Prepared by Planet Retail | April 2005 THE UK DISCOUNT SECTOR – TRENDS & IMPLICATIONS.

Prepared by Planet Retail | April 2005

THE UK DISCOUNT SECTOR – TRENDS & IMPLICATIONS

THE UK DISCOUNT SECTOR – TRENDS & IMPLICATIONS

2004-012

| e-intelligence on global retailing - www.planetretail.net Source: M+M Planet Retail Ltd

West European Outlet Trends

2004-013


Discount Stores

Number of discount stores in Europe by country, 2004 (% of total)

Germany43%France

10%Spain10%

UK4%

Italy5%

Norway5%

Others23%

Denmark4%

France4%

Norway5%

UK8%

Others14%

Germany65%

Number of discount stores in Europe by country, 1992 (% of total)

3

The UK has seen its status as a discount market increase in recent years

2004-014


Channel Development for Key Grocery Formats, 2004-2009 – Number of Outlets (W Euro)

25,359

6,455

1,604

59,795

31,328

64,432

27,041

65,047

1,752

36,545

63,399

7,160

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Hypermarkets &superstores

Supermarkets &Neighbourhood

stores

Discount stores C-stores &Forecourts

Cash & carriesand warehouse

clubs

Drugstores &pharmacies

Nu

mber

of

Ou

tlets

2004 2009Growth will continue over the next five years

4

2004-015


100

120

140

160

180

200

1999 2004 2008

181.8 Convenience & forecourt stores

179.9 Cash & carries

173.4 Hypermarkets & superstores

151.5 Supermarkets & neighbourhood stores

186.6 Discount Stores

European Market Developments by Channel, Leading Retailers (indices)

Leading retailers are planning to grow discount formats faster than others

5

2004-016


Discount StoresDiscount store numbers in Europe, 1992 - 2008 (no. of stores)

Discount StoresDiscount store numbers in Europe, 1992 - 2008 (no. of stores)

14,434

32,560

39,362

0

10,000

20,000

30,000

40,000

50,000

1992 2004 2008

The European discount channel will continue to see growth in store numbers…

6

2004-017


Discount SalesDiscount Store Sales in Europe, 1992-2008 (EUR mn; incl. sales tax)

Discount SalesDiscount Store Sales in Europe, 1992-2008 (EUR mn; incl. sales tax)

42,826

109,624

137,743

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1992 2004 2008

…with sales to approach EUR140 billion…

7

2004-018


Discount ShareDiscount Store Market Shares in Europe, 1992-2008 (% of modern grocery distribution sales)

Discount ShareDiscount Store Market Shares in Europe, 1992-2008 (% of modern grocery distribution sales)

7.0%

10.0%

10.8%

0%

2%

4%

6%

8%

10%

12%

1992 2004 2008

…and market share set to hit 11%.

8

2004-019


Number of New Stores, 2004-2009Discount Stores

-400 -200 0 200 400 600 800 1,000 1,200 1,400

Norway

Luxembourg

Iceland

Netherlands

Ireland

Switzerland

Portugal

Belgium

Denmark

UK

Finland

Greece

Sweden

Austria

Italy

Spain

France

Germany

The UK will continue to see reasonable discount channel growth, although it will be outpaced by more discount-centric markets.

9

2004-0110


Discount StoresDiscount Stores

No. of discount stores in Europe by country (no. of stores, 2004)

5

8

10

29

3240

46

71

75

88

153

392

395

425

429548

575

605

614

970

985

1,271

1,333

1,6301,711

3,331

3,385

SI

RU

LU

SK

LV

UA

RO

LT

IE

EE

SE

CZ

GR

FI

HU

CH

PT

NL

BE

AT

DK

PL

UK

IT

NO

FR

ES

DE 14,407

Although it is home to a reasonable number of discount stores, the UK lags other markets by a massive margin.

10

2004-0111


Discount StoresDiscount Stores

Food market share of discounters in Europe, 2004 (discounters’ food sales as % of modern grocery distribution, grocery sales)

35.1

27.6

18.8

15.8

14.1

12.5

9.88.9 8.5 8.4

7.77.2

6.5 6.2 6.15.2

3.7 3.5 3.3 3.2 2.92.4 2.3

1.3 1.3 0.8 0.4 0.3 0.1

NO DE AT DK EE HU PT BE ES CZ AV. LT NL FR PL GR IT UK CH LU FI IE RO SE UA LV SK SI RU

Due to slow growth and low consumer enthusiasm for discount stores, market share has remained lower than average in the UK.

11

2004-0112


Discounting in the UKKey Trends & Major Players

12

2004-0113


Key Trends

Hard discounting has been slow to take off in the UK, as mainstream grocery retailers have introduced economy private label ranges (benchmarked in price against the discounters)

The British shopper has been reticent in exploiting the discount channel, preferring instead the tidier supermarkets with their well-known brands

Consumer acceptance of discounters will increase over time

Immigration – from Eastern & Central Europe in particular – will drive traffic within the hard discount channel

Manufacturers are slowly being impacted by the channel as its key players demand shelf-ready or pallet-mounted product

13

2004-0114


Key Trends

Soft discounter Kwik Save is set to continue its decline. Post-merger problems and ongoing portfolio rationalisation have seen it significantly shrink

Aldi and Netto are set for dramatic growth, actively seeking out hundreds of new stores between them

Future growth will focus on regions such as Scotland, Wales and Northern England

The growth of discounters will see product mix shift from brands towards private label products

14

2004-0115


Growth Trends – Store Numbers

Discount Store Numbers, 1999-2009

1,313 1,3471,382 1,408 1,374

1,280 1,3251,375

1,4401,500

1,565

0

200

400

600

800

1,000

1,200

1,400

1,600

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Store numbers to resume upward trend after Kwik Save slimming is complete

15

2004-0116


Growth Trends – Total Sales Area

Discount Store Sales Area (‘000 m2), 1999-2009

983 992

1,046 1,069 1,043983 1,025

1,0731,136

1,1851,237

0

200

400

600

800

1,000

1,200

1,400

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Similarly, sales area will resume upward progress as rivals take up Kwik Save slack

16

2004-0117


Growth Trends – Average Sales Area

Discount Store Average Sales Area (m2), 1999-2009

749

736

757 759 759

768773

780

789 790 791

700

710

720

730

740

750

760

770

780

790

800

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Average store size will increase to extend product offers and improve the instore environment

17

2004-0118


Growth Trends – Retail Banner Sales

Discount Store Retail Banner Sales (GBP mn), 1999-2009

4,323 4,249

4,636 4,7264,872

4,675 4,691

5,1035,454

5,8346,253

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Retail sales through the discount channel are poised to exceed GBP6 billion by 2009.

18

2004-0119


Growth Trends – Market Share

Discount Store Market Share (%), 1999-2005

5.61

4.95

5.07

4.94

4.76

4.64

4.31

4

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

5.8

6

1999 2000 2001 2002 2003 2004 2005

Slow growth and Kwik Save downsizing has seen sectoral market share slide

19

2004-0120


755

235200

123

0

100

200

300

400

500

600

700

800

Kwik Save Aldi Lidl Netto

Leading Players - 1999

Leading Discounters by Stores, 1999

Kwik Save ended the 1990s with a clear advantage over its German/Scandinavian rivals.

20

2004-0121




By 2004, Lidl had overtaken Aldi and had closed the gap on the shrinking Kwik Save.

21

520

330290

140

0

100

200

300

400

500

600

Kwik Save Lidl Aldi Netto

2004-0122


470455

380

260

0

50

100

150

200

250

300

350

400

450

500

Aldi Kwik Save Lidl Netto



Growth plans suggest that Aldi will take top spot in outlet numbers by 2009.

22

2004-0123


2,218

890

738

477

0

500

1,000

1,500

2,000

2,500



Leading Discounters by Sales (GBP mn), 1999

Kwik Save enjoyed clear market leadership in 1999.

23

2004-0124




By 2004, Lidl had leapfrogged Aldi.

24

2,218

890738

477

0

500

1,000

1,500

2,000

2,500


2004-0125


1,906

1,735

1,545

1,067

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Aldi Lidl Kwik Save Netto



Aldi is on track for sector leadership.

25

2004-0126


1.161.09

0.96

1.31

2.88

1.36

0.62

0.95

0

0.5

1

1.5

2

2.5

3

Aldi Lidl Kwik Save Netto

1999 2005

Leading Players

Top Discounters by Market Share, 2005 (% of MGD grocery sales)

26

2004-0127


Leading Players – Kwik Save

Website: www.kwiksave.co.uk

Retail sales, 2004: GBP1,748 million

No. of stores, 2004: 520

Average sales area: 738 sq. m.

Five-year growth rates, 2000/04

No. of stores: -29.2%

Retail banner sales: -11.5%

Market share 2004: 1.73%

27

2004-0128


Leading Players – Kwik Save

28

2004-0129


Leading Players – Lidl

Website: www.lidl.co.uk





No. of stores: 32.0%

Retail banner sales: 48.5%


29

2004-0130


Leading Players – Lidl

30

2004-0131


Leading Players – Aldi

Website: www.aldi-stores.co.uk








31

2004-0132


Leading Players – Aldi

32

2004-0133


Leading Players – Netto

Website: www.netto.co.uk

Retail sales, 2004: GBP536 million







33

2004-0134


Leading Players – Netto

34

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Prepared by Planet Retail | April 2005 THE UK DISCOUNT SECTOR – TRENDS & IMPLICATIONS.

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Transcript of Prepared by Planet Retail | April 2005 THE UK DISCOUNT SECTOR – TRENDS & IMPLICATIONS.