IRI's Weekly News Update - 24th July 2017

IRI
Weekly News update
Your window on the latest trends
in Packaged Groceries
Stephen Hall
Friday 28th July

Copyright © 2017 Information Resources, Inc. (IRI). Confidential and Proprietary. 2
Retailer News:
• Tesco rolling out same day grocery delivery nationwide
• Co-op store acquisition boosts sales at McColl’s
• Waitrose expands male grooming range
• Amazon and John Lewis top customer service ranking
• Walgreens Boots Alliance signs global manufacturing deal with Fareva
• Morrisons putting localised BBQ weather forecasts in all stores
• Costcutter launches Facebook campaign to support own-label brand
• Weakened pound sends Wilko profits plummeting 80%
Category News:
• Quorn outlines £150m investment plan
• Healthy half year for Science In Sport
Other News:
• Cyber attack impacts sales at Reckitt Benckiser
• Profits and sales edge up at PZ Cussons in tough market
• Dr Oetker and Tate & Lyle to sponsor GBBO
• Inflation stabilises in new GB market data
• Asda tracker shows fall in consumer spending power
Weekly News Summary – 24th July 2017

Retailer News

Tesco Rolling Out Same Day Grocery Delivery Nationwide
Tesco has announced that it is extending its same day online grocery delivery service across the entire UK, making it the
first retailer to offer nationwide same day grocery delivery.
The group launched same day grocery delivery in London and the South East in 2014 and is now extending the service to
over 300 stores across the UK, covering over 99% of UK households.
The service allows customers who order by 1pm to have their shopping delivered from 7pm onwards, at a charge of
between £3 and £8.
Tesco said that same day deliveries are proving increasingly popular with it seeing an 18% growth in demand for the
service so far this year.
Adrian Letts, Managing Director of Tesco Online, commented: “Customers tell us they like getting their shopping delivered
quickly and conveniently, and with our same day delivery service they can now order by lunch to get their shopping
delivered for their evening meal.”
He added: “We’ve seen the service grow in popularity since we launched it in London and the South East so we’re really
excited to be rolling it out to customers nationwide.”
Source: NamNews 24th July 2017

Co-op Store Acquisition Boosts Sales At McColl’s
McColl’s Retail has revealed that its total revenue rose 7.6% to £504.8m in the six months to 28 May 2017, benefitting
from the addition of 298 stores it acquired from the Co-op last year.
Around two thirds of these outlets were trading at the half year point with all due to be integrated by the end of this
month. However, the group’s pre-tax profit declined from £8.2m to £4.5m due to exceptional costs from the deal.
Adjusted EBITDA increased to £16.5m from £16m, despite being impacted by £1.3m pre-opening costs relating to the
new stores.
Overall like-for-like sales edged up 0.2%, following a 1.4% uplift in the second quarter which was boosted by favourable
weather. Meanwhile, like-for-like sales in recently acquired and converted stores was up 2.8% in half and by 3.8% in the
second quarter.
Jonathan Miller, McColl’s Chief Executive, said: “I am encouraged by the performance we have delivered over the first half
of the year as our business has continued to gain momentum. We have traded well in a challenging environment and also
benefited from the recent hot weather, which has helped to drive sales in key growth categories including grocery and
alcohol.”
He added: “With all 298 stores now on board, they are expected to make a material contribution to sales and profit in the
second half of the year and beyond.”
The company stated that its full year results are forecast to be in line with management’s expectations.

Waitrose Expands Male Grooming Range
Waitrose has introduced a range of grooming products from exclusive, small British brands in a move that further expands
its collection of men’s skin and hair care.
The retailer is increasing its male beauty range by 77%, with over 40 new products, and doubling the size of its hair care
selection for men. It said the new brands feature a number of “earthy, rugged ingredients” such as black lava, keratin,
caffeine, Tasmanian pepper and volcanic ash.
Mark Steele, Men’s Beauty Buyer at Waitrose, said: “At Waitrose, skin and hair care collections for men have proven
popular, with sales up over 8%. Customers are increasingly becoming more confident and experimental in their grooming
regimes … We’re introducing these new brands to give men even more choice.”
This is the first time British-made brands like Heath, Hawkins & Brimble, The Great British Grooming Co and Fish have
been stocked in a supermarket. The range consists of beard oils, exfoliators, moisturisers and face wash.
Some of the featured products include:
• HEATH Moisturiser with Hyaluronic acid (100ml / £15)
• Rock Face Fash Wash Infused with Green Coffee Extract (£4)
• Fish Platinum Cream with a leather amber scent (100ml / £5.99)
• Great British Grooming Company Exfoliating Face Scrub with Volcanic Ash (£5.99)
• Hawkins and Brimble Pure Bristle Shaving Brush (£20)
• Man Cave Lemon & Oak Shower Gel (200ml / £3.99)

Amazon And John Lewis Top Customer Service Ranking
Amazon and John Lewis top the ranking of the best brands for customer service, a list dominated by retail brands,
according to the fourth annual study by service design consultancy Engine.
Marks & Spencer, Tesco and Sainsbury’s complete a clean sweep by retail of the top five brands for customer service in
the study of customer attitudes to the best brands and sectors, as well as what makes for a good customer experience.
“Amazon is taking the customer experience to a whole new level, continually rolling out new business models – be it
Prime, Prime Wardrobe, Alexa and Echo, Amazon Fresh or the Dash ordering button – to deliver customers the things
they want as quickly as possible,” said Engine’s co-founder Joe Heapy.
“Although a much more traditional brand, John Lewis keeps upping its game too, be it instore iPhone apps, a dedicated
Smart Home space or a new ‘experiential’ store including a beauty spa, travel agent and community room.”
Although retail dominates the list of best brands, as a sector it only ranks third (cited by 40% of respondents), behind
restaurants (47%) and hotels (46%). Retail suffered a 1.7 percentage point drop in the proportion of people citing it as
one of the best sectors for service – the fourth biggest fall among the 14 sectors covered.
“It’s a small but directionally important change as retail generally does a pretty good job of customer service but it needs
to be careful about letting standards slip, particularly as people become more demanding due to the improving service
they get in other sectors,” said Heapy.
“Remember, people aren’t asking the earth. The three things they value most when dealing with a company are honesty,
efficiency and reliability – and it’s been these three consistently for the last four years of the study.”
The study also revealed that consumers are more than twice as likely to recommend a company or brand based on the
quality of service (66%) than they are on price (31%). Heapy noted this is a “reassuring reminder for retailers who are
worried about competing on price. Quality is far more important.”
At the other end of the spectrum, public transport (cited by 38%), utilities (37%) and broadband/media (33%) are
regarded as the worst sectors for customer service.

Walgreens Boots Alliance signs global manufacturing deal with
Fareva
Walgreens Boots Alliance has signed a ten year deal with cosmetics manufacturer Fareva.
The new agreement means the French supplier, which employs nearly 10,000 employees worldwide, will create own-brand
beauty and private label products for Walgreens Boots Alliance.
“The proposed agreement will create a partnership to provide Walgreens Boots Alliance with a core multinational
manufacturing and development resource, enabling the company to accelerate its global product strategy,” Walgreens
Boots Alliance said in a statement.
Details of the deal were undisclosed, but Fareva will take ownership of Boots Contract Manufacturing (BCM), Walgreens
Boots Alliance’s contract manufacturing business.
Headquartered in Nottingham, UK, BCM currently produces Boots’ private label brands including No7, Botanics and
Seventeen, as well as manufactures products for third party brands.
The proposed agreement, which is subject to Works Council consultation and regulatory approval, is expected to be
completed by the end of 2017.
Source: Cosmetics Business 26th July 2017

Morrisons Putting Localised BBQ Weather Forecasts In All
Stores
Morrisons is introducing localised weather forecasts in all of its 491 stores to help its customers plan their
BBQ shopping this summer.
The weekend weather forecasts will be placed on boards at the front of store each Thursday for the
duration of the summer holidays with the aiming of help customers buy the right food for the weekend and
to help reduce food waste. There will also be weather announcements over store tannoy systems to remind
customers during their shopping trip.
Morrisons is working with MetraWeather to provide the local weather forecasts for each of its stores around
the country.
The move follows research for Morrisons found that 58% of Brits do not know the weather forecast when
doing their shopping. As a result, 21% said they buy the wrong food for the weather.
Additionally, 31% of customers find themselves commonly doing an additional shopping trip because
weather is unexpectedly good or bad.
Anna Lane, Customer Service Director at Morrisons, said: “We can’t change the weather but we hope that
by giving our customers up-to-date local BBQ forecasts we will help them plan their shopping and make
the most of our fresh British food this summer.”
Byron Drew, Weather Consultant at Metraweather, added: “Using the latest technology our localised
weather reports can predict the weather in an area between two to four kms, which means we can predict
the weather in individual areas near to Morrisons stores. The weather forecasts will help shoppers to take
advantage of any unexpected heat waves.”

Costcutter launches Facebook campaign to support own-label
brand
Costcutter has launched a Facebook Canvas advert to support its multi-channel “Tasty in No Time” own-brand campaign.
“Tasty in no Time”
The group launched the Facebook Canvas at the start of July, which focuses on its ‘Tasty in no Time’ summer burger
recipe, using all own-brand independent products. The original campaign was launched in April and features ‘food for
tonight’ recipe suggestions using own-brand products. This appeals to increasingly time-poor shoppers looking for high
quality meal solutions. The campaign is also a way for Costcutter to display its own-label credentials in an engaging way.
Alongside social media, the campaign is supported by in-store POS, in-store radio advertising, national press advertising
and consumer leaflets to directly engage shoppers.
Immersive shopper experience
The ‘Canvas’ advert allows users to build a ‘unique experience’ with the combination of text, images, videos, carousels,
and product feeds, as well as targeting content to specific users.
Jenny Leetch, Costcutter’s Brand Manager for Own Brand, commented: “Putting our shoppers first, we’ve provided
relevant, timely and fun content for them to engage with. The short and cheeky video is on trend, easy to follow, and
shows that the independent brand offers quality meal solutions at a great price.”
Source: IGD 27th July 2017

Weakened pound sends Wilko profits plummeting 80%
Value retail chain Wilko has recorded a sharp drop in profits, attributing it to the weak sterling and the “unilateral
imposition” of the national living wage.
For the year to January 28, pre-tax profit plummeted by 80 per cent to £5.2 million, exacerbated by £12.9 million losses
from currency forward contracts.
While Wilko also experienced a 13 per cent drop in EBITDA to £48.9 million, like-for-likes was up by one per cent and
total sales rose by 3.3 per cent.
“Sterling depreciated 15 per cent against the US dollar following the Brexit vote and has remained broadly at this low ever
since,” the retailer said.
“The impact on UK prices is widely expected to result in up to five per cent inflation during 2017 as UK importers struggle
to absorb the cost increase of imported goods.
“The outlook for 2017 and beyond has been reduced from pre-Brexit levels as the UK adapts to uncertainty and
consumers are expected to see a reduction in real wages.”
Wilko has also criticised the introduction of the national living wage.
“Chancellor Osborne’s final austerity budget surprised the industry by its unilateral imposition of a statutory minimum
living wage at well above expected levels,” it company said.
“All low margin businesses in a zero inflation economy were affected.”
Wilko also opened 19 new stores during the period.
Source: Retail Gazette 26th July 2017

Category News

Quorn Outlines £150m Investment Plan
Quorn Foods has outlined major investment plans to meet growing demand for its products around the world.
The meat substitute manufacturer will invest £150m in expanding its Billingham site in Teeside to double production at
the plant. Around 300 new jobs over the next five years are expected to be created as a result. It is also looking to build
new research and development facilities at its HQ in Stokesley, North Yorkshire.
The commitment was made as Quorn revealed that its global sales rose by 19% during the first half of this year, with UK
sales up 15%. Business in the US was also up 40%, while in Asia and Australia sales jumped 35%.
Quorn is benefitting from the rise of the ‘flexitarian’ diet where people reduce meat consumption in favour of more
sustainable protein sources.
The firm, which has been owned by Monde Nissin of the Philippines since 2015, has set a goal of becoming a billion dollar
(£770m) brand by 2027. Last year, Quorn posted turnover of £170m with it needing to grow by 15% per year to reach its
goal.
Chief Executive Kevin Brennan commented: “We are proud to be contributing to the UK’s export drive and to be investing
in a British innovation that is vital to addressing the future need for protein across a growing global population.”
He played down any Brexit impact to its European business when the UK leaves the EU, saying “growth will continue as
expected” and highlighting the enormous scale potential offered by further expansion in the US, Australia and Asia.

Healthy Half Year For Science In Sport
Sports nutrition firm Science in Sport (SiS) has continued its strong run of growth with a healthy rise in first half sales.
In the six months ended 30 June 2017, the group’s sales jumped 28% to £8.27m, having risen 30% for the whole of last
year. SiS said its e-commerce platform delivered growth of 78% across all markets, whilst there was also growth in all
retail channels despite “tough” trading conditions.
Additionally, SiS increased investment in its US and Italian businesses and they are said to be trading in line with
expectations, as is its Australian business.
The group said its science and innovation pipeline is healthy and revenues are expected to accelerate in the second half of
the year, with a WHEY20 relaunch this month, and both a premium recovery product and a novel immunity product to be
launched in August.
Stephen Moon, SiS’s CEO, said: “We have had a strong start to the year in a difficult market, and have made very good
progress, particularly when many of our competitors continue to face growth challenges.
“We have invested heavily in international markets and increased our investment to capitalise on opportunities we are
seeing. We continue to invest in all aspects of our e-commerce business and that is reflected in the high growth delivered.
We have good momentum and together with our healthy innovation pipeline, we expect to have a strong second half.”

Other News

Cyber Attack Impacts Sales At Reckitt Benckiser
As flagged earlier this month, Reckitt Benckiser (RB) has reported a 2% fall in its second quarter sales after the recent
global cyber attack disrupted its operations.
For the first half as a whole, like-for-like sales were down 1% with total revenues growing 2% on a constant currency
basis to £5.02bn. RB said that underlying sales performance in the second half of the year will improve with a predicated
rise of 2% for the full year, down from 3% previously forecast.
Meanwhile, the group’s adjusted operating profits were up 16% to £1.19bn when measured at actual exchange rates or
1% at constant exchange rate basis.
The group added that the integration of its recently acquired Mead Johnson business was “progressing well”. Last week,
RB announced it was selling its food division to US group McCormick.
“We have made significant progress on portfolio transformation and becoming a more focused consumer health and
hygiene business, with both the acquisition of Mead Johnson Nutrition, and the agreed sale of our food business”, said
Rakesh Kapoor, RB’s Chief Executive.
Highlighting the impact of the cyber attack, Kapoor stated that he expected the RB business to return to growth
progressively over the second half of the year. He said: “As set out in our statement of 6 July, we are targeting full year
net revenue +2% LFL growth for the RB base business. I see this as a challenging target. We are experiencing tough
market conditions, and we still have work to do on addressing the full implications of the recent cyber-attack. Operating
margin continues to make satisfactory progress and we reiterate our medium-term target of moderate expansion.”

Profits And Sales Edge Up At PZ Cussons In Tough Market
PZ Cussons has reported a slight rise in profits and sales following a year of “tough trading conditions” in most of the
markets in which it operates.
In the 12 months to 31 May 2017, the group’s pre-tax profits before exceptional items rose 1.7% (constant currency
basis) to £103.5m on revenues up 0.9% to £809.2m.
Despite competitive market conditions, the group, whose brands include Imperial Leather, Carex and Original Source, said
that it saw robust performance in its UK washing and bathing division, underpinned by product innovation. However, sales
in Europe still fell 2.4% (constant currency) to £280.9m.
Its largest market, Africa, saw sales rise 4.7% to £305.6m as its businesses in Nigeria traded relatively well despite
“significant year-on-year currency devaluation and lack of liquidity”.
Sales in Asia edged up 0.1% to £222.7m, helped by a strong second half performance as results improved in Australia.
Chairman Caroline Silver said the group had delivered a “solid set of results”, adding: “Our strategy of ongoing brand
innovation and renovation continues to underpin the group’s ability to maintain or grow our market shares.”
Meanwhile, PZ Cussons announced that Chris Davis, its Group Chief Operating Officer, will be retiring after the group’s
AGM on 27 September. The group said that his responsibilities will be assumed by its Chief Executive Officer, Chief
Financial Officer and other members of the company’s Executive Committee.
Davis was Managing Director of the group’s Australian business before being appointed to the Board in 2006. He took up
his present role as Chief Operating Officer in 2013 with Silver stressing that he has played a leading role in the company’s
recent business transformation programme.

Dr Oetker And Tate & Lyle To Sponsor GBBO
The Dr Oetker and Tate & Lyle brands have been unveiled as the joint broadcast sponsor of Channel 4’s The Great British
Bake Off, set to return this autumn for the eighth series.
The dual partnership for 2017 also includes the Jo Brand presented spin off show Bake Off: An Extra Slice as well as
festive episodes.
Tate & Lyle Sugars said: “We are proud to announce Lyle’s Golden Syrup as joint broadcast sponsor of the beloved Great
British Bake Off for 2017. As one of the nation’s favourite kitchen cupboard staples, we are very excited about the
opportunity to join the celebration of the Great British baking obsession and look forward to all the thrills and spills of the
forthcoming season.”
Dr Oetker’s sponsorship is the first time that the baking brand has ever sponsored primetime TV programming.

Inflation stabilises in new GB market data
The latest data from Kantar Worldpanel shows that the GB grocery retail market grew by 3.9% for the period to 16 June
2017. While a step back from last month's 5.0% growth, it still means that growth has exceeded 3% for the fourth
consecutive period, the first time this has happened November 2013.
Price inflation stabilises
The new numbers are the first since the annualisation of the vote to leave the European Union and include like-for-like
inflation of 3.2%. The rate is unchanged on the previous month, suggesting that inflationary pressures on imported
products resulting from sterling's devaluation may be beginning to ease. Volume growth was supported by the hot
weather in June, with surges in sales of ice cream, fruit and vegetables, alcohol and suncare products.
Record share for own label
Own label sales grew by 6.7% year-on-year to give it a market share of 51%, a record high, driven by increased spending
on premium private label options. Spending on these products increased by 13.9% year on-year, far faster than brands,
which achieved growth of just 0.9%. The higher growth follows continuing investment in the creation of new products
and improvements to existing lines as retailers use own brand more to provide shoppers with distinct reasons to choose
them over competitors.
Further double digit growth from discounters
Lidl was once again Britain's fastest growing retailer with sales up by 19.4%, its strongest growth since October 2014.
This has pushed its market share to a record 5.1% with the development following news from Lidl that it is accelerating
its store opening plans in the UK to 50-60 per year. Click here for more details. Lidl's growth is just ahead of Aldi's
17.9%, which saw it reach a market share of 7.0% this month.
Competition tight among Big Four
Tesco, Sainsbury's and Morrisons saw sales growth of 2.3%, 2.2% and 2.1% respectively. Tesco which announced plans
to roll out same day delivery nationwide this week was lifted by strong online growth. Online, alongside growth in its
convenience business, also supported Sainsbury's performance. Sainsbury's is notable too for its low proportion of
products sold on promotion, just 36%, compared to 42% across its big four rivals. Morrisons was lifted by continuing
uptake of its relaunched premium own brand lines. Asda continued to achieve growth from its Farm Stores meat and
produce lines which are now present in a quarter of its customers' baskets.
Source: IGD 27th July 2017

Asda Tracker Shows Fall In Consumer Spending Power;
Confidence Also Slipping
Latest figures from Asda’s Income Tracker reveals that families experienced falling spending power in the second quarter
of this year compared to the same period in 2016.
In June, households saw their spending power decline for the third month in a row with families having £198 of
discretionary income. Whilst a drop, the decline has plateaued compared to previous months, with only a -0.2% (47p)
change to the UK average compared to the same month last year.
Kay Neufeld, Economist at Cebr, said: “Although lower inflation in June eases the pressure on households’ budget
somewhat, rising food prices continue to drive up the cost of essential spending.
“The comparison between Q2 2016 and Q2 2017 shows that the gains in spending power made over the second half of
last year have been reversed. On a regional level, this reversal of fortunes for households was most pronounced in
Northern Ireland and Wales due to higher unemployment and weaker wage growth compared to other regions.
“For families going on vacation in the UK, cheaper fuel prices will be a welcome factor holding costs down. But prices for
hotels and restaurants have been on the rise for some time now and are likely to more than offset savings at the pump.”
Meanwhile, separate data shows that consumer confidence has returned to a level not seen since the immediate
aftermath of the shock Brexit vote. GfK’s long-running Consumer Confidence Index decreased two points to -12 in July,
with four of the five measures used in the analysis decreasing.
Joe Staton, Head of Market Dynamics at GfK, said: “The economic picture across the UK remains confusing and this mood
is reflected in the Overall Index Score, which is down by five points. It’s the sharp drop in confidence about the UK’s
general economy – both looking back one year and ahead one year – that is driving the fall. While there’s a small bounce
in consumer views of personal finance looking ahead, that’s the only measure that’s up.
“All bets must now be on a further drift downwards in confidence. Yes, employment is booming, but wages have fallen in
real terms since 2008 once inflation is taken into account. And while consumers have increased borrowing to carry on
spending, the household savings ratio is now at a record low. If Brexit negotiations continue to deliver more questions
than answers, it’s unlikely the Overall Index Score will find any tailwinds for some time.”

IRI's Weekly News Update - 24th July 2017

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Editor's Notes