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The Co-operative food
The Co-operative Group has a large food retail business facing strategic challenges from competitors. Their plan is to improve value, availability, and range through a format-led approach. They will focus on fixing basics, truly understanding customers, rolling out chosen formats across stores, and marketing their differentiated proposition. This will be supported by significant price investment, supply chain optimization, and £94M in store investments over 3 years.
The Co-operative food
- 1. Co-operatives UK The Futureof Food Retail at the Co-operative Group Sean Toal Chief Operating Officer and Acting Chief Executive
- 2. What I amgoing to cover • Our Food Business • The strategic challenges facing our Food business • Our response to these challenges • The plan for growth and success
- 3. • We havea great Food business Our food business
- 4. Our food business Ourfootfall and visit frequency is 2nd behind Tesco We have nearly 4000 Co-operative locations across the country We can own location & convenience
- 5. 5 Our food business •14.5 million customers and 20 million transactions • 30% of our customers spend less than £3 • 60% of the UK population shop in a Co-operative every year • A great Food business with opportunities to improve
- 6. • The competitionare seeing our market place as an area of opportunity and growth Strategic challenges facing our business • We have internal areas of opportunity • The economic back drop is tough
- 7. The “external” strategicchallenges • There are new entrants to our market
- 8. The “external” strategicchallenges • Customer expectations are changing in Top Up sector
- 9. The “external” strategicchallenges Global growth – IGD The EU forecast has been revised sharply down, in recognition of the current crisis The EU forecast has been revised sharply down, in recognition of the current crisis
- 10. However …. • Theconvenience market is still in strong growth 2011 Value (£bn) 2016 Value (£bn) Change in Value % 2011-2016 Superstores and hypermarkets 70.3 75.7 +7.7% Small supermarkets (3,000– 25,000 sq ft) 34.1 38.2 +12.1% Convenience 33.6 42.2 +25.7% Discounters* 7.0 11.4 +61.9% Online 5.9 11.2 +89.7% Traditional retailing 5.9 5.3 -9.8% Total 156.8 184.0 +17.4% Grocery channel forecasts to 2016 Source: IGD Research*All stores acquired and retained by Asda as part of the Netto acquisition are classified as small supermarkets from 2011.
- 11. 11 Where are wenow • After a number of successful acquisitions the business must now adjust • The convenience sector remains attractive but the multiples are changing the game • In the market more generally there are growing signs of a move towards a ‘two nation’ society • The business has as broad a customer base as Tesco • But the notion of a ‘one size fits all’ offering is becoming increasingly unsustainable • Day to day, our customers’ top concerns remain value, availability and service
- 12. Research tells usthe focus areas Consumer drivers across Top-Up must improve: Increased focus for top up: Co-operative food attributes we must maintain:
- 13. Our response tothese challenges • Improve the opportunities in customer’s core drivers to build a credible and sustainable platform for growth – Value – Price and promotion – Availability – Range – Right range for the right location • Test and trial “Format” led and exploit the opportunities in our locations • Avoid taking on the mainstream brands at their own game and find our own position – own brand & promotions are key • We can make this business “right” for customers & be the best top up retailer in the UK
- 14. 14 So in summarywhat is the plan • Fix the basics: range, availability, service, value • Truly understand our customer and develop our competitive positioning whilst keeping up momentum on own label excellence and ethics • Settle quickly on our approach with regard to price positioning and format-led segmentation and begin pushing the business in this direction • Thereafter, roll out our chosen format-led approach across the estate as quickly as possible • And finally, as soon as we are happy with the basics again, start marketing what really differentiates our customer proposition
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- 16. 2012 -2014 Formats AvailabilityPrice and Value Products & own label Costs & Structures Service Now 2012 Format blueprint & trails Fix the first aisle NOOSE and SV pricing OB Penetration 47% Cut 20% central headcount Field management consistency Refits from Q3 SMART roll out & lock-down Stores to price bands Fresh food quality training Benchmark v competition Optimised scheduling Focus on MM ESM roll out Fewer deeper promotions 1700 new products (900 value) Revised customer service programme 2013 Step up rollout SC replenishment project More tertiary and SV lines Regional & local ranging Develop and recruit Review store sizes and locations 2 not 3 week promotion periods Customer endorsed OB Completion of LIDIA More supplier funding 2014 £94m investment over 3 years OB penetration 48% Reshape to support formats Desired State Mission * Vision* Objectives *
- 17. 17 Value (2 – 14k) Neighbourhood (1– 3k) Forecourt (0.5 – 3k) Fresh (1 – 8k) Core (2 – 14k) ‘Relative’ Customer Experience Format led
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- 21. Acquisitions and Developments 20122013 2014 Total Acquisitions 80 110 130 320 Refits 375 500 500 1375
- 22. David Sands BusinessOverview • The Business consists of 29 convenience stores in Eastern Scotland. • The Business is listed at number 29 in the Grocers top 50 independents list, and is one of the top 5 largest independent c-store operators available for potential acquisition. • Stores operate in a variety of locations, demographics and formats – a number of these locations are current target towns for the Co-operative Food.
- 23. David Sands –Example Stores
- 24. Business Overview -Locations Edinburgh (15 miles)
- 25. Value “Significant investment inprice and promotion over next 3 years”
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- 27. LIDIA – Fitfor Purpose Network • Started LIDIA with 25 legacy sites • Acquired Somerfield, adding 9 sites • When LIDIA is complete, we will have: - 1 National DC - 9 Regional DCs - 2 Stockless Cross-docks Newhouse Lea Green Birtley Castlewood Thurrock Coventry AndoverPlymouth Avonmouth Inverness Carrickfergus Huntingdon
- 28. LIDIA – LISBON Newhouse LeaGreen Birtley Castlewood Thurrock Coventry Andover Plymouth Avonmouth Inverness Carrickfergus Huntingdon • Review the efficiency of every supplier through our Distribution Network • Optimise & balance the network through the NDC and RDCs • Identify which suppliers should deliver through the NDC and which through the RDCs
- 29. Store Merchandising And ReplenishmentTransformation Marketing Buying Space Planning Supply Chain Stores SMART– Improving Availability
- 30. Marketing Buying Merch Supply Chain Stores Customers ✓Right product ✓ Right shelf ✓ Right time SMART– Improving Availability
- 31. Summary • We havea great Food Business • The economic conditions are challenging • We have the opportunity to grow • We have a solid foundation and plan