This document is confidential and is intended solely for
the use and information of the client to whom it is addressed.
Fo...
210/02/2013 For Internal Use Only 2
Introductions
Key Challenges
Closing Thoughts
310/02/2013 For Internal Use Only 3
Today’s Panelists
 Tom Corley, Executive Vice President and President,
U.S. Sales
 R...
410/02/2013 For Internal Use Only 4
Introduction
Key Challenges
Key Industry Responses
Booz & Company
CPG Manufacturer and Retailer C-Level Perspectives on
Current and Emerging Industry Challenges
5
Growing co...
610/02/2013 For Internal Use Only
Historical US per capita spend stagnation on food is not a
new phenomena – overall growt...
710/02/2013 For Internal Use Only 7
Despite low growth, the grocery industry has added significant
capacity across all for...
810/02/2013 For Internal Use Only 8
The e-commerce channel will take hold in groceries – the
question for traditional groc...
910/02/2013 For Internal Use Only 9
Online will likely capture share mostly from supermarkets,
supercenters, and club – re...
Booz & Company
$Low-
high
More than ever understanding shopper basic
economic/behavioral realities is critical to success ...
Booz & Company
In the US, almost all population growth is ethnic – do CPG
players really have targeted strategies to explo...
1210/02/2013 For Internal Use Only 12
Both CPG/Retail executives characterized technology as a
highly disruptive force at ...
1310/02/2013 For Internal Use Only 13
Anticipated Activities
Significance of
Smartphones
in the Shopping
Journey1)
% of Sh...
14
Introduction
Key Challenges
Closing Comments
Prepared for Kraft Foods Group, Inc.Collaborating for Growth Conference
FinalTB.pptx
Booz & Company
Closing Thoughts and R...
Prepared for Kraft Foods Group, Inc.Collaborating for Growth Conference
FinalTB.pptx
Booz & Company
Holiday 2013 -- Foreca...
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Booz&Co Innovative Growth 2013

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Booz&Co Innovative Growth 2013

  1. 1. This document is confidential and is intended solely for the use and information of the client to whom it is addressed. For Internal Use Only9/25/2013 Innovating Growth In Challenging Times A Panel Discussion This document is confidential and is intended solely for the use and information of the client to whom it is addressed.
  2. 2. 210/02/2013 For Internal Use Only 2 Introductions Key Challenges Closing Thoughts
  3. 3. 310/02/2013 For Internal Use Only 3 Today’s Panelists  Tom Corley, Executive Vice President and President, U.S. Sales  Roxanne Flanagan, Vice President, Operations and Community Management  Tom Furphy, CEO, Managing Director, Consumer Equity Partners  Jim Smits, Senior Industry Advisor, Ex- SVP and GMM, Dollar General  Session Moderator: Thom Blischok, Chief Retail Strategist Booz & Company
  4. 4. 410/02/2013 For Internal Use Only 4 Introduction Key Challenges Key Industry Responses
  5. 5. Booz & Company CPG Manufacturer and Retailer C-Level Perspectives on Current and Emerging Industry Challenges 5 Growing concern as to where to find growth opportunities given changing behaviors Increasing channel fragmentation further exacerbated by excess capacity across all grocery category retailing channels Understanding and adapting to the rapidly changing implications of technology 1 2 3 4 Changing dynamics of consumer behaviors including profiles and preferences
  6. 6. 610/02/2013 For Internal Use Only Historical US per capita spend stagnation on food is not a new phenomena – overall growth is limited by population growth Finding Real Growth Opportunities US Consumption: Food at Home $2010 Source: US Department of Agriculture Food Expenditure Data; Booz & Company analysis 1 Total Food at Home Per Capita Food at Home 1965 20151970 1975 1980 1985 1990 1995 2000 2005 2010 2041 $ 2061 $ 395 $BN 642 $BN
  7. 7. 710/02/2013 For Internal Use Only 7 Despite low growth, the grocery industry has added significant capacity across all formats – increasing supply/demand imbalance 0 500 1,000 1,500 2,000 2,500 Mass Dollar Grocery/SM Club Drug Conv / Gas Supercenter 201 2 201 1 201 0 200 5 200 4 200 3 200 2 200 1 200 0 199 9 199 8 199 7 199 6 199 5 200 8 200 7 200 6 200 9 From 1995-2012: Sales grew by 43% but capacity has grown by 69%43% 69% Total US Grocery Retail Capacity Square Feet Millions 1 Finding Real Growth Opportunities
  8. 8. 810/02/2013 For Internal Use Only 8 The e-commerce channel will take hold in groceries – the question for traditional groceries will be how to participate Online Penetration of Grocery: 2025 10.4% Overall Source: Nielsen 2017 Retail Update, Booz & Company Analysis Perishable Stock-Up Perishable Fill In Frozen Stock-Up Frozen Fill In Ambient Stock-Up Ambient Fill In ~2% ~1% ~5% ~1% ~20% ~10% Continued Channel Fragmentation 2 E-Commerce Penetration: Total Retail % 2.9 8.1 13.0 2001 2011 2017 2025 ~20.0 Nielsen Forecast Extrapolation
  9. 9. 910/02/2013 For Internal Use Only 9 Online will likely capture share mostly from supermarkets, supercenters, and club – rethinking traditional grocery is critical Grocery $ Share by Channel1) $2010, Bn 398 45 129 45 87 24 111 3 9 Today $878 Mass Merch. Dollar Other 353 66 123 35 96 38 112 33 10 6Supermarkets Drug Supercenter Club OnlineConv / Gas 2025 $963 Continued Channel Fragmentation 2 1) Online sales are deducted prorata from Club, Mass, Supercenters and Supermarkets Supermarket Productivity Sales per Sq. Ft. in $2010 $267 2000 $227 $185 $173 2012 2025 Best Case 2025 Worst Case -15% -19%
  10. 10. Booz & Company $Low- high More than ever understanding shopper basic economic/behavioral realities is critical to success – Selectionists and Survivalists 10 Survivalists Substantial cutbacks of value products (basic and affordable premium) continued in 2013 Selective cutbacks of premium products (basic and aspirational) continued in 2013 Source: The Dialogic Group LLC – 2011, 2012, 2013, n= 1200 $>50 k 34% 39% Selectionists 61% 65% Wal-Mart EDLP Grocers Value/Discount stores Dollar Stores Clubs Channels of Choice: Channels of Choice: EDLP grocers SuperCenters Club Stores Specialty Food Retailers Value Stores househol d income $>50K househol d income all levels Consumer Purchase Dynamics 3
  11. 11. Booz & Company In the US, almost all population growth is ethnic – do CPG players really have targeted strategies to exploit this shift? Projected US Population Growth 2010 vs. 2025, in Millions 50.5 37.9 14.7Caucasian (Non-Hispanic) Hispanic African American (Non-Hispanic) Asian (Non-Hispanic) 82.3 13.5 14.2 4.7 Implied Households (2010, in Millions) 2010 0+1% 0+41% 0+15% 0+37% 11 Consumer Purchase Dynamics 3 197.3
  12. 12. 1210/02/2013 For Internal Use Only 12 Both CPG/Retail executives characterized technology as a highly disruptive force at retail – how disruptive will technology be? Identified as the single greatest catalyst of change at retail High consumer adoption of mobile smart devices Smartphone technology evolution will continue to outpace ability to harness innovation The question of “Big Data” − the challenges of scalability, affordability, end effective application In-store technologies − automate the in-store experience as well as improve operating models “Seamless retailing” – emerging table stakes demanded by the consumer Rapidly Changing Implications of Technology 4
  13. 13. 1310/02/2013 For Internal Use Only 13 Anticipated Activities Significance of Smartphones in the Shopping Journey1) % of Shoppers, N = 1503 Shoppers use mobile technology to obtain lower prices, read online reviews/search online coupons – CPG strategy implications? 68% 32% Smartphones are likely to become an integral part of the shopping journey Smartphones are not likely to become an integral part of the shopping journey 32.1% 34.2%34.4% 38.5% 11.5% 24.0% ShoppingListComparison PricingApp InStoreNavigationTool APP Application SelfCheckoutScanApp $ MobileWallet Geo- Location Tool Rapidly Changing Implications of Technology 4 1) Q17.1A – Please select all that apply. Smartphones are likely to become an integral part of the shopping journey, which of the following do you see yourself using in the future? 32% of respondents (494 of 1503) selected “None of these”. Source: Booz & Company 2013 Consumer Trends Survey; Booz & Company analysis; Nielsen Analysis
  14. 14. 14 Introduction Key Challenges Closing Comments
  15. 15. Prepared for Kraft Foods Group, Inc.Collaborating for Growth Conference FinalTB.pptx Booz & Company Closing Thoughts and Recommendations 15DATE “If there were one thing that you believe the industry must do to grow and continue to be successful, what would that
  16. 16. Prepared for Kraft Foods Group, Inc.Collaborating for Growth Conference FinalTB.pptx Booz & Company Holiday 2013 -- Forecast 16DATE “Looking into shopper behaviors for this Holiday Season” thom.blischok@booz.com

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