Your Weekly FMCG News Update!

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

Stephen Hall

Friday 5th August

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

• Morrisons ramps up ‘Price Crunch’ campaign with another 1,000 cuts• Sainsbury’s to expand presence in China• Wickes owner reports strong first half growth• Shop prices continue to fall but at slower rate• Irish grocery sector gets kick from Euros; Dunnes closing in on Tesco• Warmer weather and school holidays boost sales at Waitrose• Waitrose opens first cashless store• Study suggests self scan technology is promoting supermarket theft• Which? calls on supermarkets to offer more promotions on healthy food• P&G beats sales estimates in 2016• High street sales flat as discounting fails to spark revival• Kerry Group posts solid half year results amid “challenging” market conditions• Beiersdorf H1 results hurt by wet summer

Weekly News Summary – 1st August 2016


Morrisons Ramps Up ‘Price Crunch’ Campaign With Another 1,000 CutsAmid concerns that the Brexit vote could lead to higher food prices, Morrisons has announced another round of cuts as it strives to win back customers from the discounters.

The chain has lowered the cost of 1,045 products from today as part of its ‘Price Crunch’ campaign launched earlier this year. The cost of toiletries, seasonal produce and meat are being lowered with some reductions of up to 56%.

The referendum vote to leave the EU has led to concerns that grocery prices will rise as the fall in the value of the sterling pushes up the cost of imported products and ingredients.

Commenting on today’s price cuts, Andy Atkinson, Morrisons’ customer and marketing director, said: “We are constantly listening to our customers and know they are concerned about whether food prices will go up following the Brexit vote, especially on imports.

“Morrisons is unique as a food-maker and shopkeeper, and unlike the rest of the industry manufactures food, both in our own food processing plants and our 500 stores.

“We are British farming’s biggest supermarket customer, which means we can better control our prices, and this latest round of crunches demonstrates our commitment to offering the best possible value to our customers this summer.”

Source: NamNews 1st August 2016


Sainsbury’s to expand presence in ChinaSainsbury’s is ramping up its Chinese presence by doubling the number of products it sells there and expanding its trial with Tmall Global.

The UK’s second largest supermarket retailer is set to sell 100 products via China-based online retailer Alibaba, such as tea bags, coffee and pasta, due to “increasing demand”.

“Chinese online shoppers are increasingly demanding high-quality international products,” Sainsbury’s chief financial officer John Rogers said.

“Many customers also want to replicate tastes and occasions that they have enjoyed or heard about through international travel.

“Products to make a British breakfast and English afternoon tea have therefore proved hits.”

Sainsbury’s relationship with Tmall started in September last year, joining several British retailers, including Burberry, ASOS and fellow grocers Waitrose, which sell products on Royal Mail’s online, Alibaba-owned website.

“Our trial with Tmall has enabled us to learn a lot about China’s huge digital market, including the importance of sales events such as Singles’ Day,” Rogers said.

“Alibaba’s expertise in this rapidly growing market will be a huge asset to us as we grow and develop our business in China.”

Sainsbury’s once had plans to open stores in China, sending a small team of six to explore the possibilities there in 2010. It never eventuated.

Source: Retail Gazette 1st August 2016


Wickes Owner Reports Strong First Half GrowthTravis Perkins has posted robust first half sales and profit growth, helped by strong performance at Wickes, Toolstation and Tile Giant.

In the six months to 30 June, the consumer retail division saw total sales grow 10.5% to £766m with like-for-like sales up 6.5%. Operating profit rose 7.3% to £44m.

The group does not break down performance by individual chain but said that both Wickes and Toolstation recorded market leading like-for-like sales growth, with both gaining significant share.

In Wickes, the roll out of a new store format continued with 14 stores refitted, one new store opened and one store relocated. There are now 32 new format stores in the network of 236 shops, with the group saying that all were meeting or exceeding expectations. The programme to roll out further new formats will continue in the second half of the year.Meanwhile, Toolstation opened 16 new stores in the UK, and an additional five new stores in the Netherlands. The group said that strong returns generated from these investments meant that the store network expansion programme will continue.

For the Travis Perkins Group as a whole, which also includes general merchanting, plumbing and heating, and a contracts divisions, revenue increased by 5.8% to £3.11bn with like-for-like sales up 3.1%. Pre-tax profit rose 10.7% to £176m.John Carter, Chief Executive Officer, said: “The solid performance in the first half of 2016 reflects our leading market positions, the hard work of our teams and the investments we have been making to improve all aspects of our business. The investments to extend our range, build out our distribution infrastructure, expand our network and accelerate our online growth have helped us continue to win market share and to position us well for the future. We plan to continue to invest in our businesses where we can generate strong returns and create value for our shareholders over the long-term.He added: “It is clear that the result of the EU referendum has created significant uncertainty in the outlook for our end markets and we did experience weaker demand in the run up to and immediately following the referendum. Our two-year like-for-like sales in July have been below the levels we experienced in the second quarter, however we have seen a gradual improvement through the course of the month. In our view it is too early to precisely predict end market demand and we will continue to monitor the lead indicators we track and will react accordingly.”

Source: NamNews 2nd August 2016


Shop Prices Continue To Fall But At Slower RateData from the latest BRC-Nielsen Shop Price Index showed the cost of consumer goods continued to fall in July with a 1.6% decline. However, the figure was less than June’s fall of 2% and the slowest rate since August last year, suggesting that price pressures may be building following the Brexit vote and subsequent fall in the value of Sterling.

Non-food deflation decelerated to 2.2% in July from 2.8% in June, whilst food deflation remained at 0.8% for the second consecutive month. Both the fresh and ambient food categories saw prices fall in the period.

The BRC said the figures meant that shoppers had now seen 39 consecutive months of falling prices, driven down by intense competition between retailers. However, Helen Dickinson, Chief Executive of the BRC, hinted that things could change in the months ahead. She said: “While we may have become accustomed to prices falling, it’s worth noting that this month’s figures have seen the rate of deflation decelerate.

“It’s too early to say if this is the beginning of the end of sustained price deflation or whether pressures in the wider economy could merely mark the end of the beginning.”

Meanwhile, Nielsen’s head of retail insight Mike Watkins suggested that the tough trading conditions will remain for the foreseeable future. He said: “With unpredictable weather and a change to consumer sentiment underway, we have seen retailers cut prices or increase promotional activity in the last few weeks to help top line sales growth, so it`s of no surprise that shop price deflation is lower in July than in any other month this year.

“Once again it is clear there is currently no inflationary pressure coming from retail and discounting looks set to be a catalyst to stimulate demand in the coming months.”

Source: NamNews 3rd August 2016


Irish Grocery Sector Gets Kick From Euros; Dunnes Closing In On TescoThe latest supermarket share figures from Kantar Worldpanel in Ireland, for the 12 weeks to 17 July 2016, show that Euro 2016 contributed to a 3.3% sales boost for the grocery market compared with last year, as fans stocked up on alcohol, soft drinks and snacks to watch the matches.

David Berry, director at Kantar Worldpanel, explained: “Ireland’s involvement in the Euro 2016 certainly looks to have had a positive impact for the major supermarkets. Alcohol sales over the past 12 weeks are 11% higher than the same time last year, as consumers stocked up more often and bought more each time they shopped. Soft drinks, confectionery, crisps and snacks all also saw positive sales growth as football fans made the most of the opportunity to treat themselves.”

SuperValu maintained its position as the number one retailer in Ireland with its market share edging up to 22.5% after its sales grew 3.4%, slightly ahead of the market.

Meanwhile, it was a relatively disappointing period for second-placed Tesco with its market share falling to 21.9% following a 1.9% dip in sales. With a market share of 21.3%, third-placed Dunnes Stores edged closer to Tesco after experiencing another period of strong growth, with larger shopping trips helping boost its sales by an impressive 6.5%.Lidl remained the fourth largest supermarket with an 11.9% share of the market, an increase of 0.2 percentage points year-on-year. Aldi’s market share remained at 11.2% but sales rose 3.7% – a significant improvement from March of this year when the discounter’s growth stood at just 0.8% and its was losing shoppers.

Berry added: “The strongest growth we’ve seen this period has actually been from the smaller retailers, which together increased sales by 6.8%. This has been boosted in particular by bargain stores such as Dealz, a strong period for Iceland and an increase in cross-border shopping. Iceland and bargain stores have both felt the benefit of expanding their store estates, while the drop in the value of sterling has made cross-border shopping more appealing. While all three of these phenomena remain small, they have contributed to an impressive combined €14m sales increase.”

Meanwhile, Kantar Worldpanel’s data showed that grocery market inflation stood at 2.6% for the 12-week period.



Warmer Weather And School Holidays Boost Sales At WaitroseSales at Waitrose rose a healthy 4.4% to £125.84m in the week to 30 July, boosted by the warmer weather and school holiday activities.

The chain said that baking was proving a popular way of keeping children entertained during the school holidays. Supported by strong promotional activity, sales in the category rose by more than 21%.

Picnic foods also saw significant sales uplifts with Waitrose’s Food to Go range up by 14%, while salads and prepacked delicatessen both saw sales increases of 11%.

The group added that its new Omega 3 enriched chicken continued to produce strong week on week sales since its launch this summer with sales up by almost 6%.

The week concluded the first half of Waitrose’s financial year with sales up by 2.6% for the period as a whole.As sister chain John Lewis, sales rose by 3.4% to £76.62m, boosted by strong uplifts in the fashion (+7.9%) and electricals categories (+10.5%). However, sales in its home department slipped 7.2% as shoppers focused on the warmer weather rather than making big ticket purchases.



Waitrose Opens First Cashless StoreWaitrose has become the first major supermarket to operate a cashless store after opening in Sky’s new flagship head office building at its campus in Osterley this week.

Waitrose, Sky Head OfficeFirst announced back in March, it is the first Waitrose to open on a workplace campus in almost 20 years and at 1,400 sq. ft. becomes the second smallest store in the retailer’s estate.

The little Waitrose branded shop is located inside Sky’s new office building – Sky Central – which will be home to more than 3,500 staff. Sky employees are only able to pay by card or through their mobile devices at one of the five self-service checkouts in the store.

Waitrose opened its only other office based store in 1998 – a 520 sq. ft. shop at British Airways’ Waterside headquarters in Harmondsworth.

The retailer met with groups of Sky employees to determine what they would like to see in their new store. There is a focus on evening meals and food to go, including fresh sandwiches, wraps and sushi, as well as a selection of fresh produce and ingredients, celebration cakes, freshly cut flowers and store cupboard staples. Bread and croissants are baked each day, too.

Travel accessories and mini health and beauty range are also be available for those needing to travel at late notice or choosing to take advantage of the on-site gym.



Study Suggests Self Scan Technology Is Promoting Supermarket TheftWith self-service checkouts and Mobile Scan and Pay Technology (MSP) becoming every more prevalent in supermarkets, a new study suggests these systems are making it easier for people to steal and reduces their perception of the legal consequences.

Among the findings of the report is that the sense of risk perception felt by customers is reduced when using MSP, as human interaction is removed from the shopping process. MSP also gives offenders ‘ready-made excuses’ for non-scanning behaviour, such as blaming faulty technology, problems with product barcodes or claiming that they are not technically proficient.

The report was authored by Professor Adrian Beck and Dr Matt Hopkins from the University of Leicester Department of Criminology. Professor Beck said: “Both loved and loathed by consumers, with the phrase ‘unexpected item in the bagging area’ striking dread into many a shopper, self-scan technologies are growing in use and likely to become even more prominent as we begin to be encouraged to use our own mobile devices to both scan and pay for products in the stores we visit.

“From the retailers’ perspective, the benefits seem obvious – less investment required in staff and checkout technologies, with the former being the biggest expense they face. For the shopper it could mean the end of checkout queues as product scanning and payment can in theory be performed anywhere in the store at their convenience. To borrow a well-warn Top Gear phrase, ‘what could possibly go wrong’?

Among the key findings of the report were that:

• MSP promotes ease of effort for theft by removing human contact in the shopping process• The sense of risk perception is reduced as all elements of the customer journey can be completed without human interaction• MSP gives offenders ‘ready-made excuses’ for non-scanning behaviour – including blaming technology or lack of proficiency with MSP• It is difficult for retailers to identify whether customers intended to non-scan items or if they were simply absentminded or poor at

scanning items consistently• Available data indicated that self-scanning technologies generated significantly high rates of loss, more than 122% higher than the

average rate of loss• Retailers could find themselves accused of making theft so easy that some customers who would normally – and happily – pay are

tempted to commit crime, especially when they feel ‘justified’ in doing it

Dr Hopkins commented: “Retailers are becoming aware of these problems and introducing ways of ‘amplifying’ risk in the mobile scan and pay environment, trying to ensure that all that ends up in the basket also makes it onto the receipt.

“All innovations in retailing are a business choice – hopefully done to make the shopper happier and the business more profitable. But those same choices can also produce negative outcomes as well, such as increased opportunities for losses to occur.”

Source: NamNews 4th August 2016


Which? Calls On Supermarkets To Offer More Promotions On Healthy FoodConsumer group Which? has called on supermarkets to offer more promotions on healthier foods to assist in the battle to curb obesity in the UK.

The call comes after research carried for Which? found that supermarkets currently have more promotions on less healthy food and drink. Data collected by mySupermarket on the number of promotions across the major supermarkets between April and June this year, found that of the 77,165 promotions where nutritional data was available, 53% were on less healthy foods compared to healthier products (47%).

When comparing different food groups, Which? found that 52% of confectionery was on offer compared to only around a third of fresh fruit and vegetables (30% and 34% respectively). 69% soft drinks that would fall under the higher sugar band category (more than 8% sugar) of the Government’s proposed sugar tax were also on promotion.

In a separate survey, Which? found that 29% of shoppers find it difficult to eat healthily as they think healthier food is more expensive than less healthy food. This was the top reason given for not eating more healthily.

51% said supermarkets should include more healthier choices in promotions to make it easier for people to choose healthier food. This was the top action people wanted from supermarkets, followed by making healthier options cheaper (49%) and making foods with less fat, sugar and salt (49%).

In a snapshot study of supermarkets, high street stores, clothes shops, chemists and toy shops in May, Which? also found that confectionery and other unhealthy snacks and fizzy drinks were still being promoted at the checkout.

Which? is calling for retailers to include more healthier options in their price promotions and remove less healthy foods from their checkouts. It added that the Government should also publish its Childhood Obesity Strategy as soon as possible and, as part of a range of measures, hold retailers to account for the promotion of less healthy foods if they fail to improve.

Alex Neill, Which? Director of Campaigns and Policy, said: “Everybody has to play their part in the fight against obesity and people want supermarkets to offer more promotions on healthier foods and yet our research found the opposite.“It’s time for supermarkets to shift the balance of products they include in price promotions and for all retailers to get rid of temptation at the till by taking sweets off the checkout.”



P&G beats sales estimates in 2016• Organic sales up 3% and beauty sales up 1%• Net sales hit $16.1bn, down 3% on 2016

Sales of beauty products at P&G have increased 1% in 2016 compared to 2015. David Taylor, Chairman, President and CEO at P&G, said that 2016 was a positive one for the company.

In an official statement, Taylor said: “We grew organic volume and sales in all reporting segments. We increased investments in innovation and advertising, funded by strong productivity improvement.”

The company said that increased organic sales in skin and personal care were largely driven by the SK-II brand. This partially offset lower sales at Olay, which has not performed as well.

Sales in hair care were mostly unchanged, despite increased sales of Pantene and Head & Shoulders products. P&G said that an innovation-led sales increase for these brands was offset by a decline in sales of its other hair care brands.Sales of the Fusion FlexBall shaving brand remained strong in developing markets but was offset by competition in North America.

Innovation in baby care also helped increase organic sales but a decline in Mexico offset volume growth in the US after the discontinuation of selected product lines.

Total sales reached $65.3bn, down 8% on 2015 but this includes the negative impact of fluctuating foreign exchange rates.

Last year, P&G agreed to sell most of its beauty and personal care business to rival Coty for $12.5bn. The company is now said to be focusing on a smaller selection of core brands, including Gillette, Herbal Essences, Olay, Venus, Aussie and Head & Shoulders.

P&G now expects to see organic sales grow 2% in 2017 with the impact of foreign exchange rates and brand divestitures. The company plans to increase spending on advertising in the coming year with a focus on in-store and trialing.

Taylor added: “We expect fiscal 2017 to mark another significant step toward our goal of balanced growth and value creation and total shareholder return in the top third of our competitive peer group.

Source: Cosmetics Business 4th August 2016


High Street Sales Flat As Discounting Fails To Spark RevivalRetail sales in July narrowly missed falling into negative territory but only through widespread discounting which inevitably will hit margin and retailers’ profits, according to figures released today by BDO.

Despite stores’ attempts to lure in shoppers with extended sales that offered discounts as high as 70%, BDO’s monthly High Street Sales Tracker (HSST) recorded no growth (0%) in overall year-on-year sales for July. The figures confirm a sixth successive month without growth for Britain’s embattled retailers.

Sales of fashion goods for the month were down -1% compared to July 2015. Following one of the wettest Junes on record, stores were forced to sacrifice margins in a bid to increase sales volumes and clear warehouses piled high with summer stock. Homewares sales grew by 4.7% and sales of lifestyle goods crept up by 1% – the sector’s strongest performance in four months.

Non-store sales rose by 21.7%, the strongest performance in 2016 so far, and the sector’s best performance since September 2015. In stark contrast to bricks and mortar sales, some fashion retailers reported double – or even triple – online growth in July, and a high proportion of homewares and lifestyle retailers also saw strong online sales growth, again achieved through deeper discounts and promotions being offered online.

Sophie Michael, Head of Retail and Wholesale at BDO LLP, said retailers would need to focus on their margins now the discounting period had finished. “Inflation is low, as is unemployment, but so is consumer confidence,” she said. “Stores are finding it really difficult to get people to spend unless they feel they’re getting a bargain, which is why we’re even seeing discounts on new lines.”

She added: “The challenge for stores over the next couple of months will be to keep new stock on sale at full price for as long as possible. Retailers will be looking at opportunities to increase margins in the post-referendum marketplace, such as possible changes to their supply chains and sourcing models and exploring the export market.

“But such changes to their businesses take time to assess and implement, particularly when there are still so many uncertainties ahead. It is important that businesses stay flexible and vigilant to enable them to deal with challenges but also grasp opportunities that will arise in these changing times.”



Kerry Group Posts Solid Half Year Results Amid “Challenging” Market ConditionsAnnouncing half year results yesterday, Irish food manufacturer Kerry Group highlighted the tough trading conditions but said it was “well positioned” to meet customer requirements in the changing marketplace.

During the six month period ended 30 June, the group’s revenue edged up 0.3% to £3.04bn with good volume growth (+3.2%) offset by currency movements. Trading profit increased by 7.4% to €322m, with margins up 70 basis points to 10.6%.

Its Taste & Nutrition division achieved 3.5% growth in business volumes and pricing was 2.2% lower. Meanwhile, Kerry Foods’ consumer foods business saw volumes grow by 2.3% and pricing was reduced by 2.1%.

The group said that global market conditions remained challenging with slower economic growth, currency volatility and continuing geopolitical instability in particular in many regional developing markets. It also highlighted the changing marketplace – with increased retail fragmentation, continued growth in online shopping, increased penetration of regional brands, ongoing growth in snacking, food-to-go and foodservice demand – contributing to significant product ‘churn’ with increased demand for product differentiation and innovative offerings.

Looking ahead, Kerry said that it expected the international trading environment to remain challenging in the second half of 2016, saying that its “unique taste & nutrition, functional ingredients, and systems model was well positioned to meet customer requirements in the changing marketplace”.

It added: “Businesses acquired in 2015 are performing well providing solid growth opportunities through extension into wider taste & nutrition and foodservice markets. Kerry Foods continues to perform well in its core snacking, convenience, health and food-to-go categories, despite the competitive market conditions in the UK and Irish markets and the macro-economic uncertainty caused by the UK voting to leave the European Union.”



Beiersdorf H1 Results Hurt By Wet SummerBeiersdorf has reported a decline in first-half sales, hurt by a wet summer across Europe. However, the group said it was “cautiously confident” of reaching its full-year forecast.

For the six months, sales were down 1.3% to €3.36bn, although they grew by 2.8% on an organic basis. Meanwhile, underlying operating profit was up 1% to €513m.

Sales in Europe were up 0.4% to €1.8bn (+3.2% organic), but they declined by 1.7% to €981m in Africa/Asia/Australia (+2.6% organic), and fell by 5.6% to €574m in the Americas (+2.0% organic).

The Consumer Business segment saw sales decline by 1% to €2.8bn (+3.3% organic), with operating profit rising by 3.4% to €424m. All core brands reported growth, with Nivea sales up 4.2%, Eucerin growing by 1%, and La Prairie rising by 6.2%.

The tesa segment, however, saw sales segment by 2.7% to €560m, with organic sales up 0.2%. Meanwhile, operating profit was down 9.2% to €89m.

CEO Stefan Heidenreich said a rainy summer in western Europe had led to “substantial losses in sales” for sun cream products. He also attributed lower sales to the Brexit decision, which hurt consumer confidence. He added: “We stick to our position that things won’t get much better but we’ve already adjusted ourselves to that reality”.


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

Stephen Hall

Friday 5th August

Your Weekly FMCG News Update!

Food

Transcript of Your Weekly FMCG News Update!