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Food Retailer Trends March 2011 Adam Goodman Vertical Insight Manager


Contents


Food Retailers – Top News “It was not a good Christmas for food retailers. In December they saw a - 3.4% volume decline, the largest volume fall since the retail sales series began in 1988.” (Mintel, Feb 2011) • Food retailers‟ volume sales fell by 3.4% in December 2010, the largest volume fall since records began. • Consumer spending on food, beverages and tobacco picked up in the second half of 2010, reaching 7.7% year-on-year growth in Q3. – This appears to indicate consumers bought fewer, more expensive foods – and that food retailers lost some share of the market – possibly to internet pure players.

• Between December 2009 and December 2010 consumer food prices rose by +5.7%, underpinning the increased spending on food.

• J. Sainsbury posted 14-week Christmas like-for-likes excluding petrol up 3.6%, recording a +20% rise in sales of its top-tier Taste the Difference range in the week before Christmas. • Waitrose saw its best-ever Christmas performance. • Tesco‟s UK like-for-likes over a six-week Christmas period were up +0.6%, lower than Morrisons‟ 1% gain. • 2011 is likely to be characterised by further rises in inflation in food. This could stifle any further trading up by consumers. Source: Mintel, UK Retail Briefing Food Focus, Feb 2011


Consumer Trends: Food Retailers‟ The chart below shows the UK Food Retailers‟ Sales as a % of all Retail from 2005-2010

Mintel

NB: Note truncated scale exaggerates the trend SOURCE: ONS/MINTEL

“While the Index results for January show a very encouraging start to the year for e-retailers, it is important to note this strong growth is on the back of the lowest-ever annual growth recorded in January last year when the e-retail market grew just 4.6%.” Tina Spooner, Director of Information at IMRG


In-store food shopping will be very much focused on leisure, discovery and fulfilment Most functional and convenience shopping will be delivered through online shopping by 2020. UK is and will be largest player in Europe. % making purchases on the internet, by country (nVision forecast, 2009-based projection)

Source: Eurostat Survey on ICT Usage/nVision | Base: All individuals aged 16-74


Groceries & Personal Care – a consumer snapshot 43% are aged 35-54 72% have no children in the household Medium household income 65% are the main decisionmaker for the category They are brand loyal, rather than early adopters Make quick purchase decisions, but prepared to shop around for the best value Average number of brands considered: 3 Average number of retailers considered: 2

Source: Microsoft & Carat New Shopper Journeys Europe Study 2010 : Groceries & Personal Care n=2622

50% normally buy 2-3 times a week or more often 62% decide & buy on day of purchase On average they spend ÂŁ196 per month Buyer type: 66% Habitual 28% Impulse 6% Research Most recent purchases: 77% Fruit & veg 75% Baked goods 65% Soft drinks, juices, alcohol 58% Chilled or frozen products

Purchase triggers: 41% Ran out of the item 20% A treat for themselves 20% Wanted to try a new brand


Groceries: The future is bright for digital‌ Which of the following are you likely to do in the future?

75%

16%

Make a purchase online

12%

Send pictures/videos of potential purchases

8 10

Ask opinions from people donâ€&#x;t personally know on forums, blogs, social networks

13% Use mobile to research whilst in-store

8%

7%

Make a purchase via a mobile

Use mobile to interact with billboards/ download special offers etc via the phone

of Groceries & Personal Care consumers believe they will be utilising digital technologies for their future purchases

Source: Microsoft & Carat New Shopper Journeys Europe Study 2010 : Groceries & Personal Care n=2622


Retail & Online Retailers Spend • For the most part, Retail advertisers tend to spend the most on advertising in the Press and on TV • On average the industry currently spends around 5% on Internet advertising (not including search). 2010 expenditure has increased +1% from that of 2009

Source: NNR adDynanix : Jan – Nov 2010

8


Display Advertisement Publisher Location: Reach and Frequency (Retail – Food) • Microsoft sites delivered both the highest number of impressions and the highest number of unique visitors for Food Retailers in Dec.

Source: ComScore adMetrix : December 2010


Display Advertisement Publisher Location: Reach and Frequency (Retail – Food) • Microsoft sites also have the highest share of Food Retailers ad impressions, however average frequency is very competitive and far less than eBay, AOL and Glam Media.

Source: ComScore adMetrix : December 2010


Top Advertiser by Impression and UU by ComScore AdMetrix (Food Retailers)

Source: ComScore AdMetrix – December 2010


Food & Grocery Search Traffic KPIs Traffic • Searches for food & grocery generics increased by +29% between 2009 and 2010 •

Searches for food & grocery generics increased by +29% Oct to Dec 2010 v Oct to Dec 2009.

Searches for food and grocery however increased by 43% in Jan 2011 v Jan 2010

Top Insights: • The large grocers were the only channel to gain sales in 2010 (Mintel) •

Mobile applications will be designed to help users eat and live more healthily. Linked to a country's national health service, it holds information on all their medical history and monitors body changes throughout the day – making recommendations on intake and consumption habits (nVision)

1. Microsoft Advertising Intelligence Tool


Food & Grocery Demographics and Daily Trends

16%)

35-49

31% . 25-34 27%

59%

1.Microsoft Advertising Intelligence Tool – December 2010 to Feb 2011 data


Groceries & Personal Care shoppers are using online display media – right now

63%

Top performing Microsoft Advertising properties:

59%

51%

46%

35% 31% ALMOST

2 of Groceries & Personal Care consumers are found on 3 Microsoft Advertising – more than any other online property

Source: Microsoft & Carat New Shopper Journeys Europe Study 2010 : Groceries & Personal Care n=2622


A number of touch points to consider Microsoft Advertising products can connect you with your consumers at each point in the path to purchase:

Source: Microsoft & Carat New Shopper Journeys Europe Study 2010 : Groceries & Personal Care n=2622


Industry Insights


Food Retailers – Large Grocers benefit • The large grocers were the only channel to gain sales in 2010. The off-licences and tobacconists performed particularly weakly, but that is probably because of the demise of Threshers. It may be that the strength of the larger grocers has been because they picked up most of that business.

BREAKDOWN OF FOOD RETAILERS’ SALES, BY SUB-SECTOR, 2006-10

Source: Mintel UK Retail Briefing Food Focus UK. February 2011


Leading Retailers Share of „Food Retailers‟ Sales 2009/2010‟ Market shares based on food retailers’ sales of £133,628 million in 2009. The pie chart below overstates the market shares of the four leaders because the company sales figures include fuel and other “non-retail” sales which are not included in the total market size figure

The pie chart below accounts for the estimate proportion of the leading four retailers’ sales made up of “nonretail sales” . Once these non-retail categories are stripped out (such as petrol, restaurants and NHS income, and business to business sales) Tesco, Sainsbury, Asda and Morrison's share changed


Scrutiny of the whole journey of food products •

The Digital Revolution is already playing a role in making the full journey of food products more transparent, as demonstrated by websites like „Wheresyoursfrom.com‟ which enables consumers to trace the exact origin of the eggs they buy.

By 2020, smartphone apps -like the Breadcrumbs one pictured here which includes features like a summary of ingredients and the date of manufacture -will have significantly accelerated and amplified demand for detailed knowledge of the full journey of our food.

Mobile devices will become sensors and RFID readers, allowing consumers to interact with food in a much more detailed and informed manner, providing data on exactly where foods originate (when and how a product was produced, who came in contact with it, whether it was ethically produced) -and detailing full ingredient lists.

These mobile developments will vastly increase consumers‟ information expectations. They will stimulate new quality demands within the whole food production process, in particular around hyper-freshness and hyper-localism.

Source: nVision & Future Foundation, Beyond 2010


Retail M-Commerce “The evolution of mobile technology has given rise to the empowered consumer: at the touch of a button, almost anywhere, consumers can research products, companies, and even make purchases.” (ForseeResults) Forsee study of 10,000 UK visitors to the biggest e-retail sites in the UK (according to IMRG) stated: Key findings: • Shoppers are using mobile phones to access websites and apps more than ever before – “32% of respondents have used their phone to access a retailer website, and an additional 32% indicated they plan to access retailer websites or mobile apps by phone in the future”

• purchase behaviour is exploding – “8% of UK made purchase via mobile at Christmas 2010” • Shoppers use their phones for a variety of tasks – “47% of shoppers used phone for price comparison reasons” • Good experiences with mobile sites and apps have critical cross-channel impact - “Shoppers who are highly satisfied with a mobile experience say they are 32% more likely to buy from that retailer online and 31% more likely to buy offline”

Source: Foresee Results, Jan 2011.


Retail M-Commerce Source: Forseestudy of nearly 10,000 visitors to the biggest e-retail websites in the United Kingdom In which of the following ways did you use your phone while shopping in a store?

accessed that store’s website on their phone

accessed a competitor’s website on their phone “Applications and websites tailored to mobile shoppers are a musthave for retailers. As smartphone use increases, more customers will turn to the mobile channel to find price and product information before making a purchase.” (ForeseeResults)


Beyond 2020 Eating Habits Consumers will also eat out of the home in a more spontaneous way as mobile technology enables them to seamlessly locate food offers wherever they happen to be. They will no longer need to plan their choices in advance and instead will almost always decide at the last minute according to their mood, the latest live reviews, the location of their friends and incentives offered by hospitality players. Eating habits will be much more mobile, flexible and spontaneous % who access the internet via their mobile phone at least once a month in the UK

“

Mobile applications will be designed to help users eat and live more healthily. Linked to a country's national health service, it holds information on all their medical history and monitors body changes throughout the day – making recommendations on intake and consumption habits

“

Source: nVision & Future Foundation Research: Beyond 2010 Future of Food Beyond 2010 Base: 1,200 respondents aged 16+, GB


Microsoft Advertising & Carat Study New Shopper Journeys‟

Retail brand marketing must respond to major shifts in consumer behaviour as digital media and the economic downturn transform consumers‟ shopping habits. „New Shopper Journeys‟, a study from Carat and Microsoft Advertising, shows that shoppers no longer pass through a standard purchase funnel. Retail brand marketing must respond to new spheres of influence and balance the role of bought, owned and earned media in shaping shoppers‟ decisions

Find out more: http://advertising.microsoft.com/uk/retail-brandmarketing-research Alternatively speak to your Microsoft Advertising representative to learn more about this study.


APPENDIX

Food & Grocery


Which?/ nVision: Most popular online supermarkets Ranking measured on a scale of 1-5 (1 being poor, 5 being excellent)

Source: Which?/nVision, 2010 Base: 2,661 respondents aged 16+, UK


“How interested would you be in any of the following services? Demonstrations in the supermarket where a chef shows me how to prepare better meals / dishes� % who would be very or quite interested, by gender, age and social grade

Source: nVision Research, 2010 Base: 1,000 online respondents aged 16+, GB


Best reputation on environmental issues – supermarket Q. “For each of the following product/service categories, please write in the one brand that you feel has the best reputation on environmental issues”

Source: Readers Digest European Trusted Brands Survey/nVision, 2010 Base: 1,276 respondents aged 20+, UK


Top 10 grocery retail markets in Europe In billions of euros IGD forecast

Source: Institute of Grocery Distribution (IGD)/nVision, 2010


Retail Trends