www.kamci ty.com NamNews │ Ju ly 2017 │ 1

Whilst Revenue Management evolved in the late Seventies as a way of maximising revenue from

airline seat sales, for a number of FMCG organisations, Revenue Management really began its

surge forward in 2009, a year after the global financial crisis changed everything.

The impact of unprecedented market confusion and uncertainty on suppliers’ and retailers’ P&Ls

is now evident. Whilst this has caused many to resort to short term fire-fighting, such circumstances

represent real opportunities for those that can adapt to business change, while others await a return

to ‘normal’…

For those wishing to optimise their investment in Revenue Management, it is perhaps useful to

place key changes in the market within a Revenue Management context in order that suppliers better

understand the pressures on retailers and thereby pitch supplier Revenue Management initiatives in

ways that enhance their appeal to retailers by emphasising positive impacts on their latest P&L.

In terms of where major retailers are now, it is evident from latest annual reports that UK net

margins have fallen to 2% from highs of 5%+. This means that there is currently little, if any profit

surplus available to pay down debt, a major priority for the multiples. In addition, several years of flat-

line growth combined with low net margins means that UK retailers can only grow at the expense of

competitors, who are also under serious financial pressure. For instance, if sales go down by £1, it

means that the retailer loses two pence of profit each time.

In addition, with average gross margins of say 24%, it means that a lost sale of £1 loses the retailer

24p in gross profit i.e. a 12x multiplier of the 2p net profit. These are seriously distracting issues for

retailers accustomed historically high levels of retail profitability.

Moreover, in the ‘good old days’ when big was best, it seemed logical to build 100,000 sq. ft.

‘palaces’, designed to last forever. In fact, an annual depreciation charge of 2% means a 50 -year write-

down, in practice a 50-year lock-in to the space.

Given that multiples were able to generate sales of £1,000 per sq. ft. per annum, the relatively

recent discovery that 80% of sales are generated by 20% of a retailer’s SKUs meant that product culls

were necessary in the short term. However, the longer-term impact of the 20% space redundancy

caused potential dilution of the retail standard KPI of £1,000. This means that any alternative use (i.e.

instore theatre) of the redundant space has to generate £1k/sq. ft./annum. This space KPI also means

that the obvious option of surplus stores sell-off is compromised in that no other retail model can

achieve UK multiples’ ‘norms’, apart from the fact that placing too many shops on the market at one

time could seriously dilute property values, and thereby devalue retailers’ Balance Sheets.

Add to this the threat of online with Amazon offering a range comprising over 300m SKUs, and high

entry level standards of 1-click ordering, returns as easy as ordering and fast zero-defect delivery of 4

hours to 1 hour within the M25.

Finally, add the discounters, Aldi and Lidl, who grew sales at 19.2% year-on-year and achieved a

combined record market share of 12% in the 12 weeks ending 21 May 2017 (Kantar Worldpanel). The

research group found that 62% of the UK population shopped in an Aldi or Lidl store during the 12-

week period, compared to just 58% last year – meaning an additional 1.1 million households visited

either of the two chains.

Meanwhile, many suppliers have embraced the operational applications of Revenue Management

as a way forward. They have developed the ability to drive better visibility, control, decision-making

and collaboration across their organisations, the entire cross-functional teams, through the use of tools

like Exceedra*.

It is against the above retail reality back-drop that Revenue Management-ready suppliers need to

attract the attention of seriously distracted retailers, by positioning Revenue Management not only as

a way of directly contributing to a retailer’s sales, but also a means of improving their net margins. In

doing so, a supplier’s Revenue Management team could provide a new and complementary way of

relating supply and retail, adding a collaborative richness to their joint aims.

In terms of on-shelf execution, shelf-edge e-pricing will be an essential enabler. This final link in

the chain will need to be positioned carefully, in order to minimise the media-driven ‘surge-pricing’

negatives already causing issues with the consumer. Instead, suppliers will need to begin the massive

education job of convincing the consumer that demand-driven pricing is beneficial.

Reality-based Retail Revenue Management will make that possible….

* For a free White Paper: How can Consumer Goods organizations develop a best in class Revenue

Management capability

Global Newsletter for

National / Key Account Managers

in the Retail / FMCG Sector

NamNews I s sue 6 – J u ly 2017

Published by EMR-NAMNEWS Ltd. www.kamcity.com

@ Copyright EMR-NAMNEWS Ltd.

All facts and figures in this newsletter are

presented in good faith and on the basis of information before us at the time of

release. In consequence, no advice,

interpretation, or implication should be

acted upon without taking the normal commercial precautions.

A Reality Check for Retail Revenue Management? By Brian Moore (bmoore@namnews.com), Retail Consultant and CEO of EMR-NAMNEWS & KamCity.com

NamNews │ July 2017 │ 2 www.kamci ty.com

KAMTIPS

OTSW, the Key to Optimising Revenue Management in Retail

Why OTSW? Given that Opportunities and Threats exist outside the business, are independent of the business and are

transient, in that an Opportunity-window can close as a result of the intervention of a more agile competitor, it seems

more logical to start a SWOT analysis with an assessment of Opportunities and Threats, and then proceed to Strengths and

Weaknesses.

It follows that identifying and scoping out Opportunities for Revenue Management, and factoring in possible Threats, can prov ide

a practical basis for benchmarking a supplier’s current state of Revenue Management-readiness in terms of optimising

Opportunities in retail.

Given the already negative impact of ‘surge-pricing’ on the savvy consumer in terms of perceived mal-manipulation, it is vital that

suppliers hoping to capitalise on Revenue Management first focus on building and maintaining credibility with the consumer-

shopper. This means that anything that even looks like shrinkflation has to be avoided because of its effect in diluting brand

credibility. Think of the impact of a thought like ‘If they are cheating me on quantity, what are they doing to quality?’ on a consumer

already suspicious of the fact that variable pricing is somehow manipulation to their disadvantage, added to the possibility of being

short-changed on quality… Revenue Management in retail will succeed by effectively managing consumer expectation by

continuously ‘delivering more than it says on the tin’.

We see four retail Opportunity options for Revenue Management:

1. Current Products to Current Customers, optimising existing store traffic

The degree of supplier brand profile & shop traffic profile congruency will determine the success of Revenue Management on shelf.

In other words, people who know and use the brand, who also know what they are accustomed to pay, probably represent the best

option, of the four ways of optimising Revenue Management in retail.

This option needs predictability of pricing for the benefit of the consumer-shopper, but these price-moves will also be known to

competitor retailers, who will either align with , or price against the ‘surge-price’.

Build consumer confidence in the brand, such that when they open the tin, it exceeds expectations rather than disappoints, be aring

in mind the ‘tell a friend’ x digital multiplier (i.e. via analogue media: ‘please me and I tell a friend, disappoint me and I tell 10

friends’. Introduce social media to ‘tell a friend’ and the impact is limitless. Tailor Revenue Management initiatives to store traffi c

profile, brands’ profile congruency, and focus on whatever makes that retailer unique to that shopper.

2. New Products to Current Customers (i.e. Products that are new to them)

Current users of our products know and trust our brand and company, will probably forgive a few ‘mistakes’ i.e. fail quickly.

3. Current Products to New Customers

Conduct in-depth profiling of current customers in terms of their use and experience of our current and ‘new’ products. Use this

profile as way of identifying similar, non-user consumer-shoppers and take them through Ansoff stages 1 & 2 above.

4. New Products to New Customers

Bearing in mind that they don’t know our product, and they don’t know our company, tread carefully… In practice, feed in you r

best products to start.

Threats for Revenue Managers include:

As with any application of a process that is capable of making a real difference, Retail Revenue Management has to be navigated

through a hostile environment comprising regulatory/legal/political developments, cultural/social change, technological chang e,

apart from the usual issues of trade concentration/power/internationalisation, and competition (innovation/substitution/wealth/

risk-policy) - If you want details of Threats to Retail Revenue Management, please email me on bmoore@namnews.com.

Having dealt with Opportunities and Threats, keep in mind where retailers need to be in terms of ROCE 15%, Net Margin 5%,

Stockturn 25 times per annum, Sales/sq. ft., Gearing 30%.

With your help, Retail Revenue Management can help retailers go some of the way…

For those suppliers that now believe themselves to be Revenue Management-ready, the above analysis will provide an objective,

customer-driven benchmark to evaluate corporate Strengths and Weaknesses of their version of Revenue Management.

Any aspect of Revenue Management that contributes positively to optimising the above opportunities is of value, all else is

redundant.

You are now Revenue Management-ready…

NamNews │ July 2017 │ 3 www.kamci ty.com

UK & IRELAND NEWS

RETAIL TRENDS/ISSUES

FMCG Retailers And

Manufacturers Urged To Work

Together To Drive Growth A new whitepaper from IRI calls on FMCG retailers and

manufacturers to put aside their differences and work more

closely together on key marketing and operational tactics such

as pricing, promotional strategies and assortment in order to

drive brand and category growth.

IRI believes the industry should adopt a new standard for

Big Data Collaboration (BDC) to redefine the way that data is

shared between suppliers and retailers. The last time retailers

and manufacturers worked together with such intensity was

to make the grocery supply chain work more efficiently via the

Efficient Customer Response (ECR) strategy.

IRI says that now is the time to return to a focus on

collaboration in order to optimise the power of data

intelligence, improve practices and process and reduce the

cost of marketing, driving profit growth for both retailers and

suppliers. “In a struggling retail environment with no growth

in Western economies, retailers and manufacturers need to

change drastically the way they operate or they will have a

hard time to continue investing in innovations, driving

consumers into their stores and generating sales with the right

level of margin,” said José Carlos González-Hurtado, President

of International, IRI.

“Instead of battling over price, they need to focus on the

relatively untapped commercial advantage which they share:

customer knowledge.”

Retailers own the direct relationship with the customer

and so have the best real-time understanding of shopper

habits but they lack the fine detail about how customers feel

about brands and how important those brands are to the

people that shop in their stores. Manufacturers have an

extensive knowledge of brands and categories having spent

years building strategic, analytical and consumer-centric

organizations, but they have little evidence of what happens to

products once on store shelves.

IRI believes that by combining all of this information with

knowledge on media and other external factors such as the

macro economy, weather and petrol purchasing, would make

it possible for both retailers and manufacturers to personalize

the product offer and communications according to the

customer in a way that will truly resonate.

“Creating a system or standard for the way that

information is shared is the first step,” claimed González-

Hurtado.

“It would help overcome the barriers of data ownership,

the sheer volume of data available and the data analytics skills

required to mine it, as well as differing views of the customer.

There is also the natural mistrust that exists from fraught

partnership negotiations and, of course, the fact that separate

businesses do tend to focus on their own goals.”

Download the full whitepaper from the IRI website

NAM IMPLICATIONS:

▪ Given suppliers’ increasing interest in shopping

behaviour matched by retailers’ increasing interest in

consumption, there appears to be common ground for

sharing insights.

▪ Synchronising Supply Chain and Revenue Management

to optimise shopper visits might well provide a basis for

collaboration.

▪ Just needs a couple of big players to roll the ball

forward…

Consumers Love Of Coupons

Remains High Despite Fewer

Being Circulated Whilst the supermarket multiples have been reducing their

promotional activity to focus on everyday low pricing, it

appears that shoppers’ hunger for coupons and vouchers

remains high.

A survey by coupon provider Valassis suggests that almost

all consumers use coupons when supermarket shopping

(99%) and almost all (96%) are actively looking for

promotional offers more often or as much as a year ago.

Consumers reported saving £3.4bn in the 12 months to April

2017.

While the appetite for coupons and vouchers remains

high, 41% of consumers report that they are receiving fewer

than a year ago. The survey’s respondents reported decreases

in coupon availability across most of the usual sources, with

65% claiming they now receive fewer coupons at till and 35%

spot fewer coupons online.

Charles D’Oyly, Managing Director of Valassis UK,

commented: “Several grocery retailers have pulled back from

using basket price comparisons against other supermarkets,

which often resulted in the price difference being printed out

as a voucher when checking out. This promotional mechanic

has been popular since early 2010, but with the rise of the deep

discounters and the need to compete on everyday low prices

for household staples, it looks like retailers are not issuing as

many of those types of coupons and vouchers.”

NAM IMPLICATIONS:

▪ The unsatisfied appetite for coupons could result in more

of the current coupons being redeemed – i.e. less

wastage.

▪ Making it important that retailers and suppliers

incorporate higher redemption levels into their promo-

calculations…

Nielsen Unveils New System

That Helps FMCG Firms Tap

Into Emerging Trends Nielsen has unveiled a ‘connected system’ that aims to help

suppliers and retail companies spot emerging trends and act

on them by integrating FMCG client data with Nielsen’s retail

NamNews │ July 2017 │ 4 www.kamci ty.com

UK & IRELAND NEWS

POS, consumer panel, e-commerce, fresh food and cross

platform media data.

The Nielsen Connected System is cloud-based and

designed for decision-makers across FMCG and retail

companies to “foster collaboration and align organisations to

achieve sustained, profitable growth in today’s ever-evolving

industries”.

It includes a wide range of data, analytics and role-based

applications from Nielsen and an expanding group of partners.

The company said that in today’s challenging marketplace, the

Connected System delivers actionable, coordinated decision

making, aligning organisations around what’s happening with

their business, pinpointing the drivers of performance, and

identifying actions to drive growth.

Steve Hasker, Global President and Chief Operating Officer

at Nielsen, commented: “For more than 90 years, we’ve

maintained our position as a global measurement leader by

responding to market changes and client challenges with

resolve and innovation.

“Continuing that tradition, the Nielsen Connected System

is the next generation of interconnectivity. This is a direct

response to the changes and shifts happening in the FMCG and

retail industry. Now more than ever, the industry needs new

tools to help align businesses to the right resources to create

forward momentum through data fuelled decisions and

analytics.”

NAM IMPLICATIONS:

▪ Anything that improves dot-joining helps, especially

based on real data from the point-of-sale.

▪ Allowing you more time to think…really think, about

implications and action.

▪ Find out more on Nielsen’s website

Justin King Warns Shoppers

Will Face ‘Higher Prices, Less

Choice And Poorer Quality’

When UK Leaves EU Justin King, the former long-serving Chief Executive of

Sainsbury’s, believes that UK shoppers are “completely in the

dark” about the effect Brexit will have on their weekly food

shop.

Speaking to the BBC as part of its Panorama programme

‘Britain’s Food & Farming: Brexit Effect’, he said it was “very

clear” shoppers would face “higher prices, less choice and

poorer quality”.

King explained that Brexit, almost in whatever version it

is, will introduce barriers. “That makes it less efficient which

means all three of those benefits – prices, quality and choice –

go backwards,” he said

King, who supported Remain during the Brexit campaign,

said this frictionless movement of goods around Europe had

kept food prices down with retailers able to find the best

suppliers and markets throughout region. He also said the EU

had driven up standards and enabled the UK to get out-of-

season vegetables all year round.

However, John Mills, a vote Leave campaigner and

Chairman of consumer goods firm JML, hit back, telling the BBC

that the UK’s membership of the EU had kept prices artificially

high for shoppers. He said: “Food prices inside the EU vary

from food product to food product, but the average is

something like 20% higher than they are in the rest of the

world – so there is very substantial scope for food prices

coming down if we switch sources of supply outside the EU.”

Mills also stressed that cheaper prices may not mean

lower standards. He said: “The reason why food prices are

higher inside the EU is because they have got tariffs which

keep the prices up. It’s not anything to do with quality – it’s

due to the institutional arrangements which means the food

prices are kept much higher to increase farmers’ incomes.”

NAM IMPLICATIONS:

▪ Open markets, good and bad, dictating the need for

savvy consumers to keep their eyes wide open.

▪ Was it ever any different?

OTHER TOP STORIES Click for

details

Consumer Confidence Takes A Hit After General Election

Result

Warm Weather And Food Inflation Boosted Retail Sales

Last Month

Shop Prices Fall At Slowest Pace Since 2013 As Food

Inflation Hits 1.4%

Sales Of Prestige Beauty Products Hit £2.2bn With

Bricks And Mortar Still A Key Channel

Airports Offer A $38bn Bright Spot For Retailers

Gaining Consumer Trust And Loyalty Is Key Focus For

Retail Executives

Shoppers Looking To Innovate In The Way They Buy

Their Groceries

Energy, Water And Cola To Drive Soft Drink Sales Past

£8bn Mark

ECJ Rules That Makers Of Plant-Based Foods Should Not

Use Dairy-Style Names

SUPERMARKETS

Aldi Kicks Off Major

Recruitment Drive Aldi has kicked off its biggest ever recruitment drive to

support its plans to open hundreds of new stores in the UK

over the next few years.

NamNews │ July 2017 │ 5 www.kamci ty.com

UK & IRELAND NEWS

The discounter expects to create around 4,000 jobs across

its business as it pushes ahead with its plans to increase store

numbers from 700 to 1,000 by 2022. The new jobs will include

assistants and deputy managers across its shops and

distribution network.

Aldi said it needed to hire thousands of employees

following a recent “sales surge” which saw an extra 900,000

new customers visit its stores last year. It plans to open

around 70 stores this year.

NAM IMPLICATIONS:

▪ Vital that branded suppliers find safe ways of capitalising

on discounter growth…

▪ …and perhaps via some surrogate–label production on

the side?

▪ Even if such surrogate label initiatives are regarded as a

testing ground for the brand?

Aldi Launches Meal Kits

Range Aldi is taking on fast-growing recipe kit delivery companies

such as HelloFresh and Gousto, and upmarket rivals such as

Waitrose, with the launch of its own meal kits.

The discounter recently launched a range of fresh ‘Ready

Set Cook’ meal kits in its stores that sell for as little as £2.99,

far cheaper than rivals.

Aldi claims its meal kits are comparable to the Waitrose

Michel Roux Scratch range, but are far cheaper at £1.50 per

person compared to £2.99 per person at Waitrose. It added

that customers who buy their meal kits in bulk, or get them

delivered from “trendy services”, such as Hello Fresh, would

save a fortune if they make the switch to Aldi. The discounter

said that five meals for two people from its new range cost

£14.95 – 71% cheaper than five boxes from Hello Fresh, which

cost £52.

Tony Baines, Joint Managing Director of Corporate Buying

at Aldi UK, commented: “The meal kits are another example of

Aldi’s continued commitment to offering premium quality

products at amazing low prices, allowing customers to make

substantial savings on luxury equivalents without any

compromise.”

The major supermarkets have all been expanding into

meal kits to capitalise on demand from consumers who are

seeking healthy fresh meals but don’t have the time to prepare

one from scratch.

Back in April, Waitrose began trialling its own recipe kit

delivery service, whilst specialist HelloFresh recently

expanded into the retail channel via a tie-up with Sainsbury’s.

NAM IMPLICATIONS:

▪ And eating into the hallowed up-market ground of the

mults…

▪ …adding to its quality credentials in the process…

▪ With any traction resulting in additional interest by the

consumer in the rest of the discounter offer.

▪ Worth a fundamental review of your trade strategies?

▪ …at least.

OTHER ALDI NEWS Click for

details

Aldi To Install 96,000 Solar Panels By The End Of The

Year

Aldi Picks Up More Awards For Wine Range

Aldi Overtakes M&S And Waitrose In Customer

Satisfaction Ranking

CMA Welcomes Moves By

Asda To Make Its Promotions

Clearer The Competition and Markets Authority (CMA) has confirmed

that Asda has complied with a commitment it made last year

to ensure its promotional pricing was not misleading

shoppers.

Asda was singled out for criticism last year following an

investigation by the competition regulator into pricing tactics

used by the leading supermarkets, finding some could mislead

shoppers. Whilst the CMA did not make any rulings against

Asda, it did raise a number of specific issues with the retailer.

Asda subsequently gave a written commitment to change the

way it operates ‘was/now’ and multi-buy deals.

The CMA said earlier this month that it welcomed steps

taken by the supermarket to make its promotions were

clearer, with better labelling of offers and discounts. The

changes mean that the supermarket no longer displays the

‘now’ price for longer than it displayed the original ‘was’ price.

There have also been changes to its multibuy offers, to ensure

that these always offer a saving when compared with a single

product before the offer.

The CMA said it was now satisfied that Asda’s pricing is

clearer for shoppers and it has now formally closed its case.

Consumer watchdog Which? originally made the

compliant to the CMA about misleading supermarket pricing.

Its Managing Director of Home Products and Services, Alex

Neill, commented: “Following our super-complaint on

misleading supermarket pricing, it’s good to see that Asda has

changed its practices. The CMA needs to continue to monitor

all retailers to ensure that any misleading practices in other

sectors are also systematically tackled.”

A spokesperson for Asda said: “We welcome the CMA’s

recognition of our serious commitment to offer customers the

most trusted low prices of any full range supermarket. We

hope that the closure of this case means a level playing field is

now established where all supermarkets adhere to the

standards set by the CMA.”

NAM IMPLICATIONS:

▪ Perhaps even better for retailers to aim at preserving

hard-won credibility with the shopper…

▪ …by implementing the spirit as well as letter of law in all

dealings with consumer-shoppers?

NamNews │ July 2017 │ 6 www.kamci ty.com

UK & IRELAND NEWS

OTHER ASDA NEWS Click for

details

Asda Continues Overhaul Of Ready Meals Range

Young’s ‘Funky Fish’ Products Delisted By Asda As Part

Of Range Overhaul

Lidl Stepping Up Expansion In

The UK Lidl’s new UK boss, Christian Härtnagel, has revealed that the

discounter is stepping up its expansion and will see its fastest

ever growth in store numbers over the next two years.

In an interview with The Telegraph, Härtnagel said around

50% of the British public shopped at a Lidl store last year.

However, he believes that the main reason the rest of the

population don’t shop at the discounter is because they can’t

reach one of its 670 stores as easily as its competitors.

Härtnagel, who took over as Managing Director of Lidl UK

last September following the abrupt departure of Ronny

Gottschlich, said he was aggressively stepping up the group’s

expansion with a plan to roll out “at least one shop a week”. He

revealed that Lidl had already agreed sites to add between 50

to 60 shops a year for the next two years, compared to the 30

opened last year. The investment will be at least £1.45bn

between now and 2019. “That is the fastest we have ever

grown in the UK,” Härtnagel said.

Despite its main rival Aldi entering the online retail

market in the UK, Härtnagel stressed that Lidl would not be

revealing an online offering anytime soon in this country. He

revealed that he has a team of two dedicated to analysing all

the online options available but despite Lidl having an online

presence in Germany, Belgium and the Netherlands, such a

move was not around the corner for the UK.

“The UK is the most advanced online market in Europe and

customers wouldn’t be happy with goods being delivered in

three or five days, they want it the same day or the next day.

I’m convinced that if we just focus on our core supermarkets

we will have so much more to gain”, he said.

Meanwhile, Härtnagel admitted that Lidl’s profits in the

UK will be lower this year “because of the huge investment

figure and the effect of Brexit. But we are privately owned and

we are still focused on our long-term profitability.”

NAM IMPLICATIONS:

▪ Lidl’s plans for doubling their UK expansion over the

next two years (at least) obviously need to be factored

into your UK strategies, especially given that mults’

current growth would appear to be little more than

inflation driven, in the main.

▪ Their decision not to go online seems driven by their

inability to meet consumers’ needs of one-day delivery.

We have to assume that Lidl will reconsider this decision

as soon as Aldi show some success, at least within the

M25 market i.e. Lidl will invest to clear this hurdle.

▪ The question for suppliers has to be the extent to which

they can afford to sit on the sidelines, instead of finding

a non-compromising way of working with Lidl, and Aldi.

Morrisons Shareholders Vote

Against Chief Executive’s

Bumper Pay Package Morrisons faced a shareholder rebellion last month over its

Chief Executive’s bumper pay and bonus package.

At the company’s AGM at its HQ in Bradford, 48.1% of

shareholders voted against the directors’ remuneration report

after an influential investor lobby group recommended

opposing it. ISS had expressed concerns that Potts’s new long

term incentive plan (LTIP) has been increased from 240% of

his salary to 300%, despite the fact performance targets were

reduced.

Morrisons has softened targets to achieve bonus payouts

for future years, including a cut in the earnings-per-share

growth target from 6%-13% a year to 5%-10%. At the same

time, a maximum target for adding free cashflow over three

years was cut from £1.3bn last time to £800m. As a result of

other awards, Potts could be eligible to a maximum £5.3m total

pay package compared to the £2.8m he received last year.

In a statement issued after the AGM, the group’s Chairman

Andy Higginson said: “We fundamentally disagree with the ISS

analysis of the performance targets. Not only does the board

believe the targets to be significant and stretching, but the

judgement on what the right measures are goes to the heart of

rebuilding the business for the long term – striking the right

balance between investment in the business and continued

outperformance.”

Addressing the meeting, Potts highlighted his

achievements in turning around the chain’s performance,

adding: “We’re quietly building a broader and stronger

business, one that provides a capital-light route to long term

growth well into the future. I believe our planned

improvements for the future will further differentiate this

company from its competitors for each of its stakeholders.”

Meanwhile, Higginson told shareholders that despite the

economic and political uncertainty in the UK, the consumer

remains resilient so far. He said: “None of us knows how the

next few months and years will pan out but the team won’t

allow Morrisons to be the victim of any uncertainty. We’ll do

what’s best for customers.”

NAM IMPLICATIONS:

▪ The issue is whether the cost of management’s

remuneration package is appropriate compared with the

value added to Morrisons shares.

▪ If not, shareholders will vote with their feet…

▪ …and drive the share price down to a level that seems

fair to them.

▪ Suppliers have the option to help Morrisons

achieve/exceed turnaround targets.

OTHER MORRISONS NEWS Click for

details

Morrisons Appoints Non-Exec With Experience In The

Drinks Industry

NamNews │ July 2017 │ 7 www.kamci ty.com

UK & IRELAND NEWS

Morrisons Commits To Selling Only British Fresh Meat

Morrisons Fined £10k For Sending Unwanted Marketing

Emails

Morrisons Branches Out Into Online Florist Market

Sainsbury’s Holds Talks With

McColl’s About Supply Deal McColl’s has become involved in Sainsbury’s plans to acquire

Nisa (see p14). Reports said that senior executives from the

newsagent and convenience store operator have met with the

supermarket group’s management to discuss the deal.

Nisa has multiple supply contracts with McColl’s,

accounting for around 40% of its sales. One of these contracts

is due for renewal soon, while others are thought to run

through to 2020. Reports suggested that McColl’s is examining

whether to renew its Nisa agreement or seek another supply

deal, with Sainsbury’s named as a possible candidate.

McColl’s is also said to have had talks with a number of

other potential suppliers, including Morrisons and the Co-op.

McColl’s already has a close relationship with the Co-op,

having bought 300 stores from the society last year and

recently trialling a product supply deal. 25 McColl’s stores

have been stocking around 900 Co-op brand fresh, frozen and

ambient lines since June as part of a three-month pilot. The

products replaced Nisa’s Heritage and the Independent own

brand.

Morrisons has also been moving back into the convenience

sector via a forecourt store tie-up with Rontec and plans to

revive the Safeway brand as a range for independent retailers.

McColl’s operates over 1,400 stores and its supply

contract is said to be worth as much as £500m a year. Since

Tesco announced its plans to acquire Booker, City analysts

have suggested that McColl’s itself could become a takeover

target as the supermarket multiples battle to gain control of

stores in the growing convenience sector.

NAM IMPLICATIONS:

▪ Given that any successful transfer of a supply contract

would inevitable result in other McColl’s contracts being

transferred to the new partners as they reach maturity,

a successful move by Morrisons or the Co-op could

complicate any acquisition of Nisa by Sainsbury’s…

▪ …leading to authorities-induced uncertainties, delays and

slower decision-making, at least…

▪ The market is evolving too quickly for suppliers to risk

lingering in the wings…

Fears That Sainsbury’s Is

Embarking On Brand Cull Sainsbury’s could be set to embark on a major cull of what it

calls ‘commodity brands’ as part its strategy to win back trade

from the discounters.

According to suppliers quoted by trade magazine The

Grocer, Sainsbury’s senior management outlined details of the

group’s new differentiation strategy at a trade briefing held in

conjunction with the IGD last month. This is said to be aimed

at making Sainsbury’s stand out from its traditional

supermarket rivals and compete harder against the likes of

Aldi and Lidl.

While Sainsbury’s stressed that it was not entering a range

rationalisation process along the lines of Tesco’s Reset

programme, the retailer is reported to have indicated that

there would be a “significant” reduction in the number of SKUs

in its supermarket outlets.

One supplier told The Grocer that Sainsbury’s had outlined

that it would be assessing the “emotional functional qualities”

of all its 34,000 SKUs. They said: “So if you are a brand it’s a

case of ‘do you have an emotional connection with the

consumer?’ If you don’t then you are just really a commodity.

Sainsbury’s is saying it will drive distinctiveness by removing

duplicate products and adding NPD.”

The report added that suppliers were left under the

impression that for products to remain on shelf they would

have to deliver a 20% reduction in cost of goods sold. Another

supplier was quoted as saying that that those that stay will

have to offer a “real underlying value, and will have to be

distinctive”.

Meanwhile, a Sainsbury’s spokesperson was quoted as

saying: “We believe that, working with suppliers, we can

eliminate inefficiency from the value chain. We led the

industry on value simplicity, making buying brands at

Sainsbury’s simpler for customers and we now want to work

with brands to make them more distinctive and rewarding for

customers.”

NAM IMPLICATIONS:

▪ Ask yourself if your brand is really 20% better than

others in the category…

▪ Or wait for Sainsbury’s to do it on your behalf…

▪ …or drop your prices by 20%.

Sales Growth At Sainsbury’s

Improves In Tough Market Sainsbury’s has reported slightly better-than-expected sales

growth for the first quarter of its new financial year, helped by

inflation and the recent warm weather.

During the 16 weeks to 1 July, total group retail like-for-

like sales rose 2.3% (excl. fuel), compared with analysts’

expectations of a 2% rise and growth of 0.3% in the previous

quarter.

The results statement marked the first time since its

acquisition of the Home Retail Group that Sainsbury’s did not

issue separate like-for-like sales data for its supermarket chain

and Argos.

However, the group did reveal that total grocery sales had

risen by 3%, a significant improvement from the 0.3% growth

the previous quarter. Whilst food inflation and new stores

contributed to the figure, Sainsbury’s stressed that the number

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of transactions in its stores were up 2%, with like-for-like

transaction growth in all channels.

The group said that customers were attracted by its

investment in product innovation, with the produce category

performed particularly well, outperforming the market with

volume growth of over 1%.

Meanwhile, online grocery sales rose by 8%, while sales at

its convenience stores were up 10%.

In General Merchandise, total sales were up 1%, despite

disruption from the closure of 78 Argos in Homebase and 84

Habitat in Homebase concessions over the last year.

Sainsbury’s said that Argos had continued to perform well,

growing market share in key categories. It added that its Fast

Track delivery and collection service saw “stellar

performance” during the period of warm weather when

customers wanted to buy and receive products such as

paddling pools the same day.

Mike Coupe, Group Chief Executive, said Sainsbury’s was

working hard with suppliers to improve its price position

versus competitors. He added: “The market is competitive and

we continue to manage cost price pressures closely. Our

strategy is delivering and we are well placed to navigate the

external environment.”

Commenting on the results, John Ibbotson, director of the

retail consultancy Retail Vision, said: “It’s not far short of a

Lazarus moment. No longer leaning precariously on the Argos

crutch, Sainsbury’s core business is back on its feet and

growing food sales at a healthy clip.”

He added: “Mike Coupe has no time to rest on his laurels

though. Food price inflation has slashed margins, and with

consumer prices rising at close to 3% a year and the

consumption boom waning, retailers have to fight harder for

every sale.

“Yet for now the integrated model is delivering in spades.

Argos is no longer a ‘get out of jail’ for the struggling

Sainsbury’s brand, but an equal partner in a truly impressive

double act.”

NAM IMPLICATIONS:

▪ An integrated Sainsbury’s obviously on the way back.

▪ The key issue is how your brands’/products’ growth

compared…

▪ If matching or exceeding these results, an opportunity to

maximise on your resulting strengths.

Sainsbury’s Testing New

‘Smart’ Food Label Sainsbury’s is testing new food labels that show how fresh a

product is by changing colour.

The retailer is currently testing the

new technology on its own label cooked

ham. The ‘Smart Fresh’ label changes

colour from yellow to purple the longer

the pack has been open. It is also

temperature sensitive, with the rate of

colour change varying depending on the

temperature of the fridge.

Sainsbury’s said it hopes the new label will cut the large

amounts of perfectly good ham being thrown away by its

customers. The move is part of Sainsbury’s ‘Waste Less, Save

More’ programme designed to reduce household food

waste. If successful, the label could be extended to other foods.

NAM IMPLICATIONS:

▪ Anything that helps, helps…

▪ Giving Sainsbury’s a competitive edge, unless other

retailers follow.

▪ With overall consumer gain of less waste.

Sainsbury’s Secures Another

Concession Partner To Fill

Excess Store Space Sainsbury’s linked up with food and juice bar firm Crussh as

part of its recent moves to fill excess space in its larger stores.

A Crussh counter was opened in Sainsbury’s store in

Pimlico last month, serving healthy meals and drinks. Crussh

already operates nearly 30 outlets in London, although this is

its first opened inside a supermarket.

Initial customer response is said to have been good with

Sainsbury’s looking at rolling out the brand to other branches.

With shoppers spending more online and in local

convenience stores, Sainsbury’s has been seeking ways to fill

excess space in its larger outlets. Argos and Habitat implants

are being rolled out across the chain, whilst it also has

concession partnerships with Sushi Gourmet and Patisserie

Valerie.

NAM IMPLICATIONS:

▪ Where at: All part of a move by mults to optimise large

space redundancy.

▪ What it means: The 50-year lock-in implied by 2%

annual depreciation makes it difficult to sell-off/abandon

large stores so franchising space becomes necessary.

▪ Where headed: Unless the franchising initiatives yield a

combination of rent and % of sales that equates to

£1,000/sq. ft., then overall store profitability will be

diluted.

▪ How it affects you: Opportunities for instore theatre

that generates at least £1,000 sq. ft./annum

▪ Action: Time to explore any options that meet these

criteria, otherwise don’t bother.

Tesco’s Takeover Of Booker

Referred For Full-Scale

Investigation The Competition and Markets Authority (CMA) has announced

that it is launching a full-scale Phase 2 investigation into

Tesco’s proposed £3.7bn takeover of Booker over concerns it

could leave shoppers in some areas worse off.

The competition watchdog opened its Phase 1

investigation into the deal in May. However, at the end of June,

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UK & IRELAND NEWS

Tesco and Booker requested a ‘fast track’ referral to the more

detailed second stage.

The CMA said that its initial probe had found more than

350 local areas where there is currently an overlap between

Tesco shops and Booker-supplied symbol stores such as

Premier, Londis, and Budgens, and as a result some shoppers

could face worse terms when buying their groceries.

It stated that there are concerns that the tie-up could lead

to Booker reducing the wholesale services or terms it offers to

the over 5,000 symbol stores it currently supplies, in order to

drive customers to their local Tesco.

The investigation will now pass to a new set of decision

makers – an inquiry group chosen from the CMA’s

independent panel members. This group will assess whether

the deal could reduce competition by conducting further

research and analysis as well as seeking views and evidence

from those potentially affected by the merger.

The statutory timetable for an in-depth Phase 2

investigation is 24 weeks, which means the CMA’s final report

should be published before Christmas.

Tesco and Booker have both played down concerns that

the deal will harm competition in the grocery market, stressing

that the merger will deliver significant cost savings that will

benefit consumers and independent retailers. However, rival

groups and suppliers have warned that the tie-up will give

Tesco greater muscle in setting prices and too much control of

the nation’s grocery supply chain.

NAM IMPLICATIONS:

▪ Barring ‘accidents’ a result by Christmas…

▪ Meanwhile, suppliers have to decide whether provisional

initiatives represent a better use of their time than

equivalent use of their energies and resources devoted

to other multiples…

▪ While the discounters and Amazon are unlikely to sit on

the sidelines…

Tesco’s Booker Deal Could

Help It Avoid The Impact Of

Cost Inflation Tesco could generate far greater synergies than estimated

from its tie-up with Booker, allowing it to negate some of the

cost inflation pressures on shelf prices and so accelerate its

turnaround at the expense of rivals.

This is according to analysts at HSBC, quoted by trade

magazine The Grocer. Whilst Tesco has estimated synergies of

£200m from its takeover of Booker, HSBC believes the figure

will be more in the region of £500m which could be re--

invested so the group could avoid the impact of inflation on

prices in both the retail and wholesale sectors.

Dave McCarthy, Head of Consumer Retail Europe at HSBC,

is quoted as saying: “We are firm believers in this

transformational acquisition and believe synergies could

exceed £500m versus the £200m identified by

management. Much of these benefits will be reinvested to

drive further growth to the benefit of customers, suppliers,

employees and shareholders of both companies”.

He added that Tesco and Booker’s rivals would struggle to

match this investment, making the group’s already successful

turnaround “even better”.

NAM IMPLICATIONS:

▪ This was never about the (obvious) benefits to Tesco,

Booker, and their customers…

▪ The issue is the impact on wholesaler competition and

their independent customers…

▪ And how this is perceived by the consumer-voter and

thereby the government…

▪ …and what consumer and the government do about it.

Tesco Axing 1,200 Jobs At HQ

As Part Of Cost-Cutting Drive Tesco has confirmed that it is planning to cut 1,200 jobs at its

head office as part its turnaround strategy that aims to reduce

costs by £1.5bn.

The cull amounts to a quarter of its workforce in Welwyn

Garden City and Hatfield, along with a number of jobs at the

main office of Tesco’s One Stop chain in Birmingham and the

retailer’s IT support centre in Bangalore, India.

The move came just a week after the group

announced that it was closing a call centre in Cardiff, putting

around 1,100 jobs at risk. Tesco has also been reducing roles

in its distribution centres and stores in recent months as part

of the cost-cutting drive instigated by Chief Executive, Dave

Lewis, to improve profitability. In his first year in charge of

Tesco, Lewis axed thousands of head office and store

management jobs.

A spokesperson for Tesco said the latest cuts at its HQ

were a “significant next step” in the turnaround of the

business. “This new service model will simplify the way we

organise ourselves, reduce duplication and cost but also, very

importantly, allow us to invest in serving shoppers better,”

they added.

The jobs under threat at its head office span a number of

departments including property, finance, buying and

marketing. Final decisions will be made once a consultation

has been completed over the summer.

NAM IMPLICATIONS:

▪ Despite the financial logic, the key issue with drastic job

reduction has to be the impact on those remaining…

▪ …keeping in mind that any drop in shop floor morale

impacts the shopper.

▪ Only time will tell…

Tesco Reports Strongest

Sales Growth For Seven Years Tesco reported its strongest rise in UK quarterly sales for

seven years last month, beating City expectations and

cementing its recovery led by Chief Executive Dave Lewis.

In the 13 weeks to 27 May, the group’s UK like-for-like

sales rose 2.3% – a sixth straight quarter of growth and well

ahead of the 0.7% increase seen in the fourth-quarter of its last

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UK & IRELAND NEWS

financial year. Performance was driven by a 2.7% like-for-like

sales rise in food, supported by strong volume growth in fresh

food at 1.6%.

Tesco stated that total volume growth in the UK remained

positive and was similar to the last quarter as it continued to

be more selective in the way it drives volume. In particular,

the group has been reducing short-term marketing activities

in general merchandise and the use of promotions in its

household ranges.

Meanwhile, Tesco stressed that it was working hard with

its suppliers to protect its customers from inflationary

pressures. The group claimed that its price position relative to

competitors has improved and its efforts to offset inflation

have been recognised by shopper. Lewis commented:

“Customers have responded by doing more of their shopping

with us and as a result we continue to grow volumes,

particularly in fresh food.”

In the Republic of Ireland, Tesco’s like-for-like sales grew

by 0.2%, recovering from a 1.3% fall the previous quarter

despite continued investment in price cutting. The chain’s

improved competitiveness helped drive volumes up a strong

3.8%, including 5.3% growth in fresh foods.

Lewis described the current market conditions as “tough”

but said Tesco had made a “good start to the year”.

John Ibbotson, director of the retail consultancy Retail

Vision, commented: “Tesco has delivered a corker in its core

UK market. Food, and fresh food in particular, is firing on all

cylinders and that’s a huge shot across the bows for its

competitors, in particular Morrisons.

“With inflation rising sharply, Tesco has used its immense

buying power to keep prices lower for its customers. Against

this inflationary backdrop, the numbers are all the more

remarkable.” However, he warned of tougher times ahead,

saying the “toxic combination” of rising inflation and low wage

growth remains a major threat. “As inflation continues to

erode people’s spending power, more and more of Tesco’s

customers could be driven back to the discounters,” he said.

NAM IMPLICATIONS:

▪ Tesco obviously on the way back.

▪ However, the triple challenges of ‘redundant’ space,

discounter appeal and Amazonian growth remain.

▪ Redundant space: Expect mix of franchising, domestic-

dwelling and instore theatre to generate opportunities

for suppliers.

▪ Discounter appeal: Expect intensive price competition in

discounter categories – i.e. decision time for suppliers.

▪ Amazon: Expect fresh-based Tesco-initiatives within the

M25 – focus on helping Tesco to optimise other

categories in M25.

Tesco Rolling Out One Hour

Delivery Service Following on from recent trials, Tesco has announced that it is

rolling out its one-hour grocery delivery service in central

London.

Customers across almost 40 London postcodes are now

able to order, via the Tesco Now app, up to 20 items from a

range of 1,000 products, including fresh produce, meat, bakery

goods and dairy, as well as baby, health and beauty items.

Orders are then picked in a local store and delivered via moped

within 60 minutes by third-party fulfilment specialist Quiqup,

which has partnered with Tesco.

Tesco is looking to capitalise on rising consumer demand

for the rapid delivery of products. The likes of Amazon and

Deliveroo have led the way in offering such services

with Sainsbury’s also launching its one-hour ‘Chop Chop’

delivery service last year.

Adrian Letts, Online Managing Director at Tesco, said:

“Shoppers’ needs are changing and we want to offer a range of

services that allow them to shop with us in a way that suits

their needs. We look forward to hearing what they think of the

new service.”

Meanwhile, Hugh Fletcher, global head of consultancy and

innovation at retail consultancy Salmon, commented: “The

move is clearly designed to counter Amazon’s Prime Now

service, who, as well as buying Whole Foods earlier this month,

has threatened to seriously dent the popularity of the big

grocery stores in the country.

“Retailers should take a leaf out of Tesco’s book here; with

customers becoming more loyal to a service than a brand – and

convenience playing a huge part in how we, as consumers,

shop – retailers can’t afford to remain paralysed.”

NAM IMPLICATIONS:

▪ A service that is viable in cases of high density

coverage…

▪ …a race to the top, at least within the M25.

▪ Meaning that the M25 bounds what is likely to become

the most contested market in the UK, at least…

▪ Are you ready to anticipate the special requirements

arising, as a solus market?

Tesco Overhauls Brand Outlet

Aisles Tesco is reported to have relaunched its ‘Brand Outlet’ aisles

amid ever increasing competition from the discounters.

The retailer now operates around 270 of the value-

orientated aisles in larger stores located in less affluent

areas. They sell a range of branded grocery, household and

health & beauty products under the strapline ‘big brands at

small prices’. Many items are priced at £1 to compete with the

pound stores.

Some analysts have questioned whether Tesco would keep

the aisles given its shift towards EDLP. However, according to

trade magazine The Grocer, Tesco recently overhauled the

Brand Outlet range with a focus on large packs, such as 24

packs of toilet rolls and large packs of washing powder.

A Tesco spokesperson is quoted as saying: “Brand Outlet

offers are one of the many ways in which we offer our

customers everyday low prices on the products that matter

most.”

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Earlier this year, Tesco’s Chief Executive Dave Lewis

highlighted his concerns around rising prices, which he

believes has boosted sales at the discounters and could force

his chain to make some major changes in its current marketing

strategy.

NAM IMPLICATIONS:

▪ Only issue is the focus on Tesco stores in less affluent

areas.

▪ Been to a packed aisle in Lidl lately…?

▪ …and had any difficulty parking among the Mercs and

BMWs?

OTHER TESCO NEWS Click for

details

Tesco Makes Improvements To Clubcard Scheme

Tesco Voted Grocer Of The Year

Tesco Chairman Appointed Vice-President Of The CBI

Tesco Set To Begin Paying Compensation To

Shareholders

Tesco Outstripping Rivals In Northern Ireland

Tesco To Give Store Staff A 10.5% Pay Rise

Waitrose Hires Its First

Director Of Food Service Waitrose has appointed its first ever Director of Food Service

to support the expansion of its food-to-go and casual dining

activities.

Simon Burdess is joining the supermarket group in

September from InterContinental Hotels, where he is currently

Vice President, Restaurants and Bars. Prior to that he was

Commercial Director at Fortnum & Mason, having previously

held various commercial roles at Marks & Spencer, including

Category Manager for in store hospitality.

In recent years, Waitrose has been putting greater focus

on the fast-growing food-to-go / hospitality market in an effort

to make its larger stores more attractive places to shop. The

chain already has over 120 cafes in its stores, along with

bakery grazing areas, wine bars, and Sushi Daily counters.

Sales growth in this part of its business was running at over

7% last year.

Waitrose also recently trialled a ‘Supper Club’ at its store

in Haywards Heath and is rolling out ‘The Kitchen’, a new

foodservice counter concept serving hot meals for breakfast,

lunch and dinner.

Burdess will lead the continued expansion of these

activities with Waitrose Retail Director Ben Stimson

commenting: “We want our shops to be places where

customers will feel excited by and inspired by food – and

evolving our food service offer is vital in achieving this.”

NAM IMPLICATIONS:

▪ Another way of optimising every store visit.

▪ Opportunities for food service suppliers to propose extra

hooks?

OTHER WAITROSE NEWS Click for

details

Waitrose To Sponsor Food Shows On Channel 4

Waitrose Serves Up New Drinks Magazine

Waitrose To Launch More Easily Recyclable Sandwich

Wrapper

Waitrose Strengthens Fairtrade Commitment In Wake

Of Sainsbury’s Move Away From Scheme

Supermarket Sector Sees

Strongest Growth In Five

Years Latest grocery market share figures from Kantar Worldpanel

for the 12 weeks ending 18 June show that supermarket sales

growth has accelerated to 5% – the strongest increase since

March 2012 and a stark contrast to the 0.2% decline seen this

time last year. Tesco and Morrisons remained the top

performers amongst the big four, whilst Asda was the only

retailer to see branded products growing ahead of own label.

Fraser McKevitt, head of retail and consumer insight at

Kantar Worldpanel, said the market’s robust performance

over the period was partly down to weak sales growth last

year and a continuing increase in like-for-like grocery

inflation, which is now running at 3.2%.

However, McKevitt stressed that it wasn’t just inflation

which is bolstering market growth. “Recent spates of hot

weather have given an early boost to traditional summer

categories including ice cream and cider, with respective

increases of 12% and 16% adding £58m in sales, and that’s not

including the most recent heatwave,” he said.

Meanwhile, the performance of the Big Four grocers

continued to improve. Tesco’s sales grew by 3.5%, its fastest

rate since April 2012, with the retailer attracting a further

369,000 shoppers. Sales increased across all the group’s

channels, rising fastest online and through its Extra stores,

although its market share was still down 0.4 percentage points

on the same period last year.

Morrisons was the strongest performer amongst the Big

Four with sales increasing by 3.7% – its seventh consecutive

period of growth. Meanwhile, strong growth online and in its

Local convenience stores – particularly in London – helped

Sainsbury’s increase sales by 3.1%.

Asda’s recent recovery continued, with its overall sales up

by 2.2%, although its market share fell half a percentage point

year-on-year to 15.1%. McKevitt highlighted that Asda was

the only retailer where branded products outpaced own label

lines – significant for the grocer given it sells a greater

proportion of brands than many of its rivals. “That isn’t to say

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UK & IRELAND NEWS

Asda’s own label offer is struggling – its Extra Special premium

line and recently launched Farm Stores range contributed to a

1.4% increase in private label sales,” said McKevitt.

Lidl pipped Aldi to the title of the UK’s fastest growing

supermarket for the first time since March, with sales growth

of 18.8% just ahead of the latter’s 18.7%. Both retailers

continue to gain market share – combined, the two have gained

1.4 percentage points since June 2016 and now hold 5.0% and

6.9% respectively.

Co-op has now seen continuous growth for a full two

years, up 2.2% in the latest period alone. Meanwhile, Iceland,

which is up 7.4%, has posted 15 periods of increasing

sales. Waitrose saw its best sales growth since March 2012,

growing marginally ahead of the market at 5.3%, although its

share remained flat at 5.2%.

Related item:

Supermarket Sales Boosted By Heatwave

NAM IMPLICATIONS:

▪ Whilst the sector growth is encouraging, the stand-out

performances have to be the discounters…

▪ Making it vital that branded suppliers find safe ways of

working with Aldi & Lidl.

GCA Survey Shows Significant

Progress For Suppliers Christine Tacon marked the end of her first four-year term as

Groceries Code Adjudicator (GCA) with the release of the

results of a survey which shows suppliers are now

experiencing far fewer Code-related issues, with Tesco and

Morrisons amongst the most improved supermarkets.

Results from 2017 YouGov survey (see below) showed

that for the fourth year running, fewer direct suppliers have

experienced one or more Code-related issues. The proportion

now stands at 56%, down from 62% in 2016 and from the high

of 79% in 2014.

Tacon said: “The overall fall is welcome but the more

dramatic data comes from looking at supplier experience of

issues that I have identified among my Top 5 and where I have

used collaborative or more formal regulatory action to drive

change.”

The figures show:

• Forensic auditing: 45% of suppliers reported

experiencing this as an issue in 2014 but only 12% in

2017. In 2014, the Adjudicator secured a voluntary

commitment from eight out of the ten regulated

retailers to limit forensic audit activity to the current

year plus two.

• Margin Maintenance: The Adjudicator initially raised

concerns about retailers requesting lump sums to

maintain margin in 2014 and her report of the

investigation into Tesco made clear that any request for

margin needed to be unambiguously supported by

supply agreements. In 2017, only 10% of suppliers

have reported this as an issue, down from 36% in 2014.

• Consumer complaints: In 2014, unjustified charges for

consumer complaints was the second biggest issue with

37% of suppliers reporting it. A year later the

Adjudicator published a best practice statement and

monitored progress. In 2017, only 12% of suppliers

have reported it as an issue.

• Packaging and design charges: Following action from

the Adjudicator only 11% have reported concerns with

packaging charges this year, compared to 24% in 2014

and 30% in 2015.

Tacon commented: “Suppliers have found the issue of

packaging and design charges to be an irritant for years.

Recently a supplier in the fresh produce industry told me that

that they had been trying to resolve the problem of

overcharging in this area for more than 10 years. But within

18 months of me focusing on the problem he was pleased to

say the issue had gone away.

“I see this as a sign that the collaborative approach that I

have promoted has been a real engine of change and is

achieving positive results across all retailers. I am delighted

that suppliers are seeing the benefits of this change.”

For the fourth year running, Aldi topped the overall table

in which suppliers rank their perception of retailers’

compliance with the Code; with Sainsbury’s as the highest

placed of the big four (also for the fourth year in a row).

Tacon added: “I am also pleased to report that suppliers

are recognising that Tesco is continuing to improve; as is

Morrisons, following a step change in its engagement with

suppliers.”

Delay in payments continues to be the issue of highest

concern to suppliers and remains in the current category in the

Adjudicator’s Top 5 along with forecasting and linked to this

the issue of promotions. Tacon said: “One of the key areas

where delay in payments manifests itself is in incorrect

deductions from invoices with or without notice, with 32% of

suppliers reporting this as an issue in this year’s survey. While

this is down from 46% in 2014, this shows me that there is still

work to be done in this area and I am right to maintain this as

one of my Top 5 issues.”

Download the GCA Annual Survey Results 2017 (PDF)

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Supermarkets Planning To

Use ‘Surge Pricing’ Systems A number of the UK’s biggest retailers are working on plans to

install ‘surge pricing’ systems in their stores which allow

prices on-shelf to rise and fall depending on demand.

Report said that Tesco, Sainsbury’s and Morrisons are

planning to replace paper price tags on shelves in some stores

with electronic labels, which will let them change prices

several times a day at the click of a button.

The technology, which is already commonplace in Europe

and the US, lets shops react to events a during a day. For

example, they can remove offers on sought-after items such ice

creams and chilled drinks during heatwaves and sandwiches

at lunchtime.

Andrew Dark, Chief Executive at electronic pricing firm

Displaydata, told The Telegraph that demand for the such

systems among UK retailers is starting to “go beserk”.

He added: “This kind of technology will be dominant in the

UK within two years and within five years it will be rare to see

a paper price tag. Paper tags often show the wrong prices as

they have to be manually replaced by staff when prices move,

but electronic labels can be updated in just 20 seconds.

“At present supermarkets are only able to act on around

20% of the price changes their computer systems recommend,

but this is about to change.”

Meanwhile, Roy Horgon, director at Markethub, another e-

pricing firm, said that shops can improve their profit margins

by up to 3% by using the technology, mainly as a result of

reducing the amount of waste created by stock left at the end

of the day.

Spokespersons for Sainsbury’s, Tesco and Morrisons

confirmed that they are trialling electronic shelf edge labels

and would be reviewing customer feedback before deciding on

a wider roll-out.

NAM IMPLICATIONS:

▪ An essential step forward in terms of facilitating the

implementation of revenue management on shelf.

▪ Given the benefits of retail price optimisation for

retailers and suppliers…

▪ Issue becomes: who pays?

UK Grocery Industry Reels

From Shock Of Amazon’s

Takeover Of Whole Foods Shockwaves from the news that Amazon has agreed to a

$13.7bn deal to acquire US chain Whole Foods Market spread

to the UK grocery market last month. The day after the deal

was announced, over £1.5bn was wiped off the value shares in

the leading supermarkets as analysts warned the move will

have major ramifications for the whole industry.

Commenting on the share price falls, Chris Beauchamp,

market analyst at IG, said: “If we thought the supermarkets in

the UK had trouble with the emergence of the German

discounters, it is as nothing compared to the ramifications of

Amazon’s expansion into grocery.”

The only supermarket to escape damage to its share price

was Morrisons as investors remembered the chain had its own

tie-up with Amazon. “Whole Foods has just nine stores in the

UK so the impact on Morrisons should not be too significant,

and if anything could support Morrisons if it signals how

Amazon might be able to help it grow market share,” said Neil

Wilson at ETX Capital.

Ocado’s share price was also boosted as City analysts

speculated that it could benefit from the deal. Whilst Ocado is

unlikely to be an acquisition target in the short term, the

group’s advanced technology and supply chain systems could

now prove more attractive. Some analysts suggested that

Amazon might look to link up with Ocado, whilst others think

that US grocery chains could decide to use Ocado’s technology

platform in a bid to compete with Amazon.

Meanwhile, industry analysts gave their opinions on the

deal and what it could mean for grocery market in the longer

term. Fraser McKevitt, Head of Retail and Consumer Insight at

Kantar Worldpanel, said: “Amazon is committed to cracking

the grocery market, and a business like Whole Foods brings

with it many of the crucial ingredients the e-commerce giant

has been missing in its other forays into food and drink. The

power of a physical presence on the high street to grow a

brand’s reputation and credibility is particularly important in

grocery, where consumers want to be able to see the quality of

the items they’re buying first hand.

“Bricks and mortar stores will also allow Amazon to

expand its options for ordering, pick-up and delivery. More

broadly, as a well-established retailer focused on the lucrative

health and wellness market within grocery, Whole Foods is

perfectly positioned to give Amazon a crash course in how

food retailing really works on the ground.”

Harsha Wickremasinghe, Associate at Livingstone

Partners, commented: “This is the clearest indication that

Amazon intends to be a serious player in grocery retail – and

is a significant wake-up call for grocery retailers in the North

America and the UK. It also highlights that Amazon clearly

believes that in order to achieve long-term success in the

grocery category, it is essential to have a bricks & mortar

presence.”

He added: “It is widely known that Amazon has been

scouting for prime-Central London locations as part of its

move into grocery retail in the UK. Exactly 12 months since

the launch of Amazon Fresh in the UK, and in one fell-swoop,

the online giant will now have nine supermarkets in the UK –

seven of which are London-based. Whole Foods’ proposition

also has an excellent fit with the typical London-based Amazon

Prime Customer. The UK grocers have downplayed Amazon’s

impact on their sector to date, but this latest move should have

them genuinely looking over their shoulder.”

NAM IMPLICATIONS:

▪ Amazon’s main contribution to Whole Foods will be in

back office functions.

▪ While upmarket positioning will cover online costs.

▪ As a basis for further acquisitions in the UK (Morrisons)…

▪ Apart from a little extra Amazonian buying muscle.

NamNews │ July 2017 │ 14 www.kamci ty.com

UK & IRELAND NEWS

OTHER TOP STORIES Click for

details

Booths Bolsters Management Team Following

Departure Of Chief Exec

Iceland Joins Bink Loyalty Scheme

Market Share Of Supermarkets Shrinking Across The

Globe

CONVENIENCE

Appleby Westward Planning

Major Product Cull To Focus

On Growth Areas Appleby Westward, the SPAR wholesaler for the south west of

England, has revealed that it is planning to cull around 2,000

ambient SKUs from its store ranges this year.

The move is part of a major range review which will see

the introduction of more SPAR own label products alongside

the introduction of lines that target younger and more health-

conscious shoppers. This will include protein and free-from

products, key growth areas in the food sector.

Speaking at the company’s annual trade show in Exeter

last month, Appleby Westward’s Managing Director Mike

Boardman said: “You can do an awful look by just tweaking the

range and making sure it is working hard.”

Boardman said retailers needed cut back the space

devoted to “non-productive and declining areas”, pointing out

that the free-from sector was now worth £772m in the grocery

market and growing at 20% year-on-year. He said that

Appleby Westward was “barely scratching the surface” when

it came to free-from products and protein was now a

mainstream sector. “We’ve got to get those ranges into store,”

he stressed.

Meanwhile, the wholesaler said it plans to get the

“minimum own label planogram” of 270 SKUs into every store.

SPAR own label currently has a 24% share, ahead of the

average 18.5% seen across all symbol groups, with Appleby

Westward hoping to raise the share to about 35% in the longer

term.

Appleby Westward will be offering retailers incentives to

stock more own label and a minimum range of protein and

free-from lines. A new rebate offer will potentially be worth

£600,000 to participating retailers over a year.

NAM IMPLICATIONS:

▪ Obvious need for suppliers to ensure that their brands

remain special.

▪ With the growth of own label a constant reminder of the

risk of complacency…

Bestway Overhauls Own

Label Offer Bestway has launched a revamped own label range to help

independent retailers compete with the multiples and

discounters.

Amid the current consumer shift towards buying more

own label grocery products, the wholesaler is replacing its

‘Best-in’ own brand, which it has used for the last 22 years,

with the new ‘Best-one’ label to tie in with its symbol group.

The new design will initially be introduced to 150

bestselling lines, including biscuits, soft drinks, snacks and

grocery staples, with another 150 changing over by the end of

the year. Bestway stressed that every product has been

reformulated to offer better quality with packaging

highlighting the benefits of each product, such as being a good

source of fibre or protein.

The group is also planning to launch a new premium range

called ‘Best-one Inspired’, which will available from August

and consist of an initial 15 lines, including all-butter cookies,

fruit conserves, and pesto.

Ed Smeaton, Director of Trading for grocery at Bestway

Wholesale, said: “Shoppers now trust own label as much as

they do branded products and are looking for both quality and

value.”

Bestway will run 40% PoR promotions in July and further

offers for its retail club members.

“The main thing for our customers is that we provide

quality products with great margins and highly-competitive

prices that allow them to compete with other channels such as

multiples and discounters,” added Smeaton.

NAM IMPLICATIONS:

▪ Shoppers buy the 4 Ps…Product, Price, Promotion and

Place.

▪ And if own label delivers the same for less, brands lose

out.

▪ Only options being to lower brand price or eliminate

quality deficiencies.

▪ Good branding trains the consumer to be more savvy in

terms of ability to evaluate differences in products/

brands.

▪ It follows that brands, having set the pace, stay in front.

Sainsbury’s Trying To Win

Over Disgruntled Nisa

Members Sainsbury’s £130m takeover offer for Nisa Retail has not been

well received by independent retailers with the supermarket

group said to be offering a number of sweeteners to win their

support.

Reports last month revealed that Sainsbury’s had entered

exclusive talks with the convenience store group as it moves

to counter Tesco’s planned £3.7bn takeover of

Booker. However, the potential deal is said to have sparked

NamNews │ July 2017 │ 15 www.kamci ty.com

UK & IRELAND NEWS

fury amongst a large number of Nisa members who want the

business to remain a mutual.

More than 30 members of the Nisa group have reportedly

pooled their shares to cross the 5% threshold needed to call a

vote on future of the group’s Chief Executive Nick Read.

According to The Sunday Times, the shopkeepers want to

throw out Read, blaming him for opening the door to a

takeover and possibly selling the business short.

However, a source close to Nisa told the newspaper that

the decision to hold sale talks was taken by the whole board,

chaired by Peter Hartley. The source described the threat of

an extraordinary meeting as “pure mischief making from a

small group”, with Hartley quoted as saying that he could not

see “any merit” in a vote.

Nisa is a £1.3bn turnover business currently owned by

around 1,300 registered members that operate over 3,000

independent convenience stores across the UK. All members

own shares in the business and will have a final vote on any

deal. Each own between one and 250 shares out of almost

60,000 in total with Sainsbury’s believed to have offered

£2,500 per share.

One long-term Nisa member told The Guardian last month:

“The deal for one share is not going to get people excited. The

devil will be in the detail, but giving up our sovereignty is a big

issue for independents.” Another said: “If we take our

independence away, we are inadvertently creating a cartel.

There will be nobody else there but the big four … Every single

supply route will be corporately owned.”

Two prior takeover attempts from Costcutter to acquire

Nisa were blocked by members. However, analysts have

suggested that given the increased competition in the sector,

some shopkeepers may now agree to a deal that secures them

support from one of the largest retailers in the country.

Sainsbury’s is reported to be offering a number of

sweeteners to win support for its offer. This includes giving

members staggered payments over three years if they remain

with Nisa. They will also be able to choose whether to remain

fully independent and have an enhanced range of own label

food products or the ability to stock Sainsbury’s own brand

ranges if they can demonstrate high store standards.

Harj Dhasee, who owns a store in Mickleton,

Gloucestershire, told The Guardian that a tie-up with

Sainsbury’s could offer opportunities: “On a personal level,

running a Sainsbury’s Local franchise would be a game

changer for me, because for consumers it’s all about brand

loyalty and recognition. If the Tesco/Booker merger happens,

they will have all the volume, and the whole industry works on

sales volumes.”

NAM IMPLICATIONS:

▪ The issue is reduced profitability and thereby insufficient

ROCE…

▪ …the door then opens for radical solutions, including

takeover i.e. we have gone way beyond blaming the

CEO.

▪ Best to hope for a good price and take the money…

▪ Meanwhile, suppliers have to decide how long they wait

for resolution before taking their long-term strategies

elsewhere.

Profits Improve At Nisa Amid the talk of Sainsbury’s acquiring the business, Nisa Retail

has reported year-end results showing that its recovery over

the last year had continued with a strong rise in profits.

During the 52 weeks ended 2 April 2017, the group’s

EBITDA came in above target, up 17.8% to £8.6m. Meanwhile,

pre-tax profit was £2.8m, recovering from a loss of £5.4m the

previous year, helped by a reduction in exceptional costs.

However, total sales edged down 2.6% to £1.25bn, with

the group partly blaming the loss of business from the failed

My Local chain. Like-for-like sales were also down 1.5% as a

result of “competitive pressure and price investment”.

However, some of the decrease was mitigated by an

increase in sales to new businesses with Nisa recruiting 515

new stores compared to 476 the year before. Much of this

growth was driven by two large contract wins; namely the 298

stores McColl’s Retail acquired from the Co-op and the 47

stores acquired from the Bourne Leisure estate.

The group also pointed to the strong performance of its

Heritage own label range, with produce sales up 4.9% overall,

which included a 45.1% jump in chilled vegetables and 62.4%

increase in sales of loose salads.

Nick Read, CEO of Nisa Retail, commented: “The uplift in

performance throughout FY17 continued to build on the

foundations laid in FY16, when Nisa returned to profitable

growth. It has also helped us to convey a message of long term

sustainability, key to securing the confidence of our banking

partners in our recent refinancing discussions.”

Read also confirmed that following a number of enquiries

from interested parties, the Nisa Board has been weighing up

the merits of a possible offer for the company. Sainsbury’s is

believed to have seen off offers from the likes of the Co-op and

Morrisons.

Read said: “Should that party wish to make a formal offer

for the company, the Board will at that stage determine

whether it is appropriate for this offer to be put to members.

It will then be for the members to determine whether or not

they wish to accept the offer.”

NAM IMPLICATIONS:

▪ Whilst the turnaround continues, the issue has to be

whether members are prepared to demutualise in the

face of continuing market pressures.

▪ In other words, take a cash payment for their shares

and possibly continue as shop-managers under the

Sainsbury’s umbrella.

▪ Meanwhile, suppliers have to prepare for a period (one

year) of instability in their dealings with both companies.

One Stop Launches More

Extensive Own Label Range The Tesco-owned One Stop chain is relaunching its own label

range with the introduction of more products to give shoppers

a much broader choice.

All the new products will be One Stop-branded with a

refreshed pack design. The range will include bigger pack

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UK & IRELAND NEWS

sizes, along with more chilled fresh meat and produce lines, all

at a “competitive retail price” with better margins for retailers.

The range will feature around 330 lines and will be

launched in two phases. Phase one, comprising chilled food,

meat and produce will launch in the middle of this month.

Phase two, comprising grocery, impulse, cake, frozen and

grocery non-food, will launch at the end of October.

The range features a “contemporary look and feel” and is

being supported by a marketing campaign focused on the

message ‘you’ll love the change’. One Stop said this will enable

it to talk about “all the amazing product stories” in the new

range, when it reduces the price of products, increases the

pack size, improves the quality of products, plus the sourcing

of many of the products from UK suppliers.

The new range will be supported with new POS, fixtures

and shelving to showcase the increased offer and range.

Tracey Clements, Managing Director for Tesco

Convenience and Chief Executive of One Stop, said: “All of our

customer insight, colleague and franchise feedback over the

past couple of years has said that we need to get a better,

broader own label range to meet the needs of our customers.

Well, we have listened and developed a range that every

colleague, franchisee and customer will love.”

NAM IMPLICATIONS:

▪ Shoppers buy the 4 Ps…Product, Price, Promotion and

Place.

▪ And if own label delivers the same for less, brands lose

out.

▪ Only options being to lower brand price or eliminate

quality deficiencies.

▪ Good branding trains the consumer to be more savvy in

terms of ability to evaluate differences in products/

brands.

▪ It follows that brands, having set the pace, stay in front.

OTHER TOP STORIES Click for

details

Applegreen Makes Forecourt Acquisition In The US

New CFO Appointed At Applegreen

Central Convenience Stores Hits 110 Outlets

Co-op’s Chief Digital Officer To Depart

Blakemore Launches Innovative New SPAR Outlet

WHOLESALERS

Booker’s Q1 Sales Boosted By

Good Weather Booker has reported robust first quarter trading figures,

boosted by the good weather and a late Easter. During the 12

weeks to 16 June, the wholesaler’s group sales rose by 4% with

like-for-likes up 4.2%.

Non-tobacco sales grew by 9.6% on a like-for-like basis,

although tobacco sales continued to be adversely impacted by

changes in tobacco legislation and plummeted 7.9%.

The group said it had been a solid quarter for customer

satisfaction and cash profit, with the performance of Booker

Direct, Chef Direct, Ritter, and Booker India meeting its

expectations. It added that its Premier symbol chain continued

to grow and it was making “good progress” with Budgens and

Londis.

Chief Executive Charles Wilson said it had been a “good

quarter” for Booker. He added that that “business as usual is

going well” as it went through the competition process for the

planned Tesco deal.

NAM IMPLICATIONS:

▪ Good that Booker are managing to ‘ignore’ the potential

distractions of the CMA investigation.

▪ Revealing possible opportunities for suppliers in

appropriate categories to lengthen their strategic

planning cycles.

▪ Whilst allowing for the fact that the Tesco takeover may

not go ahead.

Parfetts Warns Tesco-Booker

Deal Will Have ‘Very Severe’

Consequences North-west independent wholesaler Parfetts has become the

latest player in the market to warn against Tesco being

allowed to acquire Booker.

Whilst Tesco has played down concerns that the deal will

harm competition, Parfetts’ Chairman Steve Parfett said that

Booker has a significant amount of control over the products

stocked in its independent stores. As a result, he believes

Tesco’s suggestion that its acquisition of Booker would have

no implications for competition in the market is wrong.

Speaking to MLex, he stressed that the takeover would

have “very severe” consequences for the retail and wholesale

grocery markets in the coming years. He added it would be

“incredibly disruptive” because other supermarkets would

respond by pursuing other wholesalers.

Parfetts, which owns six cash & carry warehouses across

the north of England supplying thousands of independent

stores, has been in touch with the CMA to voice its

concerns. Parfett told MLex that he believed competition

officials had failed over the years to tackle the market power

held by the big four supermarkets, allowing them to receive

significantly better terms on the products they bought from

suppliers. He said that if Tesco’s acquisition of Booker is

allowed to go ahead, Booker would then gain those

preferential rates.

Parfett added that he thought that within five or 10 years,

the UK grocery market would become almost entirely

controlled by the big four grocers, the Co-op, and Aldi and Lidl.

NamNews │ July 2017 │ 17 www.kamci ty.com

UK & IRELAND NEWS

NAM IMPLICATIONS:

▪ Preferential rates for Booker says it all…

▪ Hopefully the CMA factor in the implications…

OTHER TOP STORIES Click for

details

Dhamecha Foods Set To Open Its 9th Depot By End Of

Year

Landmark Wholesale Launches Summer Promotion

FOODSERVICE

& HOSPITALITY

Private Equity Firm Eyeing

1,000 Pubs Run By Admiral

Taverns Patron Capital Partners, the private equity firm which is in the

processing of buying 1,400 pubs owned by Punch Taverns, has

reportedly made a bid to acquire Admiral Taverns.

Admiral operates an estate of around 1,000,

predominantly wet-led, pubs across the UK. According to Sky

News, Patron Capital Partners is among a number of parties

which have tabled offers to buy the business.

The report added that the auction of Admiral, which has

been owned by US private investment firm Cerberus since

2013, is at an early stage and the identities of the other bidders

was unclear.

Patron Capital Partners is currently in the process of

concluding a joint takeover with Heineken of Punch, which has

a portfolio of more than 3,300 pubs. Under their plans,

Heineken will take control of 1,900 sites, with Patron

acquiring the remaining 1,400.

NAM IMPLICATIONS:

▪ The combined deals would give Patron Capital Partners

control of 9% of the UK’s 50,000 pubs.

- A significant player in that route to market...

- On the back of a financially driven approach...

- Has to mean increased market concentration.

▪ Time for a re-jig of your on-trade strategies?

Tim Hortons Appoints Exec

From Costa To Support

Expansion In The UK Tim Hortons, the Canadian café and bake shop that recently

entered the UK, has announced the appointment of Kevin

Hydes as its new UK Chief Finance & Commercial Officer. He

will oversee the group’s business strategy, brand execution

and development in the UK.

Tim Hortons opened its first British and European

restaurant on Argyle Street in Glasgow last month, with plans

to roll out the business to cities nationwide over the coming

year.

The group said that Hydes is charged with delivering a

concept that is unique to the UK market and places an equal

emphasis on freshly-prepared food and on “great value” coffee.

Hydes previously spent 11 years at Costa Coffee,

overseeing the marketing function in the UK during chain’s

significant period of growth a few years ago. More recently, he

held the role of International & Brand Development Director.

Gopi Dhaliwal, COO Tim Hortons UK and Ireland,

commented: “Kevin brings an enormous wealth of experience

from his time at Costa Coffee, and his expertise of quickly

scaling food and drink retail brands will be vital to our long-

term ambitions in Great Britain.”

NAM IMPLICATIONS:

▪ In other words, look back on the growth of Costa…

▪ ...for pointers on first-try moves by Tim Hortons UK and

Ireland.

Subway To Open Another 500

Outlets Sandwich chain Subway has announced that it is planning to

open another 500 stores in the UK and Ireland by 2020 as its

pushes to capitalise on the strong growth in the food-to-go

market.

The openings will take its store count to over 3,000 with

the group also in the process of overhauling its current stores

and revamping its menu. The expansion plans are expected to

create around 5,000 new jobs.

Foodservice Market Slows New research from The NPD Group shows that the British Out

of Home (OOH) foodservice market has slowed since the Brexit

referendum result in June last year.

While visits after the referendum (10-month period July

2016 to April 2017) were still up 0.7% over the equivalent

period a year earlier, this is slower than the 1.5% visit growth

seen in the period before the referendum (six months Jan to

June 2016 compared to same period the year before).

Visit growth to quick-service restaurants (QSR) slipped

marginally. QSR was registering pre-referendum visit growth

of 2.2% but this has now fallen to 1.9%. Full-service

restaurants – the most expensive foodservice channel – saw

the most noticeable slowdown from 3% down to 2%.

Cyril Lavenant, Foodservice Director UK at the NPD Group,

warned of further big challenges ahead for the sector. He said:

“The weakness of sterling means foodservice operators will

have to replace global sourcing with local sourcing while

ensuring they still get the quality they need.”

He added that rising inflation is likely to dampen demand

for eating out, whilst tighter immigration rules could make

harder for operators to hire staff.

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UK & IRELAND NEWS

NAM IMPLICATIONS:

▪ The challenges above, coupled with Brexit uncertainty,

means having to focus on relative competitive appeal.

▪ Meaning, with any growth coming at the expense of

competition, focus on - and optimise - competitive

advantage.

▪ And food service is no exception…

Foodservice Price Inflation

Climbs To Highest Point In

Nearly Nine Years The latest edition of the CGA Prestige Foodservice Price Index

reveals that inflation in wholesale foodservice hit 9% in May,

its highest point in nearly nine years.

CGA’s report stated that an increase in the farm gate price

of milk, low stocks and a rise in global demand have all fuelled

a sharp rise in dairy prices, where inflation is 9.9% year on

year. Inflation in the fruit category was even higher at 12.7%,

with the weak pound substantially pushing up the costs of

items imported from around the world. Poor weather and

disease in some key fruit growing regions of the UK and

Europe have reduced stocks and pushed prices up further.

GCA said that many other macro factors have added to

inflationary pressures in foodservice, including UK political

uncertainty surrounding Brexit negotiations and the General

Election, and fluctuating oil prices.

Although there are signs that inflation in some food items

may start to ease, the figures from the latest CGA Prestige

Foodservice Price Index continue a sharp upswing in costs for

the sector in 2017. The report said that the widening gap

between the rate of inflation here and in the Consumer Price

Index emphasises the need for foodservice businesses to seek

expert independent help with their procurement and pricing

strategies.

Christopher Clare, Head of Consulting & Insight at Prestige

Purchasing, commented: “There are few places to hide from

the increased costs we are seeing flow through to operators –

we would always recommend though, that operators test the

competitiveness of their pricing in the marketplace and fully

understand the justification for any increases.”

NAM IMPLICATIONS:

▪ Fact is, with prices rising, demand falls…

▪ Meaning real competitive advantage presents the only

growth option.

OTHER TOP STORIES Click for

details

HelloFresh UK Appoints Claire Davenport As CEO

Heineken Makes Offer To Allay CMA’s Punch

Competition Concerns

Greene King Posts Robust Year End Results But Warns

Of Difficult Times Ahead

Good Weather Boosts Sales At J D Wetherspoon Pubs

Pub Group Young’s Benefits From Good Weather

Whitbread Makes Good Start To The Year

GENERAL

B&M Continues Its Strong

Growth B&M has revealed another period of strong sales growth,

boosted by the good weather, the later Easter, and robust

grocery sales.

Despite “challenging trading conditions”, the fast-growing

discounter saw UK like-for-like sales in its first quarter to 24

June jump 7.3%. As well as benefitting from the favourable

seasonal weather, B&M said its performance was buoyed by

strong grocery sales and the timing of Easter trading, which

fell in the quarter this year and added approximately 1% to the

headline like-for-like total.

Total UK revenues over the 13-week period increased by

17.8% to £598.4m, whilst sales at its Jawoll unit in Germany

rose 23.9% to £57.9m.

The group opened 6 net new outlets during the period,

taking its total store count in the UK to 543. B&M expects to

open between 40 and 50 new shops this financial year as it

pushes towards its recently upwardly revised UK store target

of at least 950 outlets.

Simon Arora, Chief Executive, said: “In these uncertain

times, and with inflation returning to the UK market, more and

more shoppers are actively seeking out value in our stores and

that means our business is strongly positioned to do well and

continue its rapid growth.”

NAM IMPLICATIONS:

▪ Best to view these non-mults (discounters, online, etc.)

trade moves as a fundamental, and permanent shift in

savvy consumerism.

▪ With consumers demanding demonstrable value-for-

money, and a determination to talk about their

experiences, good or bad, via social media.

▪ In other words, any brand loyalty needs to be

encouraged and preserved, at all costs.

Bunnings Doubles Scale Of

Pilot Store Programme Wesfarmers Bunnings unit has announced that it is to expand

its pilot programme in the UK, and will have 20 stores

operating by the end of 2017 – twice as many as previously

expected.

The announcement coincided with the opening of a

Bunnings Warehouse in Milton Keynes, its fourth since

acquiring the Homebase chain last year. The store, on the site

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UK & IRELAND NEWS

of a former Homebase outlet, is its largest in the UK at over

90,000 sq. ft.

The group said its decision to accelerate the store opening

programme was in response to “positive” feedback from

customers to its first pilot stores in St Albans and Hemel

Hempstead.

The company has said it plans to invest up to £500m

rolling out the Bunnings Warehouse format in the UK and

Ireland over the next three to five years.

Managing Director PJ Davis said that increasing the

number of pilot stores to 20 will give it the opportunity to test

the concept in new geographies, with different demographics,

across a range of store sizes. “The success of the pilots still

remains a precursor to additional investment,” he added.

Bunnings’ next store will be in Folkestone, Kent in July.

Following that, the Homebase stores in Thanet (Broadstairs),

Sittingbourne, Kent and Basildon Vange, Essex will be the next

to be redeveloped.

NAM IMPLICATIONS:

▪ The advantage of retail compared with supply…

▪ Put your idea on the high street and let demand

determine growth rate…

▪ Enviable…

OTHER TOP STORIES Click for

details

Debenhams Struggles In ‘Volatile’ Market

CEO Of Hamleys Stepping Down

Falling Consumer Confidence Hits Trade At John Lewis

New Head Of Buying At Majestic Wine

Another Top Exec Departs Majestic Wine

M&S Using Laser Technology To Reduce Packaging

Waste

Sales Decline Continues At M&S But Showing Signs Of

Recovery

Poundland Launches Rival To Toblerone Bar

Robust Performance In WH Smith’s Travel Outlets

Offsets High Street Weakness

HEALTH & BEAUTY

Supplier Accuses Boots Of

Dictating Unfair Terms Boots has been accused of dictating unfair payment terms and

charges by one of its suppliers.

In an anonymous letter quoted by The Sunday Times, a

small supplier claims that the retailer levied a 2.5% “prompt

payment” charge on all invoices settled within 106 days. It

also said that Boots was applying a “non-compliance” charge

of £300 for small errors in paperwork or for using the wrong

type of pallet with deliveries.

Boots told the newspaper that it laid out all terms clearly

in agreements with suppliers.

Amid mounting government pressure, retailers are

starting to reduce their payment terms, particularly for

smaller suppliers that are under increasing pressure from

rising costs.

Last month, Asda slashed its payment terms for small

suppliers to 14 days as part of its efforts to “work more

effectively” with its supply base. And back in

March, Morrisons announced that it was reducing its payment

terms for smaller suppliers to a maximum of 14 days, following

similar moves by Waitrose and Tesco in the last couple of

years.

NAM IMPLICATIONS:

▪ Allegedly one small case, but part of a growing

awareness that paying within agreed terms is not the

issue from a consumer point-of-view.

▪ The issue is more about paying suppliers within a fair

period, ideally related to order-delivery cycle…

▪ …as evidenced by moves by major customers to pay

small suppliers in 14 days.

Sales At Boots Impacted By

Pharmacy Funding Changes Alongside last month’s news that Walgreens Boots Alliance

has dropped its plan to merge with US rival Rite Aid, the group

revealed third-quarter results that contained disappointing

figures for its UK operation.

In the three months to 31 May, sales at Boots in the UK fell

0.4%, impacted by recent changes to pharmacy funding.

However, like-for-like retail sales edged up 0.1%, supported

by good growth in the beauty category.

Meanwhile, the group’s Retail Pharmacy International

division, which includes Boots UK and other retail outlets

around the world, saw sales decrease 10.3% to $2.8bn,

impacted by currency fluctuations. On a constant currency

basis, sales decreased 0.2%, whilst on comparable store basis,

sales edged up 0.2%.

The unit’s operating profit fell 36.3% to $142m, while

adjusted operating income decreased 25.2% to $193m, down

14% on a constant currency basis.

NAM IMPLICATIONS:

▪ For more on Pharmacy Funding cuts – see here.

▪ Whilst the retail sales performance could be said to

reflect market conditions, the 14% (constant currency)

drop in operating income is more serious.

▪ Meaning Boots could be open to initiatives focused on

bottom line improvement.

NamNews │ July 2017 │ 20 www.kamci ty.com

UK & IRELAND NEWS

Boots Seeing Strong Growth

In Ireland The Irish arm of Boots saw robust growth last year, boosted by

new store openings and good trading in existing outlets.

Figures show that pre-tax profits at Boots Retail (Ireland)

jumped 27% to €25.7m in the 12 months to the end of August.

Revenues at the health & beauty chain also increased by 15%

to €367m, supported by the opening of four new stores.

A directors statement in the accounts said: “The company

delivered strong performance in the financial year as a result

of new store openings in the current and prior period, good

retail trading, partially offset by lower disbursement rates.”

At the end of August last year, Boots Ireland operated 84

stores. However, it has since opened three more stores.

The company’s online operation also enjoyed good growth

with boots.ie receiving an average of 526,000 visits per month

compared to 349,000 visits per month in 2015.

NAM IMPLICATIONS:

▪ Only issue will be cross border differences especially

given fall in sterling.

▪ Meanwhile, Boots Ireland optimising the market

dynamics within brands and generics.

Holland & Barrett Sold To L1

Retail For £1.77bn Holland & Barrett is being bought by L1 Retail, an investment

fund backed by Russian billionaire Mikhail Fridman.

L1 Retail, which is the retail investment arm of the

tycoon’s LetterOne holding company, is paying £1.77bn for the

1,150-strong chain of health & wellness stores. It is being sold

by private equity firm Carlyle which bought Holland & Barrett

as part of the purchase of its US parent company NBTY

(Nature’s Bounty) back in 2010.

The transaction is expected to close by September this

year, subject to regulatory approvals.

Commenting on the acquisition, L1 Retail’s Managing

Partner Stephan DuCharme said: “We believe that the

company is well positioned to benefit from structural growth

in the growing £10bn health and wellness market and has

multiple levers for long term growth and value creation.”

Holland & Barrett’s annual revenues in 2016 exceeded

£610m, with the business having recorded 32 consecutive

quarters of like-for-like growth. In recent years, the group has

been investing in new store openings, its online platform and

expansion overseas.

The purchase is the first by L1 Retail, which was set up last

year with the aim of investing $3bn in a small number of retail

businesses with strong growth potential. Its investment team

is led by DuCharme, and supported by an Advisory Board of

internationally renowned retail executives – Karl-Heinz

Holland (a former Chief Executive of Lidl), Clive Humby (one

of the founders of dunnhumby), and John Walden (the former

Chief Executive of the Home Retail Group).

Strong Year For Superdrug

And Savers Superdrug and Savers, the health & beauty chains owned by

A.S. Watson, have both posted exceptionally strong trading

figures for their last year.

During the 53 weeks to 31 December 2016, total sales at

Superdrug’s 789 outlets rose 10.4% to £1.2bn with like-for-

like growth of 7.8%. Meanwhile, pre-tax profits jumped 41%

to £80.4m, boosted by store expansion

Inspired by celebrities, Superdrug said sales of cosmetics

soared 14%, with it grabbing 30% of the market. Sales of

health and wellbeing products rose 12%, bolstered by diet and

fitness ranges.

Superdrug opened 23 new stores during the year and

invested £33m in store revamps, converting a further six

outlets to its Wellbeing format. Meanwhile, the group’s online

unit also performed well with sales up over 60%.

Over the same period, sister chain Savers saw its pre-tax

profits jump 24.8% to £36.3m on total sales up 15% to

£416.7m, benefitting from a significant jump in store numbers.

Operating profits at value-oriented health & beauty chain

climbed 28% to £38.7m with margins improving from 8.4% to

9.3% after costs were “well controlled”.

Like-for-like sales rose a healthy 6.9%, although this was

down on the 8.1% growth seen in the previous year.

A total of 45 new Savers outlets were opened during the

period, of which 12 were conversions of former Superdrug

sites. The company also closed five sites which meant it ended

the year with 383 shops.

In notes accompanying the accounts, Savers’ management

said that the EU referendum result had “created uncertainty

regarding future consumer sentiment and demand” and led to

upward pressure on costs due to the devaluation of sterling.

They added that the business was “planning strategies to

mitigate the impact of inflation and to maintain its strong price

perception on the High Street”.

Meanwhile, the two chains’ parent company, A.S.

Watson, revealed that it was stepping up its expansion in the

UK despite the slowdown in the retail market caused by Brexit

uncertainty and rising prices.

The group plans to create more than 1,000 jobs across the

UK with the opening of 30 more Superdrug stores, 45 Savers

outlets and 13 The Perfume Shop sites.

Dominic Lai, A.S. Watson’s Managing Director, said: “We

are under a lot of pressure, with Brexit uncertainty and

sterling going down, but we will continue to invest in the UK.”

NAM IMPLICATIONS:

▪ Contrast this with the growth in the mults and Boots

over the same period!

▪ If your brands followed suit, perhaps worth considering

how your initiatives at Superdrug and Savers affected

the result…

▪ …and perhaps replicating as appropriate in other

retailers?

NamNews │ July 2017 │ 21 www.kamci ty.com

UK & IRELAND NEWS

OTHER TOP STORIES Click for

details

AAH Appointed Solus Wholesale Partner For Derma

L’Oréal Signs Contract To Offload The Body Shop

Pharmadose Purchases Aramada Pharmacy Group

E-COMMERCE

eBay Takes On Amazon And

High Street Giants With New

Price Match Guarantee eBay has announced the launch a new price-match guarantee

on its UK site, in a challenge to retailers such as Amazon, John

Lewis and Tesco.

Launching later this month, the guarantee will cover

prices for new items included in its ‘Deals Programme’. eBay

promises that it will have the best price available of six major

online retailers – Amazon.co.uk, Currys.co.uk, Johnlewis.com,

Argos.co.uk, Tesco.com and Asda.com. If not, eBay will match

the lower price of that competitor.

Rob Hattrell, Vice President of eBay in the UK, said: “We

are confident in the strength of our deals already. But we’re

giving our customers that confidence by also matching the

price of our competitors.”

NAM IMPLICATIONS:

▪ Patently, as online matures, so the customary marketing

moves will apply.

▪ …and be used by pure-play and traditional retailers

alike.

▪ With an increasingly savvy consumer keeping all players

on their toes.

Higher Costs Hit Profits At

Ocado; To Benefit From

Amazon’s Whole Foods Deal Ocado has reported another good rise in order volumes and

revenues, although its first half profits shrunk due to higher

costs.

For the 26 weeks ended 28 May, the online grocer’s retail

revenue increased 12.5% to £659.6m with order volumes

growing by 15.6% to an average of 260,000 per

week. However, average basket size value declined by 1.4% to

£108.45, impacted by the uptake of its Ocado Smart Pass offer

and reduced multi-buy promotions.

EBITDA edged up 2.7% to £45.2m after a gross margin

increase, driven by a reduction in promotional activity and

improved operating efficiencies, was offset by cost inflation,

the impact from the opening of its new distribution facility in

Andover, and investment in its platform. Pre-tax profit

plummeted 18% to £7.7m as a result of “higher depreciation”

from the Andover opening.

Meanwhile, having recently signed up its first overseas

client for its Ocado Smart Platform (OSP) technology and

services, Ocado revealed it was having other conversations

with “multiple retailers” about future contracts. Whilst

analysts have suggested that Amazon’s expansion into the

grocery market poses a significant threat to Ocado, the group

said that the online giant’s recent acquisition of Whole Foods

will be a “positive catalyst” in advancing its tie-ups with other

retailers.

Ocado added that had begun testing a first store-pick

solution with Morrisons and was continuing to build new

facilities in the UK “in order to meet the increasing demand we

see”.

Tim Steiner, Chief Executive Officer of Ocado, said: “As the

channel shift to online advances we continue to gain share in a

competitive UK market. We expect the trend for grocery

shopping online to continue as consumers become more tech

savvy and gain confidence in the online services available.

Ocado will be a natural beneficiary of that trend thanks to its

industry-leading customer offer.”

NAM IMPLICATIONS:

▪ While its mainstream business continues to grow,

Amazon-Whole Foods move provides opportunities to

allow mults to leap-frog online barriers via Ocado…

▪ …attracting further investment in the process.

▪ Making it important for suppliers to climb aboard the

Ocado train…

▪ Or risk the delays and costs of doing it themselves.

Grocery Suppliers Need To

Upskill To Capitalise On

Online Opportunity A recent report suggesting one in seven Britons are doing all

of their food shopping online could have major implications

for the UK’s grocery suppliers and manufacturers wanting to

capitalise on this sales growth opportunity.

This is according to category and shopper management

specialist Bridgethorne, who believe that manufacturers need

to upskill their sales, category and marketing teams to ensure

they are well equipped to capitalise on this developing online

opportunity.

The comments come following the recent publication of

a report from Mintel, which suggested that the proportion of

households doing all of their grocery shopping online has

doubled since 2014. The report said the number of Brits

shopping purely online has risen from 7% to 14%, with 48%

doing at least some grocery shopping online, up from 43%.

Nick Kirby, eCommerce Director at Bridgethorne, says that

grocery manufacturers and suppliers will need to look hard at

their trade investment and marketing budgets to ensure that

they have a balance in spend across all channels and that they

are investing substantially enough to engage and attract new

shoppers and convert them to purchase where they are

conducting their shopping.

NamNews │ July 2017 │ 22 www.kamci ty.com

UK & IRELAND NEWS

“With a rise in the number of grocery shoppers only

engaging with brands when conducting an online shop, it is

becoming even more important to optimise digital shelf

activation and amplify online communication using the right

messages at the right point of the online shopper journey,” said

Kirby.

“With shoppers switching between channels – for

example, supermarkets to discounters – to complement their

online purchasing, it is essential that manufacturers have

winning channel strategies in place that are both effective in

their own right, as well as allowing for a seamless omni-

channel shopping experience.”

Getting online right, though, could also have a benefit for

bricks and mortar stores, with other research showing that up

to 70% of in-store sales are influenced by an online retailer

search – the so-called ‘e-commerce halo effect’. Kirby adds

that FMCG suppliers need to be addressing their online

strategy because it influences the shopping experience across

all channels not just online.

NAM IMPLICATIONS:

▪ In other words, with online grocery becoming

mainstream, it is time to regard online as a ‘new

traditional shop’…

▪ …and try ALL the tools…

▪ The channel will soon reveal what works.

OTHER TOP STORIES Click for

details

Amazon Expands Dash Button To 20 More Brands

New Study Finds Strong Correlation Between A

Product’s Number Of Online Reviews And Sales

Ocado Announces Winner Of Britain’s Next Top

Supplier Competition

IRELAND

Aldi Revamping Stores Aldi has revealed that it is investing €60m in revamping its

stores in Ireland, a move that will see a significant expansion

in the selection of fresh foods.

With Ireland’s post-recession consumer demanding

higher quality local foods, the discounter’s ‘Project Fresh’

strategy will see it increase chiller space in its 129 outlets by

up to 40%. Fresh produce departments are being moved to the

front of all its stores, whilst in-store bakeries are being trialled

in a number of outlets.

Aldi’s stores in Ireland will also receive a cosmetic

makeover under Project Fresh, with new signage and the

elimination of signs hanging from the ceilings to reduce the

appearance of clutter.

Giles Hurley, Managing Director for Ireland and the UK,

told the Irish Times that the new format had already been

rolled out at a handful of stores. Larger stores in metropolitan

areas are expected to be upgraded relatively quickly, although

it could take up to five years to implement the changes across

its entire estate.

Hurley revealed that Aldi will soon expand its footprint

with new stores in Ennistymon, Trim and Leixlip. It has also

nine “target locations” for 2018 as part of its €100m expansion

that will see it open around 20 new stores over three years.

Hurley added that Aldi has about 50 “target locations” beyond

its existing network.

NAM IMPLICATIONS:

▪ If you had built an 11% share in a retail market, would

you invest in your valuable asset?

▪ Anticipate Aldi and Lidl doing anything that sustains

current growth and penetration…

▪ And try to find safe ways of working with the

‘discounters’…

Musgrave Reports Jump In

Profits; Outlines Growth

Plans And Brexit Response Ireland’s Musgrave Group saw a strong performance in its last

financial year, recovering from a challenging period for the

business, and is now focused on growing its online and

foodservice operations.

During the 12 months to 31 December 2016, the group’s

turnover on the previous year was flat at €3.7bn, but on

constant-currency basis it increased 3.4%. Meanwhile,

excluding pension gains, pre-tax profit come in at €73m,

compared to €38.1m a year earlier from continuing operations

(excluding its UK operations sold to Booker). Group operating

profit before exceptional items jumped 71.2% to £79.6m.

The group’s SuperValu unit saw sales rise 2.4% to €2.67bn

with its focus on fresh and local food driving its performance.

Sales in its Centra convenience division rose 3% to €1.59bn,

supported by its ongoing ‘Live Every Day’ programme.

Chris Martin, Musgrave’s Chief Executive, said the group

had benefited from “a clear focus on cost reduction and the

delivery of a transformation programme” which began in 2014

to turn around the business and return it to growth following

the country’s lengthy recession.

He added that while the business was performing well to

date in 2017, the group remained cautious as a result of the

uncertainty caused by Brexit and its potential to slow growth

in the Irish grocery retail sector.

Whilst stressing that the Irish economy was now in a much

stronger position than before, Martin said: “For food, there are

challenges. The reality of a hard Brexit will mean tariffs and

those tariffs will impact goods as they come from the UK to

Ireland.”

He added: “We want to protect the consumer as much as

possible from any impact of tariffs. For home-grown products,

there is an opportunity for (Irish) suppliers to step in and

service the Irish market. That shouldn’t be forgotten. It’s not

all doom and gloom.”

NamNews │ July 2017 │ 23 www.kamci ty.com

UK & IRELAND NEWS

Meanwhile, the company is focused on growing its

business in a number of key areas with online food sales seen

as a major opportunity given that the Irish retail market is

relatively underdeveloped in this channel.

Martin said: “We’re absolutely embracing online shopping.

I would say we are leading in many respects. Online is clearly

running away in the non-food sector like textiles and

electricals. In food, it has been different. If you look around

the world, the market with the biggest penetration of online is

the UK which is around 6%-7% of the total grocery spend. In

Ireland, we are around 1.5%.

“What we saw last year is that our online grew by about

22%. So far this year, it has grown by around 24%. We’re

investing heavily.”

Martin added SuperValu’s venture into the Chinese market

was still just “a toe in the water” and it remained to be seen

how much growth was possible. Earlier this year, Musgrave

began selling a number of SuperValu own brand products in

China’s via local online shopping giant Alibaba. However,

Martin said the group was is examining how to introduce its

export business to the Middle East, and it has had discussions

with other platform operators in China.

Musgrave is also eyeing further expansion by supplying

Ireland’s growing restaurant scene. Martin said the group

would look at any acquisitions that were available in the

wholesale and food supply sectors, following its buyouts of CJ

O’Loughlin and wholesale operations from DCC in recent

years.

The group recently launched its Chipmonger operation in

greater Dublin which provides independently-owned chip

shops with a brand, who in turn buy their stock from

Musgrave. This is now operating with three chip shops but

Martin said it hoped to roll Chipmonger out to 30 outlets by

the end of the year.

NAM IMPLICATION:

▪ Time to ensure that you plan and execute collaborative

moves aimed at achieving your fair share of Musgrave

growth.

Calls For Reduction In VAT A body that represents retailers in Ireland is calling for VAT to

be reduced by 3% to help offset the effects of Brexit, Sterling’s

devaluation and the consumer shift towards online shopping.

Retail Excellence said Brexit is already damaging the Irish

retail sector. The group’s spokesperson Lorraine Higgins said

the current 23% rate of VAT in Ireland was introduced as an

emergency measure, and that it is time for it to be reduced.

She added: “At the moment we’re advised to compete with

England. Then you factor into the equation sterling

devaluation and increased competition in the UK.”

NAM IMPLICATIONS:

▪ Dropping VAT to 20% means a gap in the Irish budget

that needs refilling elsewhere…

▪ Unwise to hold your breath.

Tesco Gaining Ground In

Growing Irish Grocery Market The latest grocery market share figures from Kantar

Worldpanel in Ireland for the 12 weeks ending 18 June 2017

show the highest market growth (+3.5%) since January 2017,

with Tesco holding onto second spot and gaining ground on

the market leader.

The latest figures reflect the impact of Easter on

consumers and retailers alike, with the holiday falling outside

of the comparable time period in 2016. Price deflation, which

held steady at -0.2%, was offset by an increase in overall

volume sales of 4.6%. Cora Campbell, consumer insight

director at Kantar Worldpanel, commented that while average

pack prices are down, shoppers are choosing to take advantage

of this recent period of deflation by adding more items to their

baskets per trip, driving the market’s overall growth.

She added: “In the face of continuing competition the

major retailers’ investment in developing and improving their

own brand lines is paying off. Overall sales of private label

goods are up by 4.2% and they now account for 54% of grocery

spend – the highest proportion since March this year.”

Among the retailers, SuperValu’s lead over Tesco

narrowed to 0.2 percentage points. Tesco grew ahead of the

market, at 3.8%, although Dunnes Stores remained the

strongest growing retailer, increasing value sales by 4.5%.

Meanwhile, Lidl and Aldi both enjoyed a goof performance,

holding their market share at 11.7% and 11.2% respectively.

OTHER TOP STORIES Click for

details

Lidl Continues Expansion In Ireland

UK Still Offers Significant Potential For Irish Food &

Drink Firms

Retail Ireland Concerned About Disparity Between

Retail Sales Volumes And Value

NamNews │ July 2017 │ 24 www.kamci ty.com

UK & IRELAND NEWS

MANUFACTURERS

Gü Puds And Richmond

Sausages Cut Pack Sizes Due

To Rising Costs Gü Puds and Richmond sausages have become the latest

manufacturers to reduce the size of their products, whilst

keeping prices the same – a move widely dubbed as

‘shrinkflation’.

According to a report by trade magazine The Grocer, Noble

Foods has reduced the weights of its Gü twin-packs of

individual cheesecakes and pies, by almost 17% in one

instance. A Gü spokeswoman is quoted as saying the move

was down to “a sustained rise in the cost of core ingredients”.

She added: “As opposed to passing these costs on to Gü

customers, or compromising on quality, a few of our puds have

seen a small change in the weight so we can maintain our

current RRP. This decision has been a last-case scenario for

us, as we pride ourselves on consistency.”

Meanwhile, packs of Richmond sausages have also been

reduced. The Grocer found that the brand’s owner Kerry

Foods has cut the pack size of Richmond Thick Sausages from

16 sausages to 14 with the price remaining the same.

Meanwhile, 28¬-packs have been reduced to 24 sausages.

A spokesperson for Kerry Foods is quoted as saying the

move was in response to the “long-term rise in the price of

pork”, adding: “We have previously absorbed these rising

commodity costs internally. However, this decision was taken

to continue to offer the high quality and value that is expected

of our brands.”

NAM IMPLICATIONS:

▪ Explanations apart, the consumer perceives and receives

less for the same price.

▪ Thereby reducing the relative competitive appeal of the

brand vs competitors that have not changed their

offering.

GSK To Sell MaxiNutrition GlaxoSmithKline (GSK) is reportedly looking to offload its

MaxiNutrition division, which sells sports nutrition products

under the Maximuscle brand.

GSK acquired MaxiNutrition in 2010 for £162m, tapping

into the growing health food market. According to Sky News,

the group’s new Chief Executive, Emma Walmsley, wants to

sell the business and has hired professional services firm EY to

handle the process. Names of potentially interested buyers is

unclear, as is the asking price.

NAM IMPLICATIONS:

▪ This would make an interesting acquisition for an

Amazonian online player wishing to disrupt another

category…

▪ Meanwhile, an appropriate what-if might prove insightful

for other members of the sports nutrition category.

Kallø Secures Contract To

Supply NHS Food Outlets Kallø, the natural food brand owned by Wessanen UK, has

secured a major new deal that will see a selection of its single-

serve snacks made available to all NHS Trust cafés and shops.

With its focus natural ingredients, Kallø said its range had

met the NHS Commissioning for Quality and Innovation

(CQUIN) guidelines which aim to help improve the health and

wellbeing of staff and patients. Across the country, retail

outlets owned by the NHS Trusts will now be able to order

select Kallø products from the NHS supply chain.

In recent years, the NHS has been making a concerted

effort to make the food offering in hospitals healthier as part

of the government’s wider drive to reduce obesity levels in the

UK. Back in April, the NHS announced that retailers operating

in its hospitals will be banned from selling sugary drinks next

year unless action is taken to drastically reduce sales of such

products.

NAM IMPLICATIONS:

▪ A little overdue, but a welcome step

▪ Time to complete the move by opening access to

qualified products and brands.

Nestlé Commits To Cutting

Sugar Content In UK Cereals Nestlé is continuing its drive to make its product portfolio

healthier but committing to reduce average sugar content

across its UK cereal range by 10% before the end of 2018.

The food giant said the change to the products that are

made by Cereal Partners Worldwide (UK) will result in around

225 million fewer teaspoons of sugar in the nation’s diet.

Nestlé stated that the changes will be achieved through a

combination of reformulation and by growing the share of

lower sugar variants. Since 2010, Nestlé Breakfast Cereals in

the UK has already reduced its average sugar content by 15%

across the portfolio.

Gharry Eccles, UK Regional Vice President of Cereal

Partners Worldwide said: “Offering consumers healthier and

tastier cereals is one of our top priorities and we are

determined to make breakfast even better for everyone.”

Amid government pressure to help tackle the UK’s obesity

crisis, food and drink manufacturers have been reformulating

their products to make them healthier. Nestlé has been cutting

sugar content across a host of its iconic brands in recent

months including Milkybar, KitKat and Rowntree’s.

NAM IMPLICATIONS:

▪ Unless competing cereal suppliers follow suit, Nestlé

have to grow at their expense.

▪ Providing reduced sugar content truly reflects national

taste…

▪ On balance, however, we are all headed the same way.

▪ In other words, sugar (and salt) consumption are on the

way down, only issue being how far and how soon…

NamNews │ July 2017 │ 25 www.kamci ty.com

UK & IRELAND NEWS

Premier Foods Plays Down

Sale Rumours Premier Foods has played down a report by the Wall Street

Journal that said it had hired advisers to review future options

for the business that could include the sale of one or more of

its major brands, a merger with a rival food group, or an

outright sale.

The review comes amid a flurry of recent activity in FMCG

sector concerning the likes of Nestlé, Reckitt Benckiser and

Unilever.

Premier issued a statement noting the comments in the

press regarding a review of options for the group. It added: “In

line with good corporate governance, the group regularly

reviews options to deliver value for all its stakeholders. These

reviews are carried out in the ordinary course of business as

part of the group’s standard planning cycle and also on ad hoc

bases, and may involve external advisors.

“The Board has made no changes to its strategy since the

strategic update communicated in our preliminary results

announcement on 16 May 2017.”

Back in May, Premier said that it would now be focusing

more of its efforts on cash generation and cost efficiencies

after reporting a fall in annual sales amid “challenging” trading

conditions. Last year, Premier rejected a takeover bid from US

group McCormick Foods.

NAM IMPLICATIONS:

▪ Whatever the outcome, each option raises issues for its

competitors.

▪ Suppliers need to conduct what ifs on each option and

scope out the resulting competitive landscape in each

case…

▪ …and revisit their trade and marketing strategies.

Cyber Attack Impacts Trading

At Reckitt Benckiser Reckitt Benckiser (RB) has revealed that the cyber-attack at

the end of June, which hit it and dozens of other global firms,

significantly impacted its trading activities and will lead to it

reporting a fall in quarterly sales.

In a statement, RB said it had made good progress in

getting key applications and systems back on track since the

attack on the 27 June so it can start trading normally with its

customers and partners.

However, the group admitted that the ‘Petya’ malware

attack had disrupted its ability to manufacture and distribute

products to customers in multiple markets. Consequently, it

was unable to ship and invoice some orders to customers prior

to the close of its latest quarter.

As a result, the manufacturer said it expected like-for-like

sales to fall by 2% in its second quarter. It added that sales

growth would have been flat had it not been for the attack and

a separate problem in India, where the implementation of a

new Goods and Services Tax (GST) had resulted in reduced

orders from some of its customers during June.

The group said it expected that some of the revenue lost

from Q2 would be recovered in Q3. However, continued

production difficulties in some of its factories meant that it

also expects to lose some further revenue permanently. RB

now expects full year like-for-like net revenue growth of

around +2% (previously +3%).

RB’s second quarter ended on 30 June and the company is

due to report its half year results on 24 July.

NAM IMPLICATIONS:

▪ A reminder that in a fast moving market, lost sales can

be non-recoverable…

▪ Whatever the cause…

▪ A pointer for all…

Seabrook Crisps Agrees

Contract To Supply Aldi Bradford-based Seabrook Crisps has secured a contract to

supply its products to Aldi’s 470+ stores in Australia.

After being acquired by private equity firm LDC back in

2015, the fast-growing snack manufacturer has been focused

on growing its export activities. It has already agreed to export

deals with Lulu Hypermarket in the UAE, Monoprix in France,

7-Eleven in China, and Carrefour in Spain.

Marketing and international sales director, Kevin

Butterworth, said: “Successful exporting requires long-term

commitment. Securing the latest retail deal with Aldi in

Australia keeps us on target to achieve 4% revenue in exports

by April 2018, two years from our first export sale in April

2016, and our medium-term aim to achieve 10% revenue

within five years.”

NAM IMPLICATIONS:

▪ Key will be Seabrook’s ability to deepen penetration of

these retailers in other countries.

▪ i.e. 7-Eleven in in other parts of SE Asia, Carrefour in

France, and Aldi everywhere…

▪ Time for other members of the categories to conduct

some appropriate what-ifs on competitive impact…

Tayto Acquires Another

Vending Machine Firm The Northern Ireland-based crisp maker Tayto has acquired

West Country Vending Service, its second purchase of a

vending machine company this year following its takeover of

Freedom Refreshments back in April.

As with the previous deal, Tayto’s affiliate company, the

Montagu Group, made the purchase of the £11m-turnover

company. West Country Vending Service manages and

outsources vending machines, as well as selling them to a

range of customers in various sectors.

The deal provides Tayto, which owns brands such as

Golden Wonder and Mr Porky, with access to 5,300 vending

machines operating across the South West of England and

South Wales.

NamNews │ July 2017 │ 26 www.kamci ty.com

UK & IRELAND NEWS

NAM IMPLICATIONS:

▪ Tayto NI not to be confused with Tayto Ireland, a

separate brand.

▪ Either way, Tayto is now the No.3 crisp & snack business

in the UK.

▪ This continuing growth via acquisition needs watching

within the category, especially in terms of relative

competitive appeal.

Leading FMCG Manufacturers

Struggling For Growth The world’s top 50 FMCG firms saw their organic growth

slump further in 2016, down from 3.4% to 2.6%, with overall

revenue growth turning negative.

This is according to OC&C Strategy Consultants’ annual

Global 50 Index report in collaboration with The Grocer, which

examines the financial performance of the world’s 50 largest

consumer goods companies such as Nestlé, P&G, Diageo and

PepsiCo. It shows that the top 50 consumer goods giants have

lost eight percentage points of sales growth in just five years

(from 7.3% gain in 2011 to a drop of -0.7% in 2016).

Net profit last year was up 18.8% from 16.6% annual

growth in the previous year, although most of this was due to

exceptional gains.

With organic revenue growth at historic lows and

companies under pressure from activist shareholders to boost

margins, mergers and acquisitions (M&A) activity had become

a critical source of growth among the leading firms in recent

years. However, the study suggests that political uncertainty

caused by the UK’s EU referendum, populist parties gaining

ground across Europe and the US presidential election, has

depressed deal-making in the sector.

M&A activity among the top 50 consumer goods giants fell

sharply from US$226bn in 2015 to US$50bn in 2016. The

decline last year comes after a bumper year for M&A in 2015

and brings deal value to its lowest level since 2011, less than

half the ten-year average (average annual deal value between

2006 – 2015: US$108bn).

Will Hayllar, Partner at OC&C Strategy Consultants,

commented: “The bottom fell out of consumer goods M&A in

2016, and political uncertainty has undoubtedly played a

significant part in this. With the Global 50 struggling to find

growth and under increasing pressure to boost margins,

there’s more reason than ever for M&A activity – be that

acquisitions to access growth segments in their categories like

premium and natural or consolidation to drive profitability.

Clearly, events across Europe and the US made many cautious

of pulling the M&A trigger in 2016.

“However, we’ve already seen green shoots in the first half

of 2017 with M&A beginning to recover across the sector as

businesses adjust to the new political norms.”

NAM IMPLICATIONS:

▪ Having gathered the M&A low-hanging fruit, major

companies are now having to rely on real organic growth

to maintain their independence of the stock market.

▪ In the apparent absence of such growth, another stop-

gap has to be redefinition of core business and sell-off of

non-core assets.

▪ In such conditions, most growth comes at the expense

of the competition.

▪ Time for suppliers to reassess the changing competitive

landscape in a search for any competitive edge…

OTHER TOP STORIES Click for

details

Addo Food Expanding Into Foodservice Sector

Arla Boss Warns Of Price Rises And Shortages Of

Butter

Around Noon Acquires Chef In A Box

ABP Food Group To Take A 50% Stake In The Linden

Foods

AB InBev’s Marketing Director Joining Kerry Foods

Beechdean Ice Cream Group Acquires Enjays

Pancakes

BrewDog Loses Elvis Trademark Dispute

Carlsberg Acquires Craft Beer Maker In London

Coca-Cola To Double The Amount Of Recycled Plastic

In Its Bottles To 50%

Cadbury Expanding Production At Bournville Site

Diageo To Buy George Clooney’s Tequila Firm

Halewood Acquires Stake In Craft Brewer

English Tea Shop Acquires Joe’s Tea Company

Moy Park Put Up For Sale By JBS

Pladis Appoints Chief Digital Officer

Scandi Standard To Acquire Ireland’s Leading Chicken

Processor

Unilever To Acquire Cosmetics Brand Hourglass

Weetabix Appoints New Managing Director

Wyke Farms and OMSCo Extend Partnership To

Become Largest Producer of Organic Cheddar

TRADING UPDATES

2 Sisters ABF Creightons

McBride PZ Cussons Warburtons

NamNews │ July 2017 │ 27 www.kamci ty.com

INTERNATIONAL NEWS

EUROPE

AUSTRIA: Rewe Looks To

Open Smaller Merkur Stores The Rewe group has said it will look to expand its Merkur

banner across Austria by opening smaller stores.

Merkur’s current stores cover an area of around 1,800 sq.

m., but the new stores will cover an area of 1,100-1,500 sq.

m. Rewe said the new strategy will help it open stores in areas

where it does not currently have a presence, allow it to react

“more flexibly” to space constraints, and let it focus on densely

populated residential areas.

The first such compact store will open on 27 July in Kittsee

in Burgenland, with Merkur saying it sees scope for 40 more

such stores across the country. The chain currently operates

131 outlets in Austria, and aims to open seven new stores and

convert six existing ones in 2017 at an investment of €100m.

CROATIA: Agrokor To Shut

Dozens Of Konzum Stores The Agrokor conglomerate is set to shut down dozens of stores

under the Konzum banner in Croatia, due largely to the group’s

financial woes.

According to local reports, the move will see the closure of

around 80-100 Konzum outlets. No details of the number of

jobs being lost were available.

The reports said the decision was made after meeting by

Slavko Ledić, Chairman of the board, and Antom Ramljak, the

extraordinary commissioner for Agrokor. Ledić noted that the

number of stores being shut this year is more than usual given

the intense focus on profitability.

NAM IMPLICATIONS:

▪ Any non-profitable business unit will dilute group

profitability.

▪ Therefore closure is the only real option if cost-cutting or

scale purchasing fails…

▪ …better to cut & run before the creditors do it on your

behalf.

▪ Meanwhile, suppliers need to scale down contracts

accordingly.

CYPRUS: SPAR Agrees Deal

To Enter Market SPAR International has formed a new partnership with local

firm Ermes Department Stores, which will see the SPAR brand

enter the Cyprus market.

The new entity, SPAR Cyprus, aims to open its first stores

in the first quarter of 2018, with a target of more than 20

supermarkets in the next five years. It said the stores will be a

mix of company-owned greenfield outlets (to be developed by

Ermes) as well as independent retailer conversions to the

SPAR banner.

SPAR International will provide support in terms of retail

layout and design, own brand product procurement, retail

staff training and development, supply chain optimisation,

retail location assessment, project management, retail

operations, and brand building marketing campaigns.

Ermes is the leading retail company in Cyprus in the

apparel, cosmetics, DIY, and electronics sectors, operating

more than 90 retail shops, with over 75,000 sq. m. of retail

space.

DENMARK: Dansk Offers More

Details Of Netto Expansion Dansk Supermarked is planning to introduce more Netto-

branded stores across Denmark in the next few months, as it

continues to expand the banner.

The group said it will open more than 60 such stores, and

will hire up to 900 new staff for the move. It plans to open

three to four new stores each week, starting August.

The openings will include the former Kiwi stores which it

has acquired from Dagrofa, which will be rebranded to the

Netto banner. Dansk noted: “We had already set up an

ambitious plan to manage the next store openings, which was

revised after the acquisition of the Kiwi stores”.

NAM IMPLICATIONS:

▪ If you not listed in Netto, perhaps these 60 new stores

are a good place to start, given a need by all suppliers to

find a way of working with the discounters.

▪ If you are already listed, you will have already submitted

proposals to optimise the enlarged estate?

FINLAND: Kesko, Oriola Offer

New Details Of JV The Kesko and Oriola groups have revealed more details of

their health & beauty joint venture, the formation of which was

announced earlier this year.

The JV has been approved by Finland’s Competition and

Consumer Authority, and the establishment of the company

has now been finalised, with both groups holding a 50% stake.

The companies said the first phase will see them invest

€25m and open 100 physical stores and an online store in

Finland, with 15 stores set to open by end-2017. The new

chain is expected to create 1,000 new jobs, and will also offer

pharmaceuticals if the country’s legislation is amended. The

name and concept of the chain will be announced in the next

few months, with the first stores set to open in the autumn.

Kesko noted: “Together with Oriola we will build a leading

health, beauty and wellbeing chain that Finns can trust. Kesko

has extensive experience in the grocery trade and a strong K

consumer brand. Oriola, for its part, is a highly valued

distributor of health and wellbeing products and an expert in

the pharmaceutical sector.”

NAM IMPLICATIONS:

▪ It could just work.

▪ And suppliers have three months to make a play…

NamNews │ July 2017 │ 28 www.kamci ty.com

INTERNATIONAL NEWS

FINLAND: Kesko Sells Off

More Non-Food Units Kesko continues to scale down its non-food operations, this

time announcing the sale of its Indoor Group subsidiary.

The unit, which operates the Asko and Sotka furniture

trade chains, is being bought by a consortium for €67m.

Indoor Group operated 98 stores across Finland and Estonia

under the two banners, and generated net sales of €187m and

operating profit of €9.8m in 2016.

Kesko noted that it’s “strategic objective is to achieve

growth in the Finnish grocery trade, growth and expansion

within the building and technical trade in Europe as well as

growth in the car trade. The divestment of Indoor Group is a

coherent step in the implementation of Kesko’s strategy”.

The group expects to record a profit of €15m once the deal

is completed, which will take place by end-June 2017.

NAM IMPLICATIONS:

▪ Only issue for Indoor suppliers might be possible prices

and terms disparities under new ownership…

▪ Best act now to eliminate he obvious, or await he call

from the buyer...?

FINLAND: S Group To Buy

Stockmann Grocery Business The Stockmann group has announced a deal to sell its grocery

business to the S Group in a deal worth €27m.

The ‘Delicatessen’ business operates standalone stores in

several Finnish cities, as well as shop-in-shops at Stockmann

department stores in the Baltic countries, and the Delicatessen

kitchen that prepares own label Meals for Stockmann. The

business generated €127m in revenue during 2016, but

reported an operating loss of €11m.

Stockmann said the deal will boost its profitability,

adding: “Changes particularly in the food procurement and

logistics market in Finland have affected Stockmann

Delicatessen’s competitiveness”.

The S Group said it aims to improve its range of products

and quality of service, adding: “Our goal is to develop the

Delicatessen stores into S Group’s flagship stores.”

The deal will see the existing ‘Delicatessen’ stores being

transferred to the S Group’s regional cooperatives. The stores

in Helsinki, Tapiola and in the Itis and Jumbo shopping centres

will be transferred to HOK-Elanto; the stores in Turku and

Tampere will be transferred to the respective Regional

Cooperatives; and the kitchen will be transferred to Meira

Nova, a subsidiary of SOK. The operations in the Baltic

department stores will remain with Stockmann.

NAM IMPLICATIONS:

▪ In other words, a fairly smooth transition…

▪ Worth a try?

FRANCE: Costco Opens First

Store Costco has formally become operational in France after its first

store in the country opened its doors.

The opening of the outlet on 22 June, located in Villebon-

sur-Yvette, made France the third European country where the

US giant has a presence (after Spain and the UK). Costco has

previously said it aims to have 10-12 stores operational locally

within a decade.

According to local reports, the outlet stocks around 3,800

SKUs, of which 500 are luxury brands. However, the reports

also noted that Costco has only signed up 16,000 members so

far, having expected around 30,000 by now.

NAM IMPLICATIONS:

▪ Either way, a no-brainer…

▪ Anticipate 10 stores and submit product/brand initiatives

now.

▪ Or let your competitors show you how.

FRANCE: Intermarché Parent

To Acquire Bricorama Groupement Les Mousquetaires, the parent of Intermarché,

has announced that it is set to acquire DIY chain Bricorama.

The deal will add Bricorama’s 164 stores to Les

Mousquetaires’ Bricocash, and Bricomarché banners, creating

the third-largest DIY group in France with a 14% share of the

market (overtaking Mr Bricolage). The deal will also include

Bricorama’s stores in Spain, as well as its Asian sourcing office.

Les Mousquetaires said the combined new entity would

“be in a better position to stay the course of development in a

highly competitive market, respond to the challenges of online

commerce and offer an always improved service to its

customers”.

The deal is subject to regulatory approval.

NAM IMPLICATIONS:

▪ The DIY game has just changed gear in France.

▪ Think about it, how would you play it if you were

Intermarché?

FRANCE: Picard Continues To

Rejig Strategy The Picard frozen food chain is continuing to introduce

changes across its store network, as part of the ‘Plan 2020’

strategy (launched in 2015).

According to a report in Les Echos, the chain is currently

trialling an in-store catering facility, which allows customers

to heat the frozen meals they have purchased in a microwave

(for a fee of €2). The report says the service is popular with

students and young people, and has prompted Picard to extend

the facility to 20 more stores.

Picard also reportedly plans to open 25 new stores in

France in 2017, and will also keep more of its stores stay open

NamNews │ July 2017 │ 29 www.kamci ty.com

INTERNATIONAL NEWS

for longer (until 8:30pm or 9pm). The report noted that the

chain has recorded sales growth of up to 15% at stores where

the extended hours have been implemented.

NAM IMPLICATIONS:

▪ Why charge?

▪ i.e. build the cooking cost partly into the price and really

see it go…

GERMANY: Aldi Nord Set For

Major New Investment Aldi Nord is reportedly planning to invest more than €5bn on

its global operations, as it looks to revamp its existing stores.

According to local weekly Bild am Sonntagm, which cited

unnamed sources, the investment will be Aldi Nord’s largest

ever. The programme, nicknamed ‘Aniko’, is set to begin in

autumn 2017.

The report added that the group will finance the spending

from existing cash reserves, instead of taking on new

debt. However, the paper also noted that the strategy needs

the approval of one remaining foundation that controls Aldi.

Aldi has not commented on the report.

NAM IMPLICATIONS:

▪ If you were growing at Aldi’s rate, €5bn would seem

worthwhile…

▪ In other words, key to find non-compromising ways of

working with Aldi and Lidl.

GERMANY: Edeka Launches

Platform For Supplier

Startups Edeka has formally unveiled a new platform that looks to

connect FMCG startups directly with its retailers.

The cooperative giant has been trialling the ‘FoodStarter’

platform for some time, and offers new manufacturers to

connect directly with the around 4,000 retailers who are part

of its network. The portal allows the startups to feature their

products, as long as they are non-refrigerated and

transportable.

Any interested Edeka retailers can contact the companies

directly and request samples, which are then sold on a trial

basis at the individual stores. Following this, the retailers offer

feedback on issues such as pack sizes, prices, and shelf

placements.

The move offers suppliers a quicker path to market, while

individual retailers get the chance to distinguish themselves

from rivals by introducing new products quicker, and

customers benefit from a more varied product offer.

NAM IMPLICATIONS:

▪ A great way of accessing blue-skies innovation.

▪ Know any good startups?

GERMANY: Rewe In New

Online Moves Rewe unveiled two new online moves in June, as it looks to

fend off growing competition from the likes of Amazon.

First, the group began trials of an online marketplace

platform that offers products from third-party partners and

cover categories such as food, cosmetics, household items, and

kitchen supplies. Rewe, which already offers online shopping

in Germany, intends the platform to serve as a “one-stop shop

for customers”.

The initial phase will see Rewe offer its own label and

branded products, as well as those from five partners, which

will be available to select customers. More partners will be

added gradually, as the service is offered to more customers.

Later, the group launched an online store for its Penny

discount banner, the first such webshop for the brand. The

Penny-Onlineshop.de site offers largely non-food items across

categories such as household, garden & DIY, electronics,

cooking, and sports. It also offers wines and spirits, but no

food or grocery items are included.

The store is accessible by shoppers in Germany, and there

is no minimum order requirement. The orders are delivered

via DHL (within Germany only) for a shipping fee of €4.95.

NAM IMPLICATIONS:

▪ All the logical ingredients that allow roll-out.

▪ Anticipate a fully comprehensive online service…

▪ …and make your approaches now.

ITALY: Esselunga Receives

€7.5bn Buyout Bid Esselunga, the fourth-largest grocer in Italy, has reportedly

received a formal expression of interest from Chinese group

Yida International.

According to local daily la Repubblica, Yida has offered

around €7.5bn for the group, far higher than the €6bn

reported offer by private equity giants Blackstone and CVC

Capital Partners in September 2016.

However, the sale of the group is unlikely to be smooth,

given the reported differences between the heirs of founder

Bernardo Caprotti, who died last year. In his will, Caprotti is

said to have recommended that his heirs sell Esselunga as he

believed they would not be equal to the task of operating the

group. However, daughter Marina Caprotti (who holds a 70%

stake along with her mother Giuliana Albera) is now believed

to be keen on keeping Esselunga in family hands.

Neither Esselunga nor Yida have commented on the

report.

NAM IMPLICATIONS:

▪ A period of uncertainty ahead as the family weigh the

two alternatives of sale or continuing as-is…

▪ Causing suppliers to move to short-term mode until the

uncertainty is resolved…

▪ Leaving the top three competitors to grow at the

expense of Esselunga…

NamNews │ July 2017 │ 30 www.kamci ty.com

INTERNATIONAL NEWS

ITALY: TuoDi Reportedly Up

For Sale A new report has claimed that the Dico TuoDì discount

supermarket chain has been put up for sale, as it continues to

struggle in the country’s tough retail market.

According to local daily Il Sole 24 Ore, shareholders have

now given a mandate to Rothschild and lawyer Roberto

Cappelli to find a buyer for a part or all of the company. The

report comes on the back of a similar report earlier in the year.

Dico TuoDì operates 400 stores across Italy and has sales

of around €600m annually. However, it also racked up losses

of around €90m in the 2013-15 fiscal years, and is said to have

debts of €350m.

NAM IMPLICATIONS:

▪ Time for TuoDi NAMs to reassess their exposure to the

retailer…

▪ …and to calculate the incremental sales required

elsewhere in the market should the worst happen….

▪ i.e. Divide your current TuoDi debtor position by your

net margin and multiply by 100.

POLAND: EC Rules Against

Local Retail Tax The European Commission has once again ruled against the

Polish government’s retail tax, reiterating that the latter was

in violation of EU aid laws.

The law introduced a three-tiered tax and was approved

by the Polish parliament in July 2016. It came into force on 1

September 2016 but was suspended after the EU launched an

investigation.

The EC noted that the tax would “give companies with a

lower turnover an unfair economic advantage. Smaller

companies should of course pay less tax than their larger

competitors in absolute terms, but still in the same proportion

to their turnover. Poland has not demonstrated that the

progressivity of the retail tax was justified by the objective of

the retail tax to raise revenues, or that companies subject to

the higher rates would have a higher ability to pay.”

The EC noted that it did not “question Poland’s right to

decide on its taxation systems or on the objective of different

taxes and levies”, but merely wanted the tax system to “comply

with EU law, including state aid rules”.

The Polish government said it would review the latest

verdict.

NAM IMPLICATION:

▪ It’s called sovereignty, folks.

RUSSIA: Ban On EU Food

Imports Extended Yet Again The Russian government has extended a ban on imports of

perishable food products from the European Union, the US,

and several other countries.

The list of banned food imports includes meat, fish, dairy,

fruit, and vegetables. The embargo was first imposed in

August 2014 in response to sanctions related to the Crimea

crisis. It was extended until August 2016, then end-2017, and

has now been extended until 31 December 2018.

The decision follows the EU’s extension of its own

sanctions. Russian President Vladimir Putin has said the

import ban will be lifted as soon as the economic sanctions by

the West are lifted.

NAM IMPLICATION:

▪ Meanwhile…?

RUSSIA: Magnit Begins Trial

Of Pharmacy Banner Magnit, Russia’s second-largest retailer, has announced the

formal launch of a new pharmacy banner in the country.

The group said it has opened four trial outlets under the

‘Magnit Apteka’ banner in Krasnodar. The stores are located

within its existing hypermarkets and neighbourhood stores.

Magnit said the outlets stock an average of around 3,500

SKUs, and besides medicines and medical devices, also offer

products in the skin care, beauty, nutrition, and sanitary

categories.

Magnit did not say how many more stores it plans to open,

or when, under the banner.

NAM IMPLICATIONS:

▪ A low risk trial whose success will determine rate of

expansion.

▪ Worth anticipating a branch in every Magnit store, and

climbing aboard now?

SPAIN: Amazon Extends DIA

Tie-Up Amazon and DIA continue to expand their fledgling

partnership in Spain, with their tie-up moving into new areas.

The initial deal saw customers of the Amazon Prime Now

service in Madrid receiving access to select Plaza de Dia

products. The service has now been extended to Prime Now

customers in Barcelona and surrounding areas, with around

5,300 DIA products available.

The orders will be prepared in a store dedicated

exclusively to the service, with local reports saying it covers

1,800 sq. m. and employs 30 staff.

NAM IMPLICATIONS:

▪ Easier for suppliers to climb aboard now…

▪ …rather than await the inevitable move by a competitor.

SPAIN: Mercadona Set To

Revamp Online Approach Mercadona has introduced a new strategy to drive its online

sales, with the launch of the ‘Mercadona Tech’ platform.

NamNews │ July 2017 │ 31 www.kamci ty.com

INTERNATIONAL NEWS

The grocery giant said it has “finally decided to bet on

online sales”, adding that the upcoming site will be part of its

aim to “reinvent the way we buy food”. Online sales currently

account for just 1% of Mercadona’s total sales .

The company said it wants to “create a simple and

intuitive experience for our customers and also seek logistics

efficiency through technology.” Mercadona already has team

of 20 people working on the platform, but is looking for

additional engineers, product managers and design experts.

NAM IMPLICATIONS:

▪ It is all about the following (Amazon) entry standards:

1-click ordering

Infinite selection (Amazon 300m products)

No quibble returns, as easy as ordering

Delivery within 24 hours

▪ Otherwise don’t bother…

THE NETHERLANDS: Ahold In

Talks With AH Franchisees

Regarding Innovation Ahold Delhaize has been holding talks with several franchisees

of its Albert Heijn banner, with an intention of launching new

pilots to drive growth.

According to a Distrifood report, the ‘inline’ pilots aim to

combine elements of the banner’s online and physical

strengths. The report cited a company spokesperson, who

said the move was prompted due to shifts in customer

behaviour. The spokesperson added: “A number of

franchisees have indeed responded positively and would like

to start the inline pilot together with us.”

The move comes even as Albert Heijn and its franchisees

remain in conflict over the former’s direct online activities,

which the franchisees say affect their business.

NAM IMPLICATIONS:

▪ Suppliers need to ensure that any ‘franchisee

cannibalisation’ charges are directed at the retailer

rather than the supplier brand.

▪ In other words, suppliers need to check their own

compatibilities across different routes to consumer.

THE NETHERLANDS: Sligro

Confirms Offer For Emté The Sligro Food Group has confirmed that it has received a

takeover offer for its Emté supermarket banner, adding that it

has turned down the same.

The group was responding to media reports which said

that Jumbo Supermarkten had made a joint bid (with an

unnamed partner) for the 131-store banner. The reports

stated the offer price was sufficiently high enough to be

“difficult for Sligro to let go”, without a specific amount being

disclosed.

In response, Sligro said it had received a “non-binding,

conditional” bid, but said it had decided this was “not an

opportune moment for bids of this kind”. Sligro said it had

“made this known to the interested parties”.

The group also said it will present its previously-

announced review of Emté on 20 July, adding that it is “keeping

all options open, although we would clearly prefer not to

dispose of any activities”.

NAM IMPLICATIONS:

▪ But if the price is right?

▪ Time for a ‘what if’ on a sale?

▪ And a small adjustment to your trade strategies?

OTHER TOP STORIES Click for

details

EUROPE: Metro Group Names New Country Heads For

Cash & Carry Unit

FINLAND: Kesko Reports Success Of ‘vege shelf’

FRANCE: A.S. Watson Appoints New Head At Local

Marionnaud Unit

FRANCE: Auchan Uses Reflex TMS To Optimise

Transport Operations

FRANCE: Système U Centralises More Operations

Under New Unit

GERMANY: Edeka Unveils Changes To Management

GERMANY: Rewe Unveils Own Label Reformulation

ITALY: Intervias Unveils Local Esso Station Deal

ITALY: Metro Shuts Down Local Redcoon Site

PORTUGAL: Mercadona Reportedly Begins Registering

Trademarks Locally

ROMANIA: Hornbach Set To Launch Online Store

RUSSIA: Auchan To Rename Nasha Raduga Chain

RUSSIA: O’Key Announces Familia Tie-up

RUSSIA: X5 Retail Rolls Out New Loyalty Programme

RUSSIA: X5 Retail Appoints New CFO

SPAIN: Eroski In New Lufthansa Tie-Up For Loyalty

Card

THE NETHERLANDS: Ahold Delhaize To Trial

Checkout-free Concept

THE NETHERLANDS: Albert Heijn Unveils B2B Range

THE NETHERLANDS: SPAR International Appoints New

Head Of Buying

NamNews │ July 2017 │ 32 www.kamci ty.com

INTERNATIONAL NEWS

TRADING UPDATES

Axfood Casino Casino

Celesio Colruyt Condis

Cora Coop Italia Plus

AFRICA / ASIA / AUS

AUSTRALIA: Retailers Deny

Plans To Implement ‘Surge

Pricing’ Digital Tags The major Australian grocers have denied reports that claimed

they were looking to introduce digital price tags across their

stores, which would allow so-called ‘surge pricing’.

In late June, a report by news.com.au cited industry

experts who said local grocers would implement electronic

shelf labels within five years, which could lead to

supermarkets remotely changing product prices based on

demand surges.

The report cited Brent Coker, a consumer psychologist at

the University of Melbourne, who said e-pricing would make it

easier for retailers to gather customer information and use it

to their advantage. Coker noted: “They can look at sale data

and what price a product was when it sold the most units to

consumers. E-pricing combined with inventory control

information and what’s being sold and what volume, which is

gathered through the till data, prices can be adjusted according

to the demand.”

Later reports noted that Woolworths briefly trialled the

use of LCD screens for shelf-edge pricing at one store, although

the group insisted that was to increase efficiency. A former

store manager said the move was aimed at helping “reduce the

wages and the labour it takes to put those tickets up each day

or each week, and take them down again.”

However, Woolworths told SmartCompany the company

“does not have any plans to introduce electronic pricing”, Coles

said it had “no plans” to launch digital ticket, and Aldi said: “At

this stage, we have no plans to trial or implement digital price

tags in any of our Australian stores”.

NAM IMPLICATIONS:

▪ But what if they did…?

▪ With some competitors copying the surge-price and

others making contra moves to gain advantage…

▪ Time for a few what-ifs?

AUSTRALIA: Suppliers Pick

Woolworths Over Coles After

Five Years Woolworths has topped Coles in a key supplier survey, the first

time in five years it has done so.

The UBS supplier survey saw suppliers give Woolworths a

6.7/10 rating, up 50bps, with improvements recorded in every

metric. In comparison, Coles saw its rating drop to 6.1/10,

down 60bps from the previous survey. In the latest survey,

Coles led in just one category – own label.

The survey polls 48 suppliers to supermarkets each

quarter, asking them to rate them on 26 different categories,

including morale, pricing strategy, and promotional

effectiveness.

In a note to clients, UBS analyst Ben Gilbert noted: “We

believe Woolworths is turning around faster, sales momentum

is continuing (despite tougher comparables) and Coles has yet

to formulate a strategy to regain momentum”.

Gilbert forecast that the momentum would continue until

at least Christmas 2017, and warned that Coles’ recent plans

to up spending “appears to have come six months too late, with

a competitive response (based on public statements) not

coming until early this year. We believe momentum at Coles is

unlikely to improve materially until Christmas, which will be a

key test as to who is best positioned to outperform over 2018.”

NAM IMPLICATIONS:

▪ The battle will be won in the aisles.

▪ Time for suppliers to decide which of the two retailers’

traffic profile best matches their brand profiles.

▪ And invest accordingly…

MIDDLE EAST: MAF Acquires

Regional Geant Franchise The Majid Al Futtaim group has announced the acquisition of

Retail Arabia, the franchise owner of the Geant banner across

the Middle East, for an undisclosed price.

The deal gives MAF control of 26 Geant hypermarkets and

convenience stores across Bahrain, Kuwait, and the UAE, as

well as four Gulfmart supermarkets in Bahrain.

All 30 outlets will be converted to the Carrefour banner,

establishing the French group as one of the largest grocers in

the Middle East, with 99 stores across the three countries (80

in the UAE, 11 in Bahrain, 8 in Kuwait).

Alain Bejjani, CEO of MAF Holding, added: “We are open to

further prospects, through both organic growth and

opportunistic acquisitions … Our ambition is to expand our

physical as well as our digital presence, and reinforce our

omni-channel offering.”

NAM IMPLICATIONS:

▪ Meanwhile, suppliers need to recheck any potential

prices & terms inconsistencies…

▪ …and adjust accordingly…

▪ Before the real growth begins.

NamNews │ July 2017 │ 33 www.kamci ty.com

INTERNATIONAL NEWS

HONG KONG: A.S. Watson

Unveils Expansion Plan The A.S. Watson Group has said it is aiming to open hundreds

of new outlets across the world this year, even as it unveiled

plans to invest on its technology platform over the short term.

The group said it will look to open 1,400 outlets globally

this year, including 500 in China alone. A large portion of the

stores will be in the emerging markets of Eastern Europe and

Turkey, with 60 new stores set for Hong Kong.

A.S. Watson also plans to invest HK$500m (€56m) over

the next three years to improve its technology services, boost

Big Data analysis, and in its MoneyBack reward programme.

NAM IMPLICATIONS:

▪ Worth remembering that this all started with a single

vendor selling plastic flowers on the streets of Hong

Kong back in the fifties…

▪ Don’t miss a second chance…

HONG KONG: Dairy Farm

Names Ian McLeod As CEO Dairy Farm International has announced the appointment of

Ian McLeod as its new CEO, effective 18 September 2017.

McLeod, who announced his departure as CEO of

Southeastern Grocers in the US earlier in June, will succeed

Graham Allan, who is stepping down as of 31 August after five

years in the role.

McLeod spent his early career with Asda before joining

Halfords in 2003 as Chief Executive. He then became

Managing Director of Coles in Australia in 2008, where he led

a turnaround in the group’s fortunes.

NAM IMPLICATIONS:

▪ i.e. man with interesting pedigree, going to a great

company…

▪ Watch this space…

INDIA: Amazon Receives

Approval For Food Retailing Amazon has received approval from the Indian government to

invest in the local food retailing industry.

Amazon becomes one of the first companies to receive

such an approval from the Department of Industrial Policy &

Promotion, which will allow it to set up a wholly-owned

subsidiary to sell food items directly to consumers.

The clearance offers Amazon greater end-to-end control of

its supply chain, and the company noted: “We are excited by

the government’s continued efforts to encourage FDI (foreign

direct investment) in India for a stronger food supply chain”.

Interestingly, in its application, Amazon said it planned to

sell products “through any channel, offline or online”, raising

the possibility that it may be looking at a bricks & mortar

approach down the line. The company has not commented on

that, nor has it commented on reports that it may choose to

launch an own label food range following the approval.

NAM IMPLICATION:

▪ Well, you know what that means…

INDIA: Tesco-Tata JV Unveils

New Expansion Plans Trent Hypermarket, the joint venture between Tesco and the

Tata Group, has announced plans to rapidly expand its store

network across India.

The chain currently operates 45 stores, and said it aims to

have 200 operational within two to three years. Jamshed

Daboo, MD of Trent, said around 50 of the new stores will open

in the Hyderabad region alone. He added that most of the new

growth is expected to be under its ‘Star Market’ banner, which

has mid-sized supermarkets covering an area of 8,000-10,000

sq. ft.

Daboo also said Trent is setting up a 70,000 sq. ft.

distribution centre in Hyderabad at an investment of Rs.250m,

which is expected to become operational in the next year. The

distribution centre – its third in the country – will help to

expand the chain’s own label and direct sourcing efforts.

NAM IMPLICATIONS:

▪ Forget the name…

▪ Key is the opportunity to get aboard now, before the

competition show you how…

INDIA: Tata To Acquire

GrocerMax To Support Trent? The Tata Group is reportedly set to acquire local online grocer

GrocerMax in order to support Trent Hypermarket, the

former’s joint venture with Tesco.

Launched in 2015, GrocerMax is a hybrid platform for

grocery that maintains just 10% inventory, with the rest being

sourced from stores in real time. Local media claim the two

sides are nearing a deal that will see the Tatas acquire

GrocerMax’s management team and technology infrastructure.

The reports said GrocerMax will shut down its current

operations, and instead be used to set up an online platform

for Trent in the markets where the latter operates (Western

and Southern India).

NAM IMPLICATIONS:

▪ Flexible enough to be optimised in the new Tesco-Trent

Hypermarket venture.

▪ Time for suppliers to propose initiatives now?

INDONESIA: 7-Eleven

Franchisee Shuts All Stores 7-Eleven no longer has a presence in Indonesia after country

franchisee Modern International shut down all existing stores

as of 30 June.

NamNews │ July 2017 │ 34 www.kamci ty.com

INTERNATIONAL NEWS

Modern, which operated 141 outlets under the

convenience store banner, said it could no longer support

operations given its limited resources. The company had been

looking to sell to Thailand’s CP Group, but that deal fell

through earlier in June.

The first 7-Eleven store opened in Indonesia in 2009, and

at its peak in 2016, it operated 189 stores. However, Modern

began shutting down stores last year due to unprofitability,

and the company’s woes worsened after it reported a 37%

drop in sales in the first quarter of this year.

NAM IMPLICATIONS:

▪ A final departure for 7-Eleven, or a search for another

partner?

▪ Best try a couple of ‘what ifs’ and prepare accordingly…

JAPAN: Lawson Unveils Self-

Service Mini-stores In Offices Lawson Inc. has introduced a new concept in Japan, called

‘Petite Lawson’, which consists of self-serve mini c-stores in

office buildings.

The unstaffed stores offer snacks and drinks which can be

bought from automated self-checkout terminals, with the

latter only accessible using contactless payment cards. The

range of products includes convenience-store staples such as

snacks and instant noodles, with some stores featuring

refrigerators and freezers that stock chilled and frozen items.

Lawson reportedly aims to open 1,000 such outlets within

this fiscal year, mainly in urban areas.

NAM IMPLICATIONS:

▪ 1,000 sites is good…

▪ …but think of the scalability.

▪ Best to get in now, rather than allow competitors to

show you how.

MIDDLE EAST: Shinsegae To

Enter Region Via Saudi Arabia South Korea’s Shinsegae has announced a deal that will see it

enter the Middle East, through a launch in Saudi Arabia.

The conglomerate has tied up with the Fawaz Alhokair

group to launch its ‘Sugar Cup’ cosmetics banner in the

country, with the first such store opening in Riyadhi. The deal

will see Shinsegae supply products and knowledge on store

operations to Fawaz, while receiving royalty income. There

are plans to open more Sugar Cup stores in other cities, such

as Jeddah and Damman.

The move Shinsegae’s entry into Mongolia in summer

2016. The launch comes as the Middle East cosmetics market

is forecast to double in size to US$36bn (€31.6bn) by 2020.

NAM IMPLICATIONS:

▪ Add to this the Carrefour initiatives (above)…

▪ ...and decide whether you are doing enough to capitalise

on retail changes in the Middle East.

NEW ZEALAND: Woolworths

To Sell EziBuy Woolworths Ltd has announced the sale of its EziBuy fashion

and homewares chain, ending a sale process that began last

year. The Australian group is selling the local retailer to

investment firm Alceon Group for an undisclosed price.

Woolworths acquired EziBuy for NZ$350m (€225m) in

2013, but a strategic review in 2016 decided that the latter did

not fit in with the rest of its business. EziBuy has also

struggled of late, reporting a loss of NZ$15m (€9.6m) in 2016,

on sales of NZ$163m (€105m).

The Australian group noted: “Woolworths has undertaken

a comprehensive sales process to ensure the right decision

was made for EziBuy, with a buyer who has indicated a desire

to work with the team to continue to build the

business.” Alceon also owns a 49% stake in the Noni B

women’s fashion label.

NAM IMPLICATIONS:

▪ Anticipate new momentum from EziBuy via new owners…

▪ ...and renewed focus on the core business by

Woolworths.

S. AFRICA: Shoprite Targets

Woolworths Holdings With

New Checkers Strategy Shoprite Holdings has unveiled a new strategy for its

‘Checkers’ banner, which will see it try and lure away the

middle- and upper-class consumers that are the mainstay of

rival Woolworths Holdings.

Speaking to Reuters, Shoprite CEO Pieter Engelbrecht said

the group plans to open more Checkers stores in affluent areas

of the country, while increasing the quality of its convenience

food offer. He said the group will look to open 23 such stores

over the next year.

The new stores will feature a wider range of premium

foods and beverages, and will also offer more convenience

foods (with this number set to grow to 500 items by the end of

the year). The moves follow recent tie-ups with Gordon

Ramsay, spending in its supply chain and food technology, and

investment on price.

Engelbrecht said Checkers will look to highlight its lower

price point, adding: “A lot of those wealthier customers, two

million of them, actually frequent our stores already, but not

exclusively. Our job is to get a better share of their wallets

when they are in stores and then impress them so that they

come back”. He also noted: “Woolworths over time has

constantly moved the price of convenient products up and up

because they were virtually the only players in that market,

which gives us the opportunity to come in”.

NAM IMPLICATIONS:

▪ Obviously Woolworths will not sit on the sidelines.

▪ But any fight-back has to be at the expense of the

bottom line…

NamNews │ July 2017 │ 35 www.kamci ty.com

INTERNATIONAL NEWS

SINGAPORE: Alibaba Unveils

New US$1bn Stake In Lazada The Alibaba Group has expanded its stake in Lazada, the

largest online retailer in Southeast Asia, with a new US$1bn

(€878m) deal.

The move, which comes on the back of a similar US$1bn

(€878m) stake buy in 2016, will see Alibaba’s share in Lazada

grow to 83%, and values the online company at around

US$3.15bn (€2.77bn). Alibaba will pick up the stake from

existing Lazada shareholders, including Rocket Internet and

Kinnevik. The deal leaves just Alibaba, Temasek Holdings, and

current management as investors in Lazada.

Maximilian Bittner, CEO of Lazada, told Reuters: “It is a

clear signal from (Alibaba) that, now having learned the

market better, that they really believe in the opportunity of

ecommerce in southeast Asia”.

Bittner added that having Alibaba as a backer was “very

helpful”, noting: “It will be easier to take on one 800 pound

gorilla when you have the other 800 pound gorilla behind

you”.

NAM IMPLICATIONS:

▪ Time for suppliers to take their corners.

▪ i.e. remaining outside the ring is no longer an option…

OTHER TOP STORIES Click for

details

AFRICA: Carrefour Introduces ‘Market’ Format In

Ivory Coast

AUSTRALIA: Metcash Announces CEO Exit, FY Profit

Drop

AUSTRALIA: Metcash Appoints Former Tesco Exec As

New CEO

AUSTRALIA: Woolworths Reassigns Company

Veterans To Big W

CHINA: JD.com Ties Up With Farfetch For Luxury

Brands

CHINA: Startup Unveils ‘Robo-Grocery Store’ That Will

Drive To Your Door

INDIA: Amazon Pumps In More Money Locally

INDIA: Amazon Appoints New Head For B2B Platform

INDIA: Future Group Unveils Aggressive Plans For

‘Nilgiris’ Banner

JAPAN: Seven & I In Online Tie-Up With Mail-Order

Firm

THAILAND: SPAR Ties Up With DHL For Market

Expansion

AMERICAS

CANADA: Sears Canada

Declares Bankruptcy, To Shut

Some Stores Sears Canada filed for bankruptcy in June, less than two weeks

after admitting that its liquidity status had raised “material

uncertainties” as to its continued operations. The department

store chain has been granted protection under the Companies’

Creditors Arrangement Act, which gives it until 22 July to

restructure itself.

Sears said that it will use the time to try and refinance

C$450m (€310m) in debts, and will also shut down 59 of its

more than 200 stores (20 Sears, 15 Sears Home Stores, 10

Sears Outlets, and 14 Sears Hometown). The chain will also

eliminate 2,900 jobs, of which around 500 are office positions

with the rest being linked to the stores being closed.

Most recently, Eddie Lampert’s ESL Partners and

Fairholme Capital Management said they were “evaluating,

discussing and considering a potential negotiated transaction”

with Sears Canada. The two firms own about two-thirds of

Sears Canada combined.

They did not say what sort of transaction they were

considering, but added that the talks could include financing,

purchase and sale, or restructuring.

The move is the end result of years of poor results at the

chain, which has seen its sales fall from C$6.7bn (€4.6bn) in

2001 to just C$2.6bn (€1.8bn) in 2016.

NAM IMPLICATIONS:

▪ The issue for suppliers might be the extent of their

possible exposure re current credit.

▪ i.e. Divide the sum outstanding by the supplier net

margin and multiply by 100 to find the incremental sales

required by the supplier in order to recover any potential

losses.

CANADA: Walmart To

Introduce Marketplace

Concept Locally Walmart is looking to significantly expand its Canadian online

shop, by introducing its Marketplace platform in the

country. The platform, first launched in the US in 2009, offers

products from third-party sellers.

The retail giant said the move, which is expected to go live

in the next two months, will help create an “endless aisle” of

products. Lee Tappenden, CEO of Walmart Canada, told the

Financial Post daily: “We will double the SKUs we have online

at the launch date, and by early next year we will have millions

of SKUs online.”

Tappenden told the paper: “Walmart was designed based

on assortment, a one-stop shop, and this is still what it is today.

This is just making that transition to combine in store and

online.”

NamNews │ July 2017 │ 36 www.kamci ty.com

INTERNATIONAL NEWS

The Post also reported that Walmart is launching a click &

collect service in Canada, with plans to offer the same at 100

stores by Christmas 2017, and then gradually roll it out across

the entire 410-store network.

NAM IMPLICATIONS:

▪ Interesting to see how Walmart’s ‘endless aisle’

compares with Amazon’s 300m product offering…

▪ And where does that leave other online retailers…

US: Amazon Agrees Deal To

Acquire Whole Foods Market Amazon looks set to significantly ramp up its presence in the

grocery sector after announcing that it has agreed a deal to

acquire US chain Whole Foods Market.

The online giant will pay US$42 (€37m) per share in an

all-cash transaction which values the natural food retailer at

approximately US$13.7bn (€12bn), including Whole Foods’

net debt. Completion of the deal is expected in the second half

of this year, subject to approval by Whole Foods Market’s

shareholders and regulatory clearance.

Whole Foods Market generated sales of approximately

US$16bn (€14bn) last year from more than 460 stores in the

US, Canada, and the UK. However, the chain has been

struggling in recent quarters, and earlier this year unveiled

major changes while also scaling back its store expansion

plans. Its declining share price has prompted pressure from

activist investor Jana Partners, and had also led to speculation

that it could face a buyout bid from Albertsons Cos.

Whole Foods Market will continue to operate its stores

under the current brand with Mackey remaining as

CEO. Amazon also denied a Bloomberg News report that

claimed the online giant would look to reduce jobs at Whole

Foods to reduce costs.

John Mackey, co-founder and CEO of Whole Foods, noted:

“This partnership presents an opportunity to maximise value

for Whole Foods Market’s shareholders, while at the same time

extending our mission and bringing the highest quality,

experience, convenience and innovation to our customers”.

A regulatory filing later offered more details of the deal,

with Whole Foods noting that it had received interest from two

other companies and four private equity firms, although none

of them put forward a formal bid.

The filing noted that the interest began in mid-April, with

Reuters claiming that one of the parties involved was

Albertsons Cos, which proposed a merger of equals that valued

Whole Foods at US$35 and US$40 (€30.7-€35.1) per share.

At the same time, following a Bloomberg News report that

suggested Amazon had once considered making a bid for

Whole Foods, John Mackey (the latter’s CEO) discussed the

same with an unnamed external consultant. Following this

discussion, the consultant called Amazon on 21 April to

introduce the two companies, leading to a meeting on 30 April

where strategic options were discussed but no bid was made.

Whole Foods continued to reach out to other suitors

following this, which ended on 23 May, when Amazon made a

written offer for US$41 (€36) per share. The letter also noted

that Amazon “reserved the right to terminate discussions if

there was any leak or rumour of its interest” in Whole Foods.

Whole Foods decided not to pursue any other talks for

worries that the Amazon bid would leak and lead to it being

cancelled. The grocer countered with a price of US$45 (€39.5)

a share, to which Amazon made a “best and final offer” of the

current price.

Commenting the deal, Fraser McKevitt, head of retail and

consumer insight at Kantar Worldpanel, said: “Amazon is

committed to cracking the grocery market, and a business like

Whole Foods brings with it many of the crucial ingredients the

e-commerce giant has been missing in its other forays into

food and drink. The power of a physical presence on the high

street to grow a brand’s reputation and credibility is

particularly important in grocery, where consumers want to

be able to see the quality of the items they’re buying first hand.

“Bricks and mortar stores will also allow Amazon to

expand its options for ordering, pick-up and delivery. More

broadly, as a well-established retailer focused on the lucrative

health and wellness market within grocery, Whole Foods is

perfectly positioned to give Amazon a crash course in how

food retailing really works on the ground.”

NAM IMPLICATIONS:

▪ A firm foot in Bricks & Mortar food retail for Amazon…

▪ More of a challenge in terms of online execution…

▪ …but every little helps.

US: Lidl Unveils More Details

Of Market Expansion Lidl has offered more details of its plans for the US market.

The chain has opened 14 stores in the country as of early

July, and plans to have 100 stores operational by June 2018.

It also unveiled plans for a new US$100m (€87.8m) facility

in Cartersville, Georgia, which will be its fourth regional

headquarters and distribution centre in the US. The move will

create 250 new jobs over the next five years.

NAM IMPLICATIONS:

▪ In other words, the infinitely scalable Lidl model is on

the move, its potential only limited by demonstrable

demand, at a pace directly related to shopper demand.

▪ All else is detail…

US: Staples Sold To Private

Equity In US$6.9bn Deal Staples has agreed to be bought out by private equity firm

Sycamore Partners for US$6.9bn (€6.1bn), a year after its

merger with Office Depot was blocked by regulators.

The deal, which will be the largest ever retail acquisition

by Sycamore (its previous highest was the US$2.7bn (€2.4bn)

buyout of Belk), is expected to be completed by end-2017.

Shira Goodman, CEO of Staples, noted: “With the support

of Sycamore and as a private company, we will be better

equipped to continue to transform to meet changing customer

needs in an ever-evolving and competitive marketplace”.

NamNews │ July 2017 │ 37 www.kamci ty.com

INTERNATIONAL NEWS

Under Goodman, who took over recently from Ron

Sargeant, the chain has been shutting stores and overhauling

its marketing strategy. However, it continues to struggle, with

first-quarter sales down 4.9%.

NAM IMPLICATIONS:

▪ A final opportunity for Staples…

▪ In such cases anticipate cuts, sale and leaseback, and

re-flotation within five years.

▪ And adjust trade strategies accordingly.

US: Walgreens Drops Rite Aid

Merger, To Buy Stores Walgreens Boots Alliance has dropped its merger plans for the

Rite Aid chain, instead revealing a new deal to acquire

thousands of stores from its rival.

The WBA move comes after it extended the deadline for

the merger twice while waiting for the Federal Trade

Commission to issue a ruling. The termination of the deal also

includes the scrapping of the sale of certain stores to

Fred’s. As a result, WBA will pay Rite Aid a US$325m (€285m)

termination fee.

The new deal will see WBA acquire 2,186 stores, three

distribution centres, and related inventory from Rite Aid for

US$5.2bn (€4.6bn) in cash. The agreement also includes an

option for Rite Aid to become a member of WBA’s group

purchasing organisation, Walgreens Boots Alliance

Development GmbH.

The new deal is expected to attract less scrutiny from the

US regulator than the original one. WBA said it expects to

complete the initial closings within six months, following

which it will begin acquiring stores and related assets on a

phased basis, and convert them gradually to the Walgreens

brand.

WBA said the deal will be modestly accretive to its

adjusted diluted net earnings per share in the first full year

after the initial closing of the new transaction, and expects to

realise synergies of more than US$400m (€351m) within three

to four years of the initial closing, primarily through

procurement, cost savings and other operational matters.

Stefano Pessina, CEO of Walgreens Boots, said the deal

“will allow us to expand and optimise our retail pharmacy

network in key markets in the US, including the Northeast, and

provide customers and patients with greater access to

convenient, affordable care.”

NAM IMPLICATIONS:

▪ Purchasing 2,186 stores from a total of 4,621, and

presumably those least likely to raise competition

issues…

▪ …allows WBA many of the advantages of takeover,

without the possibility of further delays by the

authorities.

▪ In other words, WBA build extra buying muscle

(especially if Rite Aid exercise their option to join the

WBA purchasing organisation), and wider distribution…

US: Walmart Unveils Stricter

Delivery Rules For Suppliers Walmart is set to introduce stricter delivery rules for its

suppliers, as it looks to implement an ‘On-Time, In-Full’

strategy.

According to Bloomberg News, beginning August 2017,

Walmart will require suppliers who deliver full truckloads of

fast-moving items to deliver “what we ordered 100% in full,

on the must-arrive-by date 75% of the time.” By February

2018, the group wants OTIF deliveries 95% of the time.

The report notes that items that are delivered early, late,

or are missing during a one-month period will incur a fine of

3% per cent of their value. Suppliers will also be fined if the

products are improperly packaged. Bloomberg said Walmart

will be working on a scoring system to determine whether any

fault lies with the supplier or itself.

Walmart expects the programme to add US$1bn (€878m)

to revenue by helping improve product availability, and will

also help improve its back-room storage facility.

NAM IMPLICATION:

▪ An end to ‘drop & drive’?

US: Walmart Signs Up Dozens

Of Suppliers In ‘Open Call’ Walmart has offered product deals to nearly 100 companies,

as part of its latest ‘U.S. Manufacturing Open Call’.

The fourth annual Open Call saw Walmart receiving 750

product presentations from more than 500 suppliers based in

47 US states and Puerto Rico. Product ideas spanned a wide

range of categories, including home décor, apparel, hardware,

toys, health and beauty aids, sporting goods, and food.

Nearly 100 firms were offered deals on the spot, and will

see their products soon being stocked at Walmart stores and

website. The chain also continues to hold discussions with

other participants to help further develop their products in the

hope of a listing.

NAM IMPLICATIONS:

▪ Apparently a 20% success rate (by company).

▪ Still worth busting a gut, if you get the opportunity…

OTHER TOP STORIES Click for

details

BRAZIL: Carrefour Looks To Raise Up To $1.7bn Via

IPO

US: Couche-Tard To Divest 70 Stores For CST Brands

Deal

US: Home Depot In $265m Deal For Compact Power

Equipment

US: Japan’s Don Quijote Acquires Hawaiian Chain

NamNews │ July 2017 │ 38 www.kamci ty.com

INTERNATIONAL NEWS

US: Kroger Sues Lidl For Trademark Infringement

US: Supervalu Announces Exit Of Senior Exec

US: Walmart Warns Partners Away From Amazon Web

Services

US: Walmart Continues Buying Spree With Bonobos

Deal

TRADING UPDATES

Empire Co Jean Coutu Walgreens Boots

MANUFACTURERS

BRAZIL: JDE Looking For

More Coffee Deals Jacobs Douwe Egberts (JDE) has said it is looking to make new

acquisitions in Brazil’s coffee market, as it looks to gain ground

on global market leader Nestlé.

Brazil is the world’s second-largest coffee market and JDE

is the second-largest player in the country with an estimated

20% market share. It owns several major local brands,

including Café do Ponto, Pilão and Café Pelé. Globally, the

group has an estimated 12% share of the global coffee retail

market, compared to Nestlé’s 22%, according to Euromonitor.

Media reports quoted Lara Barns, head of JDE Brazil, as

noting: “We want to be a leader in Brazil. We continue to look

for opportunities.”

Barns noted that Brazil only accounts for 10% of JDE’s

global revenues, even though it accounts for 20% of volumes,

reflecting lower prices and the popularity of cheaper brands.

Barns said: “The premium coffee segment is the one that grows

the most in Brazil. That is our bet”.

NAM IMPLICATION:

▪ Can also bet that Nestlé will not sit on the sidelines…

SWITZERLAND: Nestlé Faces

Pressure From Investor Nestlé has come under new pressure after activist investor

Daniel Loeb’s Third Point hedge fund declared that it had

picked up a stake in the group. The food giant later unveiled

plans for a major share buyback programme and future

investments.

The 1.3% stake, worth 3.28bn Swiss francs (€3bn), is the

largest ever taken by Third Point in any company and

reportedly makes the hedge fund the eighth-largest

shareholder in Nestlé. Third Point wrote to its investors

declaring the stake, adding that it has already had productive

conversations with Nestlé’s management.

The letter said Nestlé “will need to articulate a decisive

and bold action plan that addresses the staid culture and

tendency towards incrementalism that has typified the

company’s prior leadership and resulted in its long-term

underperformance”.

The hedge fund called on the group to improve its margins,

buy back shares, and sell off non-core businesses. Amongst its

demands is the setting of a formal target of achieving margins

of 18%-20% by 2020, the sale of the 23% stake in L’Oréal

(possibly “via an exchange offer for Nestlé shares), and taking

on additional debt to generate funds and buy back shares.

Just days after the announcement, Nestlé announced plans

to buy back shares worth 20bn Swiss francs (€18bn). The

group said the buyback programme, which began on 4 July

2017 and is expected to be completed by June 2020, was

prompted by a review and “low interest rates and strong cash

flow generation”.

Nestlé also reiterated that its future capital spending will

be focused “particularly on advancing high-growth food and

beverage categories such as coffee, petcare, infant nutrition

and bottled water, as well as expanding its presence in high-

growth geographic markets”. Additionally, it said it will look

for opportunities in consumer healthcare.

Nestlé stressed that it will only consider deals that “fit

within targeted categories and geographies, deliver attractive

returns”, and help consolidate its position in the food &

beverage categories.

The group also said it continue to study options to improve

its margins “through targeted efficiency programs that do not

undermine the company’s performance in attractive long-term

growth categories”.

NAM IMPLICATIONS:

▪ In other words, a request for few cosmetic changes.

▪ Resulting in a renewed focus on growth…

▪ …and inevitable changes in the competitive landscape in

a number of categories.

▪ Time to check your categories?

US: Campbell Soup In $700m

Deal For Pacific Foods Campbell Soup has announced the acquisition of Pacific Foods,

a maker of organic soups and broths, in an all-cash deal worth

US$700m (€615m).

Pacific Foods also makes organic sauces and non-dairy

beverages, dips, meals and sides. It generated sales worth

US$218m (€191m) for the fiscal year ending 31 May 2017.

Campbell said the deal expands its presence in the health

and well-being categories, while giving it “more access to

natural and organic customers and channels”. The group will

invest in expanding Pacific Foods’ distribution, marketing, and

R&D.

Following the completion of the deal, Pacific Foods will

become part of Campbell’s Americas Simple Meals and

Beverages division. Chuck Eggert, CEO and co-founder of

Pacific, will remain as a supplier of key ingredients through his

family farms.

NamNews │ July 2017 │ 39 www.kamci ty.com

INTERNATIONAL NEWS

NAM IMPLICATIONS:

▪ A little more leverage within their categories.

▪ Time for competing suppliers to re-evaluate the new

competitive landscape?

US: Lactalis To Buy Danone’s

Stonyfield Unit Danone has agreed to sell off its Stonyfield business in the US

to Lactalis, in a deal worth US$875m (€769m). The move is

part of Danone’s deal with the US regulators in exchange for

receiving approval for its own acquisition of WhiteWave

Foods.

Stonyfield, which generated around US$370m (€325m) in

sales in 2016, produces a range of organic yogurts, frozen

yogurts, smoothies, and packaged milks. Danone said the

business “remains a highly attractive asset”, but added that it

“made the strategic decision to divest Stonyfield as it allows us

to take a major step towards completing the WhiteWave

transaction expeditiously.”

NAM IMPLICATION:

▪ A silver lining for Lactalis…

US: Nestlé To Support Startup

Accelerator Nestlé USA has signed a new partnership with Rabobank and

RocketSpace, which will see them support startups for the

Terra ‘Food + Agtech Accelerator’ programme.

The Swiss group said it will collaborate with Terra and

other corporates to “select and coach the most innovative and

disruptive startups in the food and agricultural industry”.

Nestlé said it expects to support 20 startups over the duration

of the two 6-month accelerator programmes, and will explore

new and improved ways to produce, sell and distribute food.

A cross-section of startups will be selected from more than

1,000 applicants, with the goal of finding healthier and more

sustainable products and services that enhance the quality of

people’s lives. The first of two Nestlé-hosted Terra

programmes will be selected in autumn 2017, and applications

for the second cohort will open in early 2018.

Nestlé USA noted: “We’re experiencing a seismic shift in

the food industry, and our partnership with Terra by

Rabobank and RocketSpace is just one way in which Nestlé can

play a leading role in meeting quickly evolving consumer

expectations and explore new disruptive technologies and

business models. When we combine the resources of Nestlé

with the creativity and new thinking born from the startup

culture, we can create real change in our industry and best

deliver on consumer needs.”

NAM IMPLICATIONS:

▪ Mutually beneficial way of locating and optimising

innovation in key categories.

▪ With the machinery to drive and real breakthroughs…

US: Nestlé Considering Sale

of Local Confectionery Unit Nestlé has said it is considering selling its US confectionery

business, amongst other options, without offering a reason

why.

The country unit owns brands such as Butterfinger,

BabyRuth and 100Grand, and generated sales of around

US$920m (€801m) last year. The US confectionery business

accounts for just 1% of the group’s global annual sales, and

Nestlé is only the fourth-largest in the market (behind Mars,

Hershey, and Mondelez).

Nestlé said it will “explore strategic options”, although the

move does not include the Toll House brand. It also stressed

that it remains “fully committed” to its international

confectionery business, and will continue to invest in its US pet

care, bottled water, frozen meals, infant food, and ice cream

businesses.

NAM IMPLICATIONS:

▪ Little harm and possible benefits in competitors

exploring what-ifs re sale of confectionary unit…

▪ …and reassessing the resulting competitive landscape.

OTHER TOP STORIES Click for

details

AUSTRALIA: Woolworths Holds Off On Stocking New

Coca-Cola Product

AUSTRALIA: Coca-Cola Hit Again After Domino’s

Switches To Pepsi

CHINA: Asahi To Sell JV Stake To Tingyi

INDIA: Coca-Cola Targets Value Segment With New

Fizzy Range

NORWAY: Mars Scraps Orkla Wrigley Distribution Deal

US: Avon Appoints New COO

US: Dean Foods Acquires Uncle Matt’s Brand

US: Hain Celestial Announces First Deal Via Cultivate

Ventures Unit

US: Mondelez Issues Revenue Warning Over Cyber

Attack

US: Nestlé Picks Up Minority Stake In Freshly

TRADING UPDATES

Barry Callebaut PepsiCo

NamNews │ July 2017 │ 40 www.kamci ty.com

RETAILER FACTFILES

J Sainsbury PLC

A pivotal year for Sainsbury’s following its acquisition of the Argos chain with the

aim of creating a leading multi-channel food and general merchandise retailer.

Whilst integratiation of the two businesses appears to be going well so far, the group

is having to contend with the fall-out from last year’s EU referendum and continued tough competition from

discounters.

RETAIL STORE PORTFOLIO

As of 11 March 2017, the Sainsbury’s group operated 605 supermarkets, 806 convenience stores and 715 standalone Argos

outlets. It also operates a growing number of Argos and Habitat stores operating within its larger supermarket outlets (see

stores section below).

KEY FINANCIALS & PERFORMANCE REVIEW

Despite a boost from a 27-week contribution from its new

Argos business driving up turnover, Sainsbury’s reported

a third straight year of underlying profit decline and

warned of further tough times ahead.

The group’s underlying pre-tax profit declined by 1% to

£581m, whilst retail underlying operating profit fell by

1.4% to £626m. The falls reflected lower like-for-like sales,

investment in price cuts and cost inflation. This was partly

offset by cost savings of £130m and a contribution from

Argos of £77m. Retail underlying operating margin declined 32 basis points to 2.42%.

Annual like-for-like sales in the Sainsbury’s chain were down 0.6%, although this was a slight improvement on the 0.9% dip the

previous year. The figure improved throughout the year, falling by 1% in the first half, but by only 0.1% in the second half as

food price deflation eased.

The group revealed that supermarket sales over the year declined by nearly 2%, whilst in its convenience chain they grew by

over 6%. Online grocery sales were up by over 8%, with order growth of nearly 12% being partially offset by a reduction in

basket size due to deflation and a lower number of items per basket.

The group stressed that its overall food performance was “resilient” with consumers said to be responding positively to the

chain’s new focus on lower regular prices. Sainsbury’s revealed that total transactions over the year increased by nearly 3% to

26 million per week.

Argos sales contributed 14.5% growth since its acquisition and the chain’s like-for-like sales were up 4.1% in the second half.

First Quarter to 1 July 2017: Sainsbury’s reported slightly better-than-expected sales growth for the period, helped by inflation

and warm weather. Total group retail like-for-like sales rose 2.3% (excl. fuel), compared with analysts’ expectations of a 2% rise

and growth of 0.3% in the previous quarter.

The results statement marked the first time since its acquisition of the Home Retail Group that Sainsbury’s did not issue separate

like-for-like sales data for its supermarket chain and Argos. However, the group did reveal that total grocery sales had risen by

3%, a significant improvement from the 0.3% growth the previous quarter. Whilst food inflation and new stores contributed to

the figure, Sainsbury’s stressed that the number of transactions in its stores were up 2%, with like -for-like transaction growth

in all channels.

Meanwhile, online grocery sales rose by 8%, while sales in its convenience stores unit were up 10%. Clothing sales climbed 7.2%

following growth in both stores and online. Sainsbury’s opened one supermarket and 10 convenience stores during the period.

In General Merchandise, total sales rose 1%, despite disruption from the closure of 78 Argos in Homebase and 84 Habitat in

Homebase concessions over the last year. Sainsbury’s said that Argos had continued to perform well, growing market share,

with particularly good growth in mobile, audio, tech categories and electricals and toys.

Online sales were up 10% with its Fast Track delivery (+36%) and collection service (+64%) seeing “stellar performance”,

particularly during the period of warm weather when customers wanted to buy and receive products such as paddling pools the

same day.

Year to 11 March 2017 2016 Change

Turnover (£m) 26,224 23,506 11.6%

Operating Profit (£m) 642 707 (9.2)%

Operating Margin (%) 2.45 3.01

Pre-tax Profit (€m) 503 548 (8.2)%

ROCE (%) 4.5 5.3

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RETAILER FACTFILES

RECENT DEVELOPMENTS & CURRENT ACTIVITIES

Sainsbury’s

Supermarkets: The group’s grocery chain remains at the core of the business, although up against changing shopper trends and

the revival of Tesco and Morrisons, Sainsbury’s performance has been disappointing of late. However, the group still has a strong

and differentiated food offer with a number of improvements made over the last year.

A key plank to Sainsbury’s strategy to compete with the discounters over the last couple of years has been to simplify its pricing,

replacing promotions such as multi-buys with lower regular prices. Promotional participation has decreased by almost 6% to

25%, with the group claiming this has helped attract shoppers back to its stores with total transaction numbers increasing.

The group has also completed a revamp of 3,000 of its own label products with a focus on quality and price, which helped driv e

up volumes of its core ‘by Sainsbury’s’ range by 2% last year. Meanwhile, over the course of its current financial year, the group

revealed that it will be reviewing 125 of its food ranges, which account for around 60% of its food sales. Sainsbury’s also recently

became the latest supermarket group to overhaul its alcohol range with a host of leading brands seeing some of their products

being dropped, in favour of popular craft beers and ciders.

Sainsbury’s says its strategic focus is on growing categories where it can increase market share. This has seen it invest in ranges

such ‘Deliciously FreeFrom’, tapping into the fast-growing allergen-free food market. This range doubled in size last year

incorporating new fresh, frozen, chilled and ambient lines. Meanwhile, in September the chain launched its ‘On the Go’ range of

breakfast, lunch and snacking lines with an investment of £8m. A new prepared vegetable range has also proved successful as

health-conscious customers seek alternatives to carbohydrates.

Along with its most recent first quarter results, the group said that customers had been attracted by its investment in product

innovation with 430 new and improved food products launched during the period, including over 250 new Summer eating lines.

The group added that the produce category performed particularly well, outperforming the market with volume growth of over

1%.

Recent reports have suggested that Sainsbury’s could be set to embark on a major cull of what it calls ‘commodity brands’ as part

its strategy to win back trade from the discounters . According to suppliers quoted by trade magazine The Grocer, Sainsbury’s

senior management outlined details of the group’s new differentiation strategy at a trade briefing held in conjunction with t he

IGD in June.

While Sainsbury’s stressed that it was not entering a range rationalisation process along the lines of Tesco’s Reset programme,

the retailer is reported to have indicated that there would be a “significant” reduction in the number of SKUs in its superma rket

outlets. One supplier said that Sainsbury’s had outlined that it would be assessing the “emotional functional qualities” of all its

34,000 SKUs. They added that if a brand doesn’t have an “emotional connection” with the consumer, then it was really a

commodity. Sainsbury’s is hoping to drive distinctiveness by removing duplicate products and adding new lines.

The report added that suppliers were left under the impression that for products to remain on shelf they would have to delive r

a 20% reduction in cost of goods sold. Another supplier was quoted as saying that that those that stay will have to offer a “real

underlying value, and will have to be distinctive”.

Meanwhile, Sainsbury’s has been seeking ways to fill excess space in its larger outlets. Whilst Argos and Habitat implants are

being rolled out across the chain, Sainsbury’s has also agreed to a number of concession partnerships. Most recently Sainsbury’s

linked up with food and juice bar firm Crussh, which operates 30 outlets in London. A counter operated by the firm opened in a

Sainsbury’s store in Pimlico in June this year, serving healthy meals and drinks. Initial customer response is said to have been

good with Sainsbury’s looking at rolling out the brand to other branches.

Sainsbury’s is also trialling an in-store partnership with Patisserie Valerie, selling its upmarket cakes at counters in 12

supermarkets. The group has also expanded its tie-up with Sushi Gourmet. Following a “successful” 20-store trial, Sainsbury’s

is planning to roll-out a further 30 Sushi Gourmet counters in its supermarkets by the end of the year.

Convenience: Sainsbury’s convenience chain continues to outperform its larger supermarket stores, with sales growing 6% last

year. However, the chain’s planned growth is being held back by the lack of suitable sites with Sainsbury’s planning to open just

25 of its ‘Local’ format stores this year, down from 41 last year and 66 the year before. It had once hoped to open around 100 a

year.

The group is looking for new avenues of growth for its convenience business, and is currently trialling a franchise arrangement

with Euro Garages on eight of its petrol station forecourts. Sainsbury’s is also considering offering franchise deals to independent

retailers, highlighting that such a strategy would be a lower-cost alternative to leasing or buying its own stores.

Online: The group’s online grocery operation also remains a key growth area. Orders increased by nearly 12% during the last

year with Sainsbury’s delivering around 276,000 per week. It expects demand for its online grocery service in London to double

NamNews │ July 2017 │ 42 www.kamci ty.com

RETAILER FACTFILES

over the next eight years. To help meet this growing demand, the group opened its first purpose -built online fulfilment centre

in Bromley-by-Bow, East London last September which has the capacity to fulfil 25,000 orders each week.

Meanwhile, grocery Click & Collect sites are now available at over 150 of its stores and Sainsbury’s offers same day delivery from

29 sites across the country. The group is also trialling a one-hour delivery service to over 40,000 London postcodes via its ‘Chop

Chop’ bicycle delivery service to compete with the likes of Amazon.

Cost Saving: To help fund investment in its offer, the group continues to seek ways to simplify its business. By the end of its last

financial year, the group had delivered on its target of £500m of cost savings over three years. It has now committed to finding

a further £500m over the next three years, starting this year.

As part of this efficiency drive, Sainsbury’s announced in March that it was cutting up to 400 roles as part of a shake-up of its

store operations. The group removed 400 price controllers (staff that check prices are displayed correctly on shelves) from its

operations with the task now set to be carried out by other staff. Sainsbury’s also revealed that it was cutting night shifts in 140

stores, requiring around 4,000 staff to move to either early morning or late evening shifts.

Argos

Sainsbury’s completed its acquisition of the Home Retail Group-owned Argos business in September 2016. As one of the leading

non-food retailers in the UK with an advanced online operation, Sainsbury’s is hoping to use Argos to create a dynamic business

that can capitalise on changing shopper trends.

The group has been rolling out Argos Digital stores in its supermarkets to fill excess space and make them more attractive

destinations for shoppers. Sales at such stores that have been open for over a year are said to be delivering like -for-like growth

of between 20 to 30%, with the supermarkets themselves also seeing sales uplifts of between 1 to 2%. The group now has 75

Argos Digital stores in its supermarkets, with plans to have 175 operating by the end of the current financial year and 250 by

March 2019.

Argos digital collection points are available in 142 Sainsbury’s supermarkets for customers to collect Argos orders. It is also

trialling collection points in its convenience chain. The group also plans to transform another 60 existing stand-alone Argos

stores to its new digital format, meaning that over a third of the Argos store estate will be digital by the end of the current

financial year.

As part of the Home Retail deal, Sainsbury’s also acquired the Habitat business. It now has 11 mini Habitat concessions in its

supermarkets to support the chain’s multi-channel business strategy.

Meanwhile, Argos is planning to significantly grow its own brand offer with the help of Sainsbury’s. Commercial Director Rob bie

Feather said earlier this year that Argos has been strong on brands, particularly in electricals and gadgets. However, the chain

is now focused on harnessing the design expertise of Sainsbury’s to help it gain market share in categories such as homeware.

Feather said Argos now had a “big opportunity” to develop more of its own products and would be “driving hard into home” as

part of the strategy.

Sainsbury’s expects the tie-up to deliver £160m of EBITDA synergies over three years. The synergies include the integration of

central and store support functions across the two businesses, as well as cost savings from opening Argos Digital stores in

Sainsbury’s supermarkets.

Nisa Takeover

In June this year, it emerged that Sainsbury’s had entered into exclusive talks to acquire Nisa Retail in a deal worth £130m as it

moves to counter Tesco’s planned £3.7bn takeover of Booker. This followed unconfirmed reports earlier in the year that

suggested it was mulling over a bid for Palmer and Harvey (P&H).

Nisa is a £1.3bn turnover business currently owned by around 1,300 registered members that operate ov er 3,000 independent

convenience stores across the UK. All members own shares in the business and will have a final vote on any deal. Whilst some

members believe a tie-up with Sainsbury’s could offer opportunities for growth and support in an increasingly competitive

convenience sector, others are said to be fiercely opposed, preferring to remain independent.

The supermarket group is said to have offered a number of sweeteners to win their support. This includes giving members

staggered payments over three years if they remain with Nisa. They will also be able to choose whether to remain fully

independent and have an enhanced range of own label food products or the ability to stock Sainsbury’s own brand ranges if the y

can demonstrate high store standards.

The talks have also opened the door to Sainsbury’s taking over a major supply contract with newsagent and convenience chain

McColl’s. Nisa has multiple supply contracts with McColl’s, worth some £500m a year and accounting for around 40% of its sales.

These contracts are coming up for renewal and executives from Sainsbury’s are reported to have met with McColl’s management

to discuss taking over the supply contract despite being in talks to acquire Nisa. However, Sainsbury’s faces competition for the

contract with Morrisons and the Co-op said to be involved in the talks.

NamNews │ July 2017 │ 43 www.kamci ty.com

RETAILER FACTFILES

TRADING OUTLOOK

Whilst the Argos deal has the potential to support Sainsbury’s growth in the years ahead and expand its share of the all -important

online retail market, the group is set to face some difficult times in the immediate future. The UK grocery market remains highly

competitive with Sainsbury’s facing a squeeze on several fronts. On one side, the discounters are crushing prices and stealing

market share, while Tesco and Morrisons are both in the middle of strong turnaround programmes that are leaving Sainsbury’s

trailing.

Whilst sales number will benefit from inflation, cost price pressures are likely to hit profits at a time when the City wants to see

some improvement following three years of declines. Meanwhile, the current squeeze on consumer’s incomes could also start

to hit trading at Argos, particularly demand for big ticket items.

On a more positive note, if it goes ahead, the acquisition of Nisa for a relatively sm all sum could prove a valuable asset for

Sainsbury’s in the battle for convenience shoppers.

ADDITIONAL INFO: Company website: www.about.sainsburys.co.uk

Waitrose Headquarters: 33 Holborn, London, EC1N 2HT. UK

Tel: 020 7695 6000

ANNUAL REPORT

& ACCOUNTS

Auchan Holding

The French group has had a busy year, working on expanding its existing store network

while introducing new formats and concepts. Its underlying financials remain strong, a

key factor as it prepares for a significant medium-term investment in expanding its

presence across the world.

RETAIL STORE PORTFOLIO

As of 31 December 2016, Auchan operated 3,617 outlets (hypermarkets and supermarkets), both directly and through

franchises. These include:

Western Europe: 2,585

• France (593) – 144 hypermarkets (Auchan) and 449 supermarkets (Simply Market, franchises)

• Spain (345) – 56 Alcampo hypermarkets and 289 supermarkets

• Portugal (49) – 30 hypermarkets (Jumbo, Pao de Acucar) and 19 convenience stores

• Italy (1,597) – 59 hypermarkets (Auchan, franchises) and 1,538 convenience stores (Simply Market, Lillapois,

franchises)

• Luxembourg (1) – 1 Auchan hypermarket

Eastern Europe: 472

• Hungary (19) – 19 Auchan hypermarkets

• Poland (109) – 76 Auchan hypermarkets, and 33 supermarkets

• Romania (33) – 33 hypermarkets (Auchan, Auchan City, Real)

• Russia (300) – 101 hypermarkets (Auchan, Auchan City, Raduga) and 199 Atak supermarkets

• Ukraine (11) – 11 Auchan hypermarkets

Asia: 471

• China (447) – 447 hypermarkets (Auchan, RT Mart)

• Taiwan (25) – 25 RT Mart hypermarkets

• Tajikistan (1) – 1 Auchan hypermarket

• Vietnam (8) – 8 convenience stores

Africa: 89

• Senegal (6) – 6 convenience stores

• Tunisia (81) – 81 supermarkets

• Mauritania (2) – 2 supermarket

NamNews │ July 2017 │ 44 www.kamci ty.com

RETAILER FACTFILES

KEY FINANCIALS & PERFORMANCE REVIEW

The group’s revenue was up 0.7% on a constant-currency

basis, while underlying operating profit grew by 1.3%, and

underlying net profit jumped up 18.2% to €824m.

Auchan Retail saw revenue grow by 0.7% to €51.7bn,

helped by growth in 11 of its 14 markets (in constant-

currency terms).

In France, revenue was down 0.5% to €19.2bn, whilst in

Western Europe revenue declined by 0.7% to €9.9bn.

Central and Eastern Europe saw revenues fall by 5.8% to

€9.9bn, while the Rest of the World recorded a 0.8% decline to €14.5bn.

Year to 31 Dec 2016 2015 Change

Turnover (€m) 52,820 53,814 (1.8)%

Operating Profit (€m) 1,081 1,122 (3.7)%

Operating Margin (%) 2.05 2.08

Pre-tax Profit (€m) 989 1,021 (3.1)%

ROCE (%) 4.91 5.04

RECENT DEVELOPMENTS & CURRENT ACTIVITIES

Expansion

The past year saw Auchan enter one new country, while expanding in various existing markets via acquisitions. It also ended

two existing associations as part of its aim to streamline its operations.

In June 2016, Auchan formally entered the market of Tajikistan, marking an expansion of its presence across Central Asia. The

group opened a 5,000 sq. m. hypermarket (operated by Auchan’s partner Schiever) in the capital Dushanbe. The group has yet

to say if it plans to expand its presence in the market.

That move was accompanied by the group’s continued expansion in its existing markets.

In Russia, Auchan said it would spend 20bn-30bn roubles (€295m-€442m) annually over the next few years, with the money

going towards opening new stores and revamping existing ones. Since its launch in the market, Auchan has so far invested

around 200bn roubles (€295m).

In China, its hypermarket joint venture (Sun Art Retail) unveiled plans in August 2016 to invest 1bn yuan (€135m) over two

years to boost its online operations. Sun Art added that it expects the online business to break even in the 2020-21 fiscal year.

In Ukraine, the group acquired local hypermarket chain Karavan in June 2017. Karavan operates nine hypermarkets in the

country, and will add to Auchan’s existing 11 local stores. The deal will also see the French group expand its reach to nine cities,

from its existing five.

And finally, in Hungary, Auchan is set to open its first supermarket (in August) in an attempt to establish a presence where it

cannot open hypermarkets. The group also plans to open 30 hypermarkets and 30 franchise stores nationwide over the next

five years, while expanding its online operations.

Format Development

Auchan continues to work on introducing new store formats and tweaking existing ones, as it looks to keep up with consumer

trends and attract more shoppers.

Several of those moves involved the group’s operations in Russia. In October 2016, Auchan said it would phase out the Atak

banner in Russia, and rebrand all such stores to its namesake banner. Russia is the last market in which the Atak banner operates,

and the conversion of all the stores will take place by May 2018. Auchan said the move will not only be “a change of signage” but

also involve a “change of concept”, with the stores being revamped to diversify the product offer. Auchan also said it plans to

add 20 new outlets to the format over the next year, and from 2018, will look to open 35 -40 supermarkets annually.

The group also decided to rename its Nasha Raduga (‘Our Rainbow’) hypermarket banner, announcing the move in June 2017.

Auchan will initially rename one store in Kovrov to the ‘Kashy Den’ (‘Every Day’) banner, which is also the name of it s local

budget own label range, and if successful, will rebrand all the remaining Nasha Raduga stores. Auchan said the move is expected

to help the store attract more customers, as the Kashy Den brand is already known to the general public.

Those rebrandings were accompanied by the continued roll-out of existing store formats into new markets.

In August 2016, Auchan announced plans to launch the ‘Lillapois’ drugstore banner in Russia. The first such store was a 200 sq.

m. store located in a Moscow shopping centre, which stocked around 7,500 items. The group plans to invest 400m roubles in

adding 20 more stores by the end of 2017, although it has not offered details on any investment plans beyond that.

In November, Auchan opened a new convenience store format in France called ‘MyAuchan’, aimed at urban and on-the-go

shoppers. The first such store opened in Paris, covering just under 300 sq. m. of space and stocking 5,500 products, with a focus

on seasonal, organic, local, and dietary items. The new format offers an eating area (which includes a coffee machine, a water

NamNews │ July 2017 │ 45 www.kamci ty.com

RETAILER FACTFILES

fountain, and a microwave), a kiosk which offers access to Auchan’s online shops, lockers where packages can be picked up,

newspapers and wifi.

Encouraged by the initial success of the format, the group then launched MyAuchan in Portugal, with the opening of two stores

in April, with plans to open four more by the end of 2017. And in May, the group launched MyAuchan in Italy, with an opening

in Piacenza. And finally, in Romania, the group announced plans to open MyAuchan stores at fuel stations operated by OMV

Petrom. The first such stores began rolling out in May, and there are plans to have 15 stores operational by end -2017.

Tie-Ups

Auchan had a busy year in terms of its tie-ups with peers and service providers, moving out of some partnerships while entering

into several others, both in France and internationally.

In June 2016, Auchan and Système U announced that they had dropped plans to swap stores in France belonging to their

individual banners. The deal had become the focus of an expanded probe by the French competition regulator, and the two

groups decided that it was “too complex to roll out in the short-term”, adding that they will now only focus on their existing

buying alliance.

In December, Auchan ended its association with the ‘Little Extra’ banner in France, having sold its stake to founder and CEO

André Tordjman. At the time, Little Extra operated 19 stores across the country, specialising in home products sold at cheap

prices, as well as a small grocery offer. It also has shop-in-shop corners at Auchan hypermarkets, mostly selling its own label

offer.

And in January, the Auchan-Sma grouping ended its purchasing tie-up with the Sisa buying group in Italy. The two sides had

entered into an agreement in January 2015, which was set to last until 2019 and result in joint purchasing of more than €8bn.

The new tie-ups made by the group largely focused on improving its purchasing operations and its digital marketing.

In July 2016, Auchan partnered with HookLogic (which offers performance marketing for brands) to help boost its French online

site. The tie-up offers brands “high performing advertising opportunities” on Auchan.fr, in the form of sponsored products,

native product ads on retail websites, and allowing brands to leverage real-time targeting to reach the highest intent shoppers.

The deal made Auchan the first French retailer to partner with HookLogic.

In the same month, Auchan China announced a deal with digital intelligence firm Keyrus, in a move aimed at boosting its online

shopping platform in the Asian market. Keyrus has used SAP’s hybris solution to introduce “new payment methods” for Auchan

China, while also “putting in place connectors with the major marketplaces in China”. Additionally, Keyrus is working to improve

Auchan’s click & collect capability, and expand the Auchan Wine platform (by connecting it with the Feiniu and Tmall

marketplaces).

In September 2016, Auchan announced a new purchasing partnership in France with Boulanger, a specialist in the local

household electrical goods and multimedia market. The partnership covers the negotiation of purchases of white, brown and

grey household electrical goods manufactured by national and international brands aimed at the French market. Auchan granted

Boulanger the mandate to negotiate on its behalf, beginning with the commercial terms for 2017 (excluding retailers’ own

brands), which got underway in October 2016. The tie-up involves an estimated business volume of more than €2.1bn (excl.

tax), making it the second-largest such deal in France.

And in October, Auchan signed a purchasing partnership with Parashop, covering the negotiation of purchases with all over-the-

counter pharmaceutical product suppliers for Auchan’s retail activities in France. Parashop is France’s leading OTC pharmacy

network, with 64 stores in France and 4 stores in Italy. The agreement saw Eurauchan – Auchan Retail’s purchasing centre in

France – granting Parashop the mandate to negotiate on its behalf. The deal, which was also effective for the negotiations on

commercial terms for 2017, is expected to get both groups “obtain the best market terms across all product categories.”

Logistics

In October, Auchan signed an agreement to build a new warehousing and logistics centre in the Moscow region, which will be

the biggest single-user building in Europe. The facility, which will cover a total area of more than 138,000 sq. m., will be built on

an investment of around 6bn roubles and will create more than 750 new jobs. The centre will be constructed using advanced

technologies and has a planned capacity to handle loading and unloading of more than 230 trailers simult aneously, and will

service more than 50 Auchan stores in the region.

In November, Auchan launched trials of a new robotic shopping trolley in France, aimed at helping customers who suffer from

limited mobility. The ‘wiiGO’ trolley is linked to an electronic ID badge to be carried by customers, and as long as they stay within

a 1.5 metre radius of the trolley, it will follow them automatically. Auchan trialled the system for a month, and is considering

future options (including larger trolleys) based on customer feedback.

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RETAILER FACTFILES

In March 2017, Auchan kicked off a unique new promotional campaign, which saw it offer a basket of 60 SKUs at the same

discounted price in 14 countries. The ‘Ça Va Booster!’ campaign saw Auchan offer deep discounts on the products, which were

available at 4,000 of its stores.

And in June 2017, Auchan France deployed the latest version of the Reflex TMS solution by Hardis Group, enabling it to drive the

execution of its transport operations in real time.

Executive Changes

The past year saw a small number of high profile changes to Auchan’s executive team across the global.

In November 2016, Auchan announced the resignation of Jean Patrick Paufichet as CFO. Paufichet, who left the group, was

succeeded by Jean Chausse, then Deputy CFO.

Then in February 2017, Auchan announced that Vianney Mulliez would be stepping down as Chairman of the Board after 11

years in the post. Mulliez was succeeded in March by Régis Degelcke. The move was termed part of the group’s ‘Vision 2025’

project, with Auchan saying Mulliez “felt it was time for Auchan Retail to take a new direction in the years ahead”.

In May, Auchan announced the departure of Shen Hui, GM of its China unit, effective immediately. Shen, who had been with

Auchan since 1999, was made GM in February 2016. Vincent Mignot, Auchan’s director of innovation, took over the post and

Stephane Boennec, former GM of e-commerce for Auchan China, was made GM of the client and innovation department.

And finally, in July, announced the appointment of new Executive Chairmen for its Russian and Chinese operations.

TRADING OUTLOOK

Auchan is clearly eager to expand its operations, and has announced moves to grow gradually in most of its markets. It also

continues to work on tweaking its store concepts to keep in touch with changing consumer demands, as can be seen by its push

to roll out the MyAuchan c-store format in various countries. The various tie-ups in the past year to push its digital presence and

marketing also offer signs of its priority areas for the immediate future. The success of even some of these initiatives will only

help to further consolidate Auchan’s presence in the global market.

ADDITIONAL INFO: Company website: www.groupe-auchan.com

Headquarters: 40, avenue de Flandre – BP 139, 59964 Croix Cedex – France

Tel: +33 (0)3 20 81 68 00

ANNUAL REPORT

& ACCOUNTS

Companies in this Issue

The NamNews Team

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Assistant Editor Fabian Panthaki

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ISSN 1357-4418

7-Eleven ............................................................... 33

A.S. Watson ................................................... 20, 33

Admiral Taverns ................................................ 17

Agrokor ................................................................ 27

Ahold ..................................................................... 31

Aldi ......................................................... 4, 5, 22, 29

Alibaba .................................................................. 35

Amazon ............................................ 13, 30, 33, 36

Appleby Westward ........................................... 14

Asda ......................................................................... 5

Auchan .................................................................. 43

B&M ....................................................................... 18

Bestway ................................................................ 14

Booker ......................................................... 8, 9, 16

Boots .............................................................. 19, 20

Bricorama ............................................................ 28

Bunnings .............................................................. 18

Campbell Soup ................................................... 38

Coles ...................................................................... 32

Costco .................................................................... 28

Dairy Farm .......................................................... 33

Danone .................................................................. 39

Dansk .................................................................... 27

DIA ......................................................................... 30

eBay ....................................................................... 21

Edeka..................................................................... 29

Esselunga ............................................................. 29

Geant ..................................................................... 32

GlaxoSmithKline ................................................ 24

Holland & Barrett .............................................. 20

JDE .......................................................................... 38

Kesko .............................................................. 27, 28

Lactalis .................................................................. 39

Lawson .................................................................. 34

Lidl .................................................................... 6, 36

MAF ........................................................................ 32

Magnit ................................................................... 30

McColl’s................................................................... 7

Mercadona ........................................................... 30

Morrisons ............................................................... 6

Musgrave .............................................................. 22

Nestlé ...................................................... 24, 38, 39

Nisa ................................................................. 14, 15

Ocado ..................................................................... 21

One Stop ............................................................... 15

Oriola ..................................................................... 27

Parfetts ................................................................. 16

Picard .................................................................... 28

Premier Foods .................................................... 25

Reckitt Benckiser............................................... 25

Rewe ............................................................... 27, 29

Rite Aid ................................................................. 37

S Group ................................................................. 28

Sainsbury’s .......................................... 7, 8, 14, 40

Savers ................................................................... 20

Seabrook Crisps ................................................. 25

Sears Canada ...................................................... 35

Shinsegae ............................................................. 34

Shoprite ................................................................ 34

Sligro ..................................................................... 31

SPAR ...................................................................... 27

Staples .................................................................. 36

Stockmann ........................................................... 28

Subway ................................................................. 17

Superdrug ............................................................ 20

Tata ........................................................................ 33

Tayto ..................................................................... 25

Tesco ....................................... 8, 9, 10, 15, 23, 33

Tim Hortons ........................................................ 17

TuoDi .................................................................... 30

Waitrose ............................................................... 11

Walgreens Boots Alliance ............................... 37

Walmart ........................................................ 35, 37

Wessanen............................................................. 24

Whole Foods Market ........................................ 13

Woolworths Ltd .......................................... 32, 34