.2% 7.4%6.6%

4.9%4.8% 4.6%

Sa

les

in C

on

sta

nt

EU

R B

illio

nS

qu

are

Me

tre

s M

illio

n

Nu

mb

er

of

Sto

res


Quick service restaurants are performing Quick service restaurants are performing well by offering an accessible premiumwell by offering an accessible premium

• McDonald’s year to date life for like sales are up 10.7% across Europe

• Dominos in the UK and Eire has seen like-for-like sales for through September 2008 up 10.5%

• YUM brands has recorded year-to-date growth of 12% in Europe


Tesco is trying to change the perception Tesco is trying to change the perception of its brand by attacking the discountersof its brand by attacking the discounters

New Strap Line

Expanded price matching to discounters

Private label instead of own label to match discounters

Source: MVI photos


Healthy brands are improving their value Healthy brands are improving their value to try and regain momentumto try and regain momentum

« L'innovation Danone continuera d'animer le marché. Nous réfléchissons aussi à la façon de couvrir le spectre entier du pouvoir d'achat, sur tous nos pays, y compris les plus matures comme la France ou l'Allemagne. »

« The innovation of Danon continues to change the arket. We also consider the need to cover the entire spectrum of purchasing power in all countries incrlind the very mature markets like France and Germany »

Franck Riboud, PDG Danone28.07.2008

Danone ECO Pack launched July 2008

GBP 2.88 with nearly constant

promotion in Tesco for the

past few months

“Oranges are cheaper than mangoes, passionfruits and blueberries…We’re going to make the average price cheaper over the next year or two on our core smoothies so we can get them into peoples’ weekly shopping trolley.”

Innocent Drinks Co-Founder Richard Reed28.10.2008

GBP 1.89 with nearly constant

promotion in Tesco for the

past few months

Sources for quotes: Le Figaro and the Financial Times


The current environment gives retailers a chance The current environment gives retailers a chance to attack 75% to 80% of their coststo attack 75% to 80% of their costs

Source: MVI research


However, the market is changingHowever, the market is changing

• We are moving from record levels of inflation to potentially record levels of deflation

• Deflation in the retail market will come from two areas:1. Fundamental changes in commodity and

transportation costs2. Pricing actions designed to attract shoppers back

into retail outlets


The deflationary cycle will be as sharp as The deflationary cycle will be as sharp as the recent inflationary spikesthe recent inflationary spikes

• The rise in prices was driven by a steady growth in demand from emerging markets which was largely reflected in prices through the end of 2006

• Speculative investments in 2007 and 2008 took prices well above the rates of normal demand growth

• We now have the double impact of a collapse in speculation and a slowdown in demand• The markets should correct over the next 12

months


Deflation will allow retailers to begin Deflation will allow retailers to begin profitable price reductionsprofitable price reductions

AMAROY® Premium Röstkaffee Extra

2,69

500-g-Packung 2,49

Fein Zucker

–,92

1-kg-Packung -,85

Würfelzucker

1,15

1-kg-Packung 1,09

Irische Butter

–,99

250-g-Stück -,95

MILFINA® Deutsche Markenbutter

–,79

250-g-Stück -,73

MILFINA® H-Schlagsahne

–,39

200-g-Packung -,33


ConclusionsConclusions

• The economic crisis is changing shape• Retailer and manufacturer strategies will follow

• Consumer opinion changes more slowly than the fundamentals• We are still dealing with inflation although

fundamentals have already begun to change

• Build a strategy that breaks 2009 into quarters as the consumer begins to see the changing nature of the economic crisis



• There are some obvious growth strategies for retailers in the meantime• Aggressively correct your value proposition if it is out

of line with the marketplace• If you have a good price position, emphasize quality

of life• Focus on building sales through traffic and frequency

at the expense of weight of purchase until the consumer again feels purchasing power returning to their pockets

• Reduce costs and reduce the range to free up cash flows as credit lines tighten



• There are some obvious growth strategies for manufacturers in the meantime• Follow the discounter channel growth• Shift distribution into retailers who have a strong price

image with consumers irrespective of their channel (discount supermarkets)

• Adapt your trade marketing programmes to promotions that reduce the emphasis on basket building and look more for increasing frequency and capturing more shoppers

• Find profitable ways to close the price gap with own label

Thank You!Thank You!

. . . A Partner in Your Success. . . A Partner in Your Success

Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI

Ethan SinickManaging Director, EMEAMVI

EMEA Headquarters6 More London PlaceTooley StreetLondon SE1 2QY

[email protected]

Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Management Ventures, Inc....

Documents

Transcript of Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Management Ventures, Inc....