Weekly News Summary – 3rd October 2016

Macroview
Weekly News update
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in Packaged Groceries
Stephen Hall
Friday 7th October

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• Co-op food focuses on ethics in new ad campaign
• Coty completes P&G beauty acquisition
• Tesco highlights success of carrier bag charge
• Blakemore Wholesale opens third Bmorelocal store
• SPAR brings back ‘12 Deals of Christmas’ promo
• Tesco delivers positive LFL sales across the entire Group
• Waitrose relaunches Heston from Waitrose range
• John Lewis sales benefit from cooler weather
• Shop prices dive, driven by drastic deflation in clothing
• Ocado now selling smart home products
• Dunelm first quarter sales hit by warm weather
• New research: why it pays to personalise for millennials
• ‘Next day' delivery overtakes 'economy'
Weekly News Summary – 3rd October 2016

Co-op Food Focuses On Ethics In New Ad Campaign
The Co-op is continuing its brand overhaul with a new ad campaign celebrating the quality of its food and highlighting the
fact that ingredients in its products are ethically sourced.
The campaign launched at the end of last week under the tagline ‘Food The Co-op Way’ and spans TV, VOD, outdoor, and
press.
The TV ad is comprised of vignettes showing different people enjoying a variety of food from Co-op. The ad explains that
every egg in a Co-op product is free-range; the fresh chicken, beef and pork is British; and Co-op sells more Fairtrade
products than any other convenience store.
Meanwhile, print work showcases products such as pasta, sugar, eggs and meat which highlight the brand’s commitment
to sourcing free-range, best of British and Fairtrade products.
Jemima Bird, customer director at Co-op, commented: “Ethics is at the heart of Co-op. Doing business to benefit
communities is the Co-op way and the ad campaign highlights our difference and willingness to do the right thing.”
The Co-op is currently undergoing a radical makeover with it rolling out its new retro Co-op branding, announced back in
May, to its own label food range and stores. This is expected to take up to three years to complete. It also introduced a
new membership loyalty scheme last month, aiming for half of all purchases to be made by members within five years.
Source: NamNews 3rd October 2016

Coty Completes P&G Beauty Acquisition
Coty has completed the acquisition of Procter & Gamble’s speciality beauty business, making it the third-largest beauty
company in the world, with estimated revenues of $9bn.
The deal included P&G’s fine fragrance, colour cosmetics, salon professional, and hair colour and certain styling
businesses. With the move, Coty is now also the world’s leading fragrance company, and the global number two and
three in salon hair and colour cosmetics, respectively.
Camillo Pane became the new CEO of Coty, with Bart Becht remaining Chairman of Coty’s Board of Directors.
Coty will assume approximately $1.9bn of debt of the P&G Specialty Beauty Business.
Source: NamNews 3rd October 2016

Tesco Highlights Success Of Carrier Bag Charge
Tesco has revealed that over 1.5 billion single-use carrier bags have been saved by its customers in England since the
introduction of the Government bag charge a year ago.
The figures represent a 72% fall in the use of single-use plastic bags being used in Tesco stores. Tesco customers
shopping on tesco.com have also dramatically reduced the number of bags they use, with 57% of online shoppers
selecting ‘bagless’ deliveries.
The Government’s 5p plastic bag charge was introduced in England on 5 October last year with the aim of cutting the
number of plastic bags given out in shops and improving the environment.
Over the last year, the money raised by Tesco customers has been used to help fund 1,170 community projects as part of
Tesco’s Bags of Help initiative.
George Gordon, UK & ROI Communications Director at Tesco said: “We’re encouraging our customers to use fewer single-
use bags, so these figures are really encouraging.
“Also the money raised from our customers buying bags is making a big difference to local communities across the
country.
“Thanks to Bags of Help, nearly £12m has been spent so far on local environmental improvement projects like parks,
sports facilities, school playgrounds and community gardens – projects that have all been chosen by our customers.
“Going forward, we will help customers do even more for their communities by bringing together more projects for them
to vote on every month.”
Earlier this month, Lidl pledged to stop selling single-use plastic carrier bags altogether across all its stores in England,
Scotland and Wales from 1 July next year.
Source: NamNews 4th October 2016

Blakemore Wholesale Opens Third Bmorelocal Store
Blakemore Wholesale has opened the third store under its new premium Bmorelocal fascia.
The first two Bmorelocal stores opened in June, aimed at attracting the best retailers with the highest store standards.
The latest opening is a 1,000 sq. ft. store located in Cleethorpes, Grimsby which has taken advantage of the full symbol
group package including chilled, frozen, EPOS, and drop shipments. There are also plans to launch a Costa and food to go
offering in the next six months.
Blakemore Wholesale Stores Director Nick Rose commented: “The Bmorelocal fascia has been extremely well received by
retailers and customers alike. We are still on track to open 30 stores by the end of the financial year and have a number
of promising stores due to launch in the next few months.”

SPAR Brings Back ‘12 Deals Of Christmas’ Promo
SPAR UK is set to re-launch its ‘12 Deals of Christmas’ campaign this year, which will run for 12 weeks starting 6 October.
The campaign, which ran for the first time in 2015 and was a huge success, offers market leading promotions and
money-off deals every week.
Offers will run once again on top brands from suppliers including Smirnoff, Coca-Cola and Budweiser, as well as on
Christmas essentials and SPAR Brand’s fantastic award-winning products.
Digital activity to support the promotion will include a dedicated ‘12 Deals’ landing page on the SPAR website, as well as
ideas for last minute Christmas recipes and party planning. The website will also feature engaging videos, such as a
‘How-to guides’.
Meanwhile, social media activity will include posts across Facebook, Twitter, Instagram, and to the Christmas section of
spar.co.uk. Facebook and Instagram will also feature ads on weeks two, three and four of the campaign. These will
champion the products in a modern and simple style and feature brands such as Smirnoff, Coca-Cola, Budweiser and
SPAR Brand products.
On SPAR’s in-store radio, there will be a dedicated advert each week for each new deal, as well as Christmas sweepers,
reminders, sound effects and classic Christmas tunes. Finally, retailers will receive in-store POS with an advent calendar
theme, to create a magical feel to consumers and highlight the new deals every week.

Tesco delivers positive LFL sales across the entire Group
Tesco's UK and International divisions grow both volume and value sales across H1 2016.
LFL sales and volume growth delivered across the entire Group
Tesco's core UK business has delivered LFL volume and value growth of 2.1% and 0.6% respectively. Value growth hit
0.9% in the second quarter of the reporting period; indicating an upwards trajectory. The International business has
grown volume and value sales by 3.3% and 1%.
Alongside volume and value growth, footfall into Tesco's UK stores is increasing, with transaction numbers growing by
1.6%.
Progress against all three priorities
Tesco has pointed to significant progress against its three key business priorities:
1. Becoming more competitive in the UK. As indicated by volume growth outstripping sales, Tesco UK's prices are falling.
In fact a "typical" shopping basket is now 6% cheaper than when Dave Lewis joined the company in September 2014.
2. Building a more secure balance sheet. Tesco's net debt has been reduced by a further £0.8bn since 2015 year-end.
3. Rebuilding trust. Brand health has reportedly returned to its highest level in more than four years.
On the right track
Tesco has also spoken of its progress against colleague and supplier satisfaction measures, with the Group also on track
to deliver a full year operating profit of £1.2bn before exceptional items. This will be boosted by £1.5bn of further
operating cost reductions throughout H2 2016, as Tesco works towards its ambition of achieving a group operating margin
of between 3.5% and 4% by 2019/20.
Mr Lewis stated: "We have made further strong progress in the first half, with positive like-for-like sales growth across all
parts of the Group as we re-invest in our customer offer whilst rebuilding profitability in a sustainable way... Whilst the
market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the
business and positioning us well for the future."
Source: IGD 5th October 2016

Waitrose relaunches Heston from Waitrose range
Six years after Waitrose first teamed up with celebrity chef Heston Blumenthal, it is now relaunching the Heston from
Waitrose range with a new design and ten new products.
These include a new Christmas pudding “showstopper”, a mince pie with a twist and edible baubles.
The range now offers nearly 60 products with new packaging featuring quirky illustrations of animals impeccably dressed
in human clothing which aim to embody the whimsy of the range.
Rupert Thomas, Waitrose marketing director, said: "We hope that the new range and quirky look will encapsulate the fun
we've had creating the range with Heston. Each and every product is carefully created to deliver truly outstanding taste,
as well as bringing an unexpected twist to our favourite dishes, making it easier than ever for customers to experience
the very latest in food innovation in their very own kitchen.”
The Hidden Orange Pudding is back along with previously launched items such as parfaits, brioche buns and a lemon and
Earl Grey gin.
Blumenthal added: "I am thrilled with the outcome of the new range, having spent a lot of time developing the look and
feel of the products, making sure they are the best they possibly can be and going that extra mile to make sure the taste
is better than ever.”
Source: Retail Bulletin 5th October 2016

John Lewis sales benefit from cooler weather
John Lewis enjoyed strong trading last week with sales up 9.6% year-on-year as the cooler weather drove fashion sales.
The retailer reported a good performance across all three directorates as customers tried out new season products. It also
opened its first Essex department store in Chelmsford.
Fashion sales rose by 8.6% with the cooler weather supporting an increase across the different product areas.
Womenswear was a star performer with sales surging by 18.6% as trade was boosted by buoyant sales of outerwear
brands.
Home sales were up 7% with the furniture and lighting categories both achieving strong uplifts.
Meanwhile, electricals and home technology sales were bolstered by new product launches and finished the week up
15.1% on last year.

Shop prices dive, driven by drastic deflation in clothing
Shop prices fell once again in the first week of September, driven by falling fashion prices, according to the BRC Nielsen
Shop Price Index.
The fall in prices amounted to 1.8%, compared with 2% in August
Overall the fall in prices amounted to 1.8%, compared with a 2% fall in August.
This was led by clothing and footwear prices falling 6.5% year-on-year during September 5-9. This is a slight deceleration
of deflation from August, when prices dropped 6.8% year-on-year.
Outside clothing, the picture was less dramatic. Electricals experienced the next highest deflation, falling 2.9%, while
health and beauty fell the least, at 0.5%.
The price of books, stationery and home entertainment was the only category where prices inflated, rising 3%.
In grocery, prices dropped 1.3% year-on-year. This represented the second-biggest drop ever recorded, following on from
August’s record low. The past two months are the only instances of prices dropping by more than 1%.
BRC chief executive Helen Dickinson said: “There’s been little change in the ongoing trend of price movements this month
with shoppers finding their purchases 1.8% cheaper than at the same time last year, only marginally different from the
2% in August.
“We are now in the fourth year of falling shop prices, so the record-setting run of shop price deflation continues, which is
great news for consumers. This is as a direct result of the intense competition and transformational change in the retail
industry with consumers having access to more choices and greater ability to compare prices than ever before.”
Nielsen head of retailer and business insight Mike Watkins said: “With a new round price cuts by supermarkets in
September and fresh foods also promoted to encourage visits, this has helped maintain deflation in shop prices.
”However, the warm and late summer weather was a challenge for many in the non-food channel so we may well see
further price discounts as we move into October.”
Source: Retail Week 5th October 2016

Ocado now selling smart home products
Ocado has introduced its new 'Smart Home' section, which will sell smart home products alongside groceries.
Smart home products available
Ocado now sell smart home lighting, heating, security, home control and Wi-Fi range extenders. Products include Philips
Hue lighting, Hive thermostats and TP-Link smart plugs, which can be controlled through mobile apps and Amazon Echo.
Nelson Qiao, country manager at TP-Link UK, said; "The demand from Ocado customers for sophisticated technology
products that help their everyday lives underlines how the smart home has moved from concept to reality.“
Voice recognition
Ocado's chief technology officer Paul Clarke revealed that Ocado is developing its own smart technology for customers'
homes, hinting at voice recognition technology saying this is "a hugely important part of how people shop". You can take
a look here at why IGD chose 'the power of voice' as one of the top 5 global grocery trends for 2016.
The future with the smart fridge
The development of the smart fridge will have important implications for online grocery shopping. In Australia, Samsung's
Family Hub refrigerator has partnered with local retailer Woolworths, you can read about the 'innovation of the week' and
the implications of grocery shopping through your fridge here.
Source: IGD 6th October 2016

Dunelm first quarter sales hit by warm weather
Homewares retailer Dunelm has seen a fall in like-for-like sales in its first quarter after unseasonably warm weather
impacted footfall in its stores.
In the 13 weeks to 1 October, like-for-like sales declined by 3.8% while total revenue fell by 1.8% to £198.7 million.
Although store footfall dropped in the period, the retailer continued to see good growth in its online business, including a
17.9% increase in home delivery sales.
Dunelm chief executive John Browett said: “As expected, the homewares market has fallen due to unusually warm
weather and this has correspondingly impacted our store performance over the period given the reduced footfall to our
out-of-town superstores. However, we have continued to focus on our value based customer proposition and are
increasing our market share in homewares, whilst also seeing good growth in our online business.”
No new stores were opened in the period leaving Dunelm’s superstore footprint at 152 stores. The company is now legally
committed to ten new stores of which nine are due to open in the current financial year and four before the end of the
calendar year. The current year‘s 15 store refit programme has also begun with three stores due to be completed before
the end of the calendar year.
Browett added: “We are looking forward to a stronger second quarter as we continue to invest in extra seasonal space,
new till systems, store refits and new store openings. We should also benefit from weaker comparatives.”

New research: why it pays to personalise for millennials
Millennials are more likely to be brand loyal than other age group but expect more personalisation in their interactions
with businesses, according to new research.
The study was part of a new American Express initiative that saw the company engage psychologist Emma Kenny to
decipher how businesses can better appeal to millennial consumers and how their influence might also be changing the
behaviours of other age groups.
The study found millennials are more brand-loyal than any other age group surveyed. 62% of millennials polled said they
tended to only ever buy a preferred brand, compared to just 54% of the wider population. However, the research also
indicated that inspiring loyalty from this generation can present challenges to businesses.
Spend consciousness and a willingness to use money-saving tools was evident across the generations, with 86% of those
surveyed having used at least one offer. However, while offers were widely used across different age groups, the survey
found that personalisation was most important for the millennial generation with almost half of millennials expecting
brands to customise offers to suit their needs. Furthermore, millennials were more likely to go out of their way to use a
customised offer compared to other age groups.
According to Kenny, this demonstrates how brand loyalty is being driven by longer term relationships with brands as this
enables them to build customisation over time. She points to customisation as a way of evoking feelings of being
understood by brands and said: “While millennials are demonstrating brand loyalty these days, they also require a sense
of being ‘looked after’ if they are to remain that way. The psychology of our interaction with offers often arises from our
initial positive experiences of consumer engagement.“
Millennials were also found to be more likely than any other age group to share details of recent purchases on social
media. Meanwhile, over a third of 55-64 year olds said they used social media to share recent purchases, illustrating how
millennial trends are shaping behaviours across the generations.
Dan Edelman, VP at American Express, said: “While brand loyalty is important among millennials, we can see that in
order to inspire their repeat custom, businesses must consider how they build long term relationships with their
customers which are tailored to their preferences and needs.”

‘Next day' delivery overtakes 'economy'
New figures have shown that the percentage of orders using 'next day' delivery as a fulfilment option has exceeded the
'economy' option for the first time.
According to the IMRG MetaPack UK Delivery Index, 36.7% of orders in August specified next day delivery compared to
33.8% for economy.
Andrew Starkey, head of e-logistics at IMRG, said: “There are a number of factors potentially influencing this – some
retailers see delivery as a differentiator and are offering next day as standard, others offer it if the customer’s basket
value is above a specific threshold and for others the charge for next day is smaller than it has been on average in
previous years.
“A move toward faster delivery is not unexpected and, for carriers, it doesn’t represent a capacity issue during most of
the year – but during peaks such as the Black Friday period, promotion of next day delivery should be handled more
cautiously.”
The study also found that online retail order growth was up 18.2% year-on-year in August and that there has been an
increase in the percentage of orders going cross-border since the EU referendum due to the sharp fall in the valuation of
sterling. This continued to be the case in August, with 27.8% of UK orders going to international destinations.
Kees de Vos, chief product officer at MetaPack, said: “Despite our concerns about the effects of the European
Referendum, overseas shoppers are taking advantage of the strength of Sterling which is boosting overseas deliveries
with the added bonus that we are seeing a rise in order values from cross-border shopping.”

Quarterly LFLs over time
Source: Retailers (Waitrose and Co-op do not release quarterly data). M&S is food business only
%
Note: Trading periods vary in their length and dates.
-8
-6
-4
-2
0
2
4
Q1
2013
Q2 Q3 Q4 Q1
2014
Q2 Q3 Q4 Q1
2015
Q2 Q3 Q4 Q1
2016
Q2 Q3 Q4
Asda M&S Morrisons Sainsbury's Tesco

Weekly News Summary – 3rd October 2016

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Weekly News Summary – 3rd October 2016

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