IRI's Weekly News Update - w/c 13th March 2017

IRI Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 17th March

Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2

• Data from Visa shows consumer spending picked up last month• Ocado delivers double digit sales growth in Q1 • Dunnes holds on to top spot in Ireland• Three of the Big 4 poised for petrol price war• UK shoppers rate retail experiences merely average• Argos forges ahead in Sainsbury's Q4 results • Supermarkets could soon have online "Buy British" buttons post-Brexit• John Lewis sales up 7% last week• Sainsbury's trials weather activated advertising • PwC warns of consumer spending slowdown• Morrisons and Just Eat announce new partnership

Weekly News Summary – 13th March 2017


Data From Visa Shows Consumer Spending Picked Up Last MonthWhilst data released last week by British Retail Consortium suggested that shoppers are starting to adopt a more cautious approach as prices start to rise, latest figures from Visa show that consumer spending restored some momentum in February.

Overall spend grew at an annual rate of 1.5% from a low point of 0.4% in the previous month.

Kevin Jenkins, UK & Ireland Managing Director at Visa, commented: “Growth in the experience sector continues to be a significant driver. Valentine’s Day and the half-term break gave consumers more reasons to dine out and treat their loved ones to short getaways around the UK. At the same time, the level of growth in the leisure and hospitality sectors was softer than we have seen in the past year, showing signs that consumers are becoming more cautious with their discretionary spending. And for clothing retailers, February was yet another challenging month, recording the biggest drop across all the sectors that we track.

“Notably, online retailers continued to enjoy strong growth, while the high street trailed behind, declining for the third month in the last four.”

Source: NamNews 13th March 2017

http://www.kamcity.com/namnews/uk-and-ireland/supermarkets/shoppers-rein-in-their-spending-as-prices-rise/


Ocado delivers double digit sales growth in Q1 In its first quarter update, Ocado has announced that sales have increased by 13.1%.

Strong order growthThe sales growth is in line with the previous quarter and driven by orders growth of 16.7%. Ocado is now delivering 252,000 orders each week versus 216,000 last year. The order growth is a result of new shoppers using the service and more customers using the Ocado 'Smart Pass' to shop more frequently.

Basket decline slowingOcado's average basket size declined again by 1.6% to £110.84 but this was a slower rate of decline than in previous quarters. Ocado stated that the decline was driven by a reduction in multi-buy promotions and shoppers ordering more frequently. A declining basket size is a challenge for an online retailer as larger baskets are needed to cover the costs of picking and delivery.

Change in market pricingOcado's CEO Tim Steiner said, "while the market remains very competitive, there are the first signs of a change in market pricing dynamics coming through. However, it remains too early to predict how this will unfold throughout the year, and in particular is dependent on any future currency movements."

Source: IGD 14th March 2017


Dunnes Holds On To Top Spot In Ireland; Strikes Hit Sales At TescoFor the first time Dunnes Stores has held its position as Ireland’s largest grocer for two consecutive months. Latest supermarket share figures from Kantar Worldpanel in Ireland for the 12 weeks ending 26 February 2017, show the chain’s sales grew by 4.6% with its market share increasing to 22.9%, up from 22.5% last year.

David Berry, director at Kantar Worldpanel, said shoppers at Dunnes are adding more to their baskets, helping it hold onto the top spot. “The grocer’s ‘Shop & Save’ initiative is continuing to influence customers, with the average basket featuring an extra one and a half items – an additional €3 per trip and €25m for the retailer in the past 12 weeks,” he said.

Former number one SuperValu remained close behind Dunnes with a 22.6% share of the market. Average customer spend in its stores was up by over €1 more per trip, helping sales rise by 0.5%. “With Supervalu planning to open three new stores and refurbish a host of others, the retailer will be expecting to experience a boost in sales later in the year,” said Berry.

Meanwhile, following three months of steady growth, Tesco’s sales fell by 1% as eleven days of staff strikes led to disruption for the retailer. Despite the industrial action only affecting eight stores, Kantar Worldpanel said there has been a clear impact on the retailer’s performance, with its market share falling by 0.9 percentage points to 21.7%.

Aldi and Lidl continued their robust growth, with sales rising by 5.3% and 4.1% respectively. Over the 12 week period, Aldi attracted an additional 20,000 customers into its stores, while also encouraging them to visit more frequently. Lidl’s uplift in sales enabled the retailer to increase its share of the market to 10.6%.

The data also showed that grocery inflation eased slightly to 0.5%, down from the 0.7% seen the previous month.



Three of the Big 4 poised for petrol price warThree of the UK’s largest grocers have all slashed their fuel prices in a move predicted to spark a new price war.

Following today’s news that the grocery price war might be starting to ease off, another price war is looming between Tesco, Asda and Morrisons as they each drop their petrol and diesel prices.

Sparked by Asda’s announcement that unleaded petrol prices will be capped at 114.7p per litre, below the UK average of 120p per litre, its Big 4 rivals have now followed suit.

Marking the end to four consecutive months of rising prices, Morrisons responded with an announcement that would be dropping petrol prices by 2p per litre. Tesco has also pledged to do the same.

“While this cut may come as a surprise to drivers as prices at the pump have been going the wrong way for months, it is has been on the cards for a couple of weeks – we’re very relieved retailers have acted without any need for outside encouragement,” RAC fuel spokesman Simon Williams said.

Source: Retail Gazette 14th March 2017


UK Shoppers Rate Retail Experiences Merely AverageNew research reveals that only 40% of UK shoppers think their favourite retailers provide a good or great customer experience, and accurately anticipate their needs.

The research, commissioned by marketing technology company Zeta Global, asked over 3,000 UK adults about their shopping preferences and experiences. The study was conducted so that retailers can better understand what their customers expect in terms of service and experience, and how they can respond more effectively to their shoppers’ needs in a complex and constantly changing competitive retailer landscape.

The study, conducted for the company by Sapio Research, also found that nearly half (48%) of respondents considered their retail experience to be merely ‘average’, while a further 11% believe that their favourite shops provide poor service, and they have to shop around as a result – clearly highlighting a massive opportunity for retailers to set themselves apart.

Other key findings from this report include:

• 81% of UK consumers have confirmed they are more likely to go on to buy if a store recognises them as a previous customer and offers relevant discounts

• Almost two-fifths of shoppers would be less inclined to shop around if they received a personalised service• 63% of UK shoppers have bought items as a direct result of a communication from a retailer• Customers have high service expectations of retailers – 87% of people expect an answer back within 24 hours from a store if they

complain

The full report, entitled Content, context and trust: Identifying the golden customer opportunities for retail marketing, also highlights key gaps that retailers have in their ability to anticipate shopper needs which need to be met, such as expectations of a joined up online and in store experience. It demonstrates how retailers who react quickly to customer demands will be rewarded by happier, more loyal shoppers.Jill Brittlebank, Senior Director – Strategy & Analytics of Zeta Global, commented: “Clearly, retailers continue to face challenges in being able to acknowledge their customers and understand how they interact with the brand – online, in a physical location, or when they interact through social media. Retailers need to be able to spot these interactions and acknowledge quickly, or there is a real risk that time-pressured and demanding UK shoppers will take their customer to retailers that can.

“This research highlights just how critical it has become for stores to understand their customers, and put this knowledge systematically to work throughout their organisations to enhance customer service, experience and engagement. If this doesn’t happen, they will lose ground to competitors.”


https://goo.gl/Sp7tMc


Argos forges ahead in Sainsbury's Q4 results Sainsbury's has reported contrasting results for its newly enlarged business for the final quarter of 2016/17. Strong sales growth at Argos helped to offset a slight fall in Sainsbury's headline retail like-for-like sales, which were impacted by the later timing of Mother's Day and Easter this year.

Encouraging growth at ArgosAt Argos, LFL sales were up +4.3% in the nine weeks to March 11th, a pick-up on the 4.0% achieved in Q3, with strong strong growth in technology categories. Performance was also boosted by investments in service and availability, and enhancements to the Argos website and app. At the same time, Sainsbury's continued to introduce Argos concessions to more of its stores: 11 opened during the quarter taking the total to 41. The 10 shop-in-shops that have been opened for more than a year continued to deliver very strong LFL growth of around 25% and online participation continued to grow. Sainsbury's expects to open 25 more Argos concessions at supermarkets over the next quarter as it works towards its 250 store target over three years.

Headline LFL impacted by event timingSainsbury's retail LFL was -0.5% for the quarter, a step down from the +0.1% achieved in the Q3 Christmas quarter, pulled down by a 4% fall in general merchandise sales reflecting the later timing of Mothers Day and Easter this year. Adjusting for this timing impact, Sainsbury's estimates LFL retail sales would have been +0.1% in Q4. Even so this LFL figure was lifted by the return of slight inflation by the end of the quarter and LFL volumes were slightly negative. For the full 2016/17 financial year, retail LFL sales were -0.6% (2015/16 = -0.9%).

Strategy to impact external challengesTo mitigate the gradual long term decline in volumes, Sainsbury's is focusing more on delivering quality, choice and value across its food offer. To improve value, it continues to simplify its trading strategy, cutting back promotions to concentrate on lower regular prices. Key here are continuing initiatives with suppliers to reduce costs and improve internal efficiency. Sainsbury's is also keen to differentiate further on food quality by launching innovative products. Product launches during the quarter includes sweet potato tagliatelle and butternut squash waffles, creating distinct reasons for shoppers to choose Sainsbury's over competitors.

Investment in growth channelsSales continued to build in Sainsbury's online and convenience businesses. Online sales were up 7% and orders by 8% as Sainsbury's furthered its strategy of steady investment in the channel rather than aggressive customer acquisition. Sales were helped by integrating Sainsbury's recipe and online grocery websites, making it easy for shoppers to add recipe ingredients to their online orders. Convenience sales grew by 7%, helped by strong LFL growth and 10 new shops. By the end of the quarter Sainsbury's operated 806 Local stores including nine Eurogarages concesions.



Supermarkets could soon have online "Buy British" buttons post-BrexitOnline grocery shopping could soon see consumers use a “Buy British” button to help filter out non-UK produce as part of post-Brexit policy proposals.

The plans – revealed in Houses of Parliament yesterday – means grocery retailers would update their websites so consumers can select to only list home grown food items only.

While identifying UK-produced food can be easy in-store thanks to frequently-used Union Jack labels on packaging, doing so online can be difficult due to the size of images and lack of categorisation.

Environment Minister George Eustace yesterday told Westminster that he had met with at the National Farmers' Union (NFU) to discuss the proposal.

The idea was supported by MPs, which could provide a welcome boost for UK farmers once the UK leaves the EU. "Often if one wants to shop online one doesn't know whether it's British food or not,” Taunton Deane Conservative MP Rebecca Pow said.

"Would there be a way that we could consider having a button to press when you do your online shop so that you can just choose from British produce? “Surely that's really going to help us as we leave the EU?“

York Outer Conservative MP Julian Sturdy also applauded the idea, as well as Jim Fitzpatrick, a Labour MP who sits on the Environment and Rural Affairs Committee.

NFU president Meurig Raymond said: “From the independent surveys that the NFU has carried out over the years, we know that 86 per cent of shoppers want to buy more British food, so we would welcome any move which would enable them to back British farming.”

The news comes after a brief vegetable “crisis” last month, whereby lettuces, courgettes and other produce were in short supply due to severe storms in Spain – which highlighted the UK’s reliance on foreign imports.



John Lewis sales up 7% last weekFashion sales were up 11.1% as the warmer weather drove an increase in menswear and womenswear sales with casual clothing seeing the strongest demand. Overall sales of womenswear were up 17.7% on last year while menswear sales rose by 8%.

Sales of beauty, wellbeing and leisure products surged by 18.1% year-on-year driven by the retailer’s Never Knowingly Undersold price matching activity.

Electrical, and home technology sales were up 7.5% as trade was influenced by a promotion on Samsung products.Meanwhile, sales in the home category rose by 2.6% overall as sales of outdoor living products climbed by 20.6% due to the warmer Spring-like weather. Furniture sales increased by 3.7% driven by demand for fitted furniture and beds. Textile and carpet sales rose by 3.4%.

Source: Retail Bulletin16th March 2017


Sainsbury's trials weather activated advertising Sainsbury's has launched a responsive outdoor advertising campaign for its clothing range that uses Met Office data to show images of weather appropriate Tu products.

Clothes to match the weatherThe new campaign aims to address the challenge of aligning seasonal clothes with the British weather and communicate that "Tu has the right outfit for the right moment", according to the agencies behind the launch. The campaign will vary the products shown depending on the weather, with appropriate products shown on sunny, dry, wet or windy day using a feed from the Met Office. The ads will run on outdoor media, such as bus shelters, until March 26th.

Developing a more compelling clothing offerThe activity is part of a broader push by Sainsbury's to expand its clothing business, which includes the hiring last month of Portas Agency, the creative agency of retail guru Mary Portas. This follows the launch of Tu Premium last year, a womenswear brand that aims to rival brands such as Hobbs and Whistles, and the addition of men's sportswear brand Admiral Performance. Sainsbury's is also about to launch a high fashion Tu collection in almost 200 stores this Sunday, designed by a fashion graduate under the guidance of designer Holly Fulton. Collectively, these moves should help Sainsbury's build on the 5% growth in clothing it achieved in Q4



PwC Warns Of Consumer Spending SlowdownFinancial services giant PwC has become the latest firm to warn that UK consumer spending is set to slow this year due to rising inflation and Brexit-related uncertainty.

Real consumer spending growth will moderate from around 3% in 2016 to around 2% in 2017 and 1.7% in 2018, according to PwC’s latest analysis, which says the impact of Brexit on consumers will also vary by category of spending.In an extract from its ‘UK Economic Outlook’ report, which launches in full next week, PwC says consumer spending is currently the single most important driver of UK economic growth. Household spending has grown on average by 2.4% per annum faster than inflation over the past four years, propelling the overall UK economic recovery both before and after the Brexit vote. PwC says this has been reflected in rising employment levels, continued historically low interest rates, and a declining household savings ratio, driven by higher borrowing and a strong housing market.

John Hawksworth, chief economist at PwC, said: “Real household income growth is expected to slow in 2017-18 as rising inflation squeezes spending power. Increased borrowing may help fill the gap in the short term, but there are limits to how far UK consumers can continue to live beyond their means with spending rising faster than disposable incomes.“We therefore expect consumer spending growth to moderate over the next couple of years as higher inflation and Brexit-related uncertainty start to bite.”

PwC’s report also analyses some potential impacts relating to the weaker pound and possible changes in migration policy after the UK leaves the EU.

Barret Kupelian, senior economist at PwC, commented: “Clothing and food sectors are potentially most exposed to the fall in sterling due to their high reliance on imports. In addition, the retail, hotel and restaurants sectors, together with food production and processing and construction, could be most vulnerable to any significant restrictions on EU workers coming to the UK after Brexit.

“Such sectors need to start making plans now both to help existing EU workers to register as UK residents where possible, and to consider other options like expanding recruitment and training of UK nationals.”



Morrisons and Just Eat announce new partnershipMorrisons is set to become the first grocer in the UK to set up a takeaway food service inside its stores after partnering with food delivery firm Just Eat.

The retailer plans to open a Bombay Bites Express concession at its Victoria Shopping Centre store in Bradford this weekend.

This means customers can either dine in-store at the concession, collect their takeaway order while they do their shopping, or have Bombay Express deliver it to their homes via Just Eat.

The concession will create 10 new jobs and will be open 8am-8pm Monday to Saturday and 9.30am-4pm on Sundays.

According to Retail Week, Morrisons and Just Eat intend to roll out the concept across the UK.

It’s the latest partnership that Morrisons has signed up to as part of its ongoing drive to provide more incentives for shoppers. Its other tie-ups are with Amazon, Timpson and Doddle.

“We have listened to the customers who shop in our Victoria store and they told us they’d love a takeaway service as an extra reason to shop with us,” Morrisons director of local solutions Rebecca Singleton said.

The news comes as the Big 4 retailer kicked off a nationwide tour of small and independent food producers, as part of a campaign to find at least 200 new British food suppliers within the next year.


IRI Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 17th March

IRI's Weekly News Update - w/c 13th March 2017

Food

Transcript of IRI's Weekly News Update - w/c 13th March 2017