IRI's weekly news update - w/c 5th June 2017

IRI
Weekly News update
Your window on the latest trends
in Packaged Groceries
Stephen Hall
Friday 9th June

Copyright © 2017 Information Resources, Inc. (IRI). Confidential and Proprietary. 2
Retailer News:
• Tesco moves back into second place in growing Irish grocery market
• AmazonFresh expanded across Hertfordshire and Bedfordshire
• Iceland reports growth for FY 2016/17
• Discount shoppers shift from Labour diehards to Tory voters
• Steinhoff upbeat about Poundland H1 results
• Costco UK results show strong growth in latest year
• Tesco celebrates partnership with British farmers
• Natura Cosmeticos unexpected winner of Body Shop bidding war
Category News:
• Sainsbury’s doubles its range of non-dairy milks
• Dove Men+Care celebrates all father figures in There to Care campaign
Other News:
• Retail sales fell in May despite strong month for supermarkets
• Average grocery basket price continues to fall
• Consumer spending hits 10-month low
Weekly News Summary – 5th June 2017

Retailer News

Tesco Moves Back Into Second Place In Growing Irish Grocery
Market
The latest grocery market share figures from Kantar Worldpanel in Ireland for the 12 weeks ending 21 May 2017 show that the
market continues to grow despite further price deflation.
The value of the grocery market increased by 2.2% during the past quarter compared with last year, making the sector worth
€2.37bn over the 12 weeks – up €50m on last year.
David Berry, director at Kantar Worldpanel, explained: “With the average price per pack falling slightly, growth has been driven by
households buying extra items, with the average shopping basket increasing in size. Retailers’ own brands continue to lead the way,
growing sales by 3.8% and accounting for 54% of grocery purchasing.”
Among the retailers, SuperValu remained in the top spot with a clear 0.5 percentage point lead over Tesco in second place. Sales at
SuperValu have increased by 1.2% as shoppers added more items to their trolleys, spending an additional €1 on average per trip
compared with this time last year.
Edging ahead of Dunnes Stores by 0.1 percentage points, Tesco moved back into second place during the past quarter for the first
time since September 2016, capturing a 22.0% share of the market. While value sales increased only slightly by 0.3%, volume sales
continue to tell a more positive story – up 4.6% year on year as shoppers visit Tesco more regularly.
Berry commented: “The recent strong performance from Dunnes Stores has continued, with overall sales improving by 4.9%
compared with last year. This is despite the number of consumers visiting Dunnes actually falling – the retailer had 54,000 fewer
shoppers during the past 12 weeks. However, this has been offset by an impressive spending increase among remaining customers,
with Dunnes shoppers spending 10% more – €47 extra on average – with the grocer during the latest quarter.
“Meanwhile Lidl and Aldi have also enjoyed strong performances during the past 12 weeks. Growth for Lidl has accelerated to 2.7%
with Aldi boosting sales by 4.0%. Lidl now captures 11.4% of the grocery market, with Aldi just behind with an 11.2% share. Both
retailers have benefited from shoppers visiting them more often, with Lidl seeing almost one additional trip per shopper over the past
12 weeks.”
Grocery market inflation stood at -0.2% for the 12 week period, up slightly from the -0.3% seen last month.
Source: NamNews 5th June 2017

AmazonFresh Expanded Across Hertfordshire And Bedfordshire
Amazon is continuing to expand the coverage of its grocery delivery service further outside London, this time to 42
postcodes in Hertfordshire and Bedfordshire.
Having launched the service in 62 postcodes a year ago, AmazonFresh is now available in 302 postcodes across London
and the South East. The latest expansion means that Amazon Prime members from Watford to Berkhamsted to Luton can
order their weekly groceries from the online giant.
AmazonFresh now offers a selection of over 180,000 grocery items, after adding more than 50,000 products over the last
year.
“We value the great feedback from our customers over the past year, and it’s helping us to continually improve
AmazonFresh as we bring the service to more and more Prime members across London and the South East,” said Ajay
Kavan, Vice President, AmazonFresh International.
“We have built on our momentum in the UK with the launch of AmazonFresh in Germany and Japan over the past couple
of months and will keep working to expand selection, offer great value, and provide fast and convenient delivery options
for all of our customers.”

Iceland reports growth for FY 2016/17
Specialist frozen food retailer, Iceland has announced financial results for its year to 24 March 2017, reporting sales up by
4.4% to £2.8bn. In a market place where many major UK grocery retailers have struggled to keep like-for-like sales
positive, Iceland posted underlying growth of 2.0%, and has reported a continuing positive trend into the fist quarter of
2017/18.
Increased focus on product innovation
In a drive to revolutionise consumer perceptions of its retail offer, over the last two years Iceland has significantly upped
the pace and quality of its new product development, with a focus on underlining the advantages that freezing can
offer. In 2016 the company invested £2m in a new development kitchen at its head office, which has been instrumental
in bringing more luxury and speciality lines to the range.
Food Warehouse format driving new space
Iceland opened 28 new stores in the course of the year, taking its total portfolio to 884. Twenty four of these new units
were under the Food Warehouse fascia, which are larger stores, combining a cash & carry bulk concept with elements of
the more traditional Iceland freezer centre format.
Malcolm Walker, Executive Chairman, Iceland commented:
"The set of strategic initiatives we began in 2015, with the aim of differentiating Iceland, changing consumer perceptions
and so restoring growth to our business, bore fruit in the year. Like-for-like sales performance improved throughout the
year to make us one of the UK's fastest-growing food retailers by the year-end."
Source: IGD 5th June 2017

Discount shoppers shift from Labour diehards to Tory voters
Aldi and Lidl shoppers are now more likely to vote Conservative, despite coming from strong Labour areas in the 2010
election, according to a new survey.
GlobalData’s Consumer Sentiment Tracker has revealed that both Tesco and Sainsbury’s shoppers also favour the Tories,
while the other Big 4 retailers Asda and Morrisons are predominantly Labour supporters.
GlobalData’s results are based on data from 1886 shoppers asked who they were intending to vote for and where they
usually shopped. If supermarkets represented parliamentary seats, the results of the survey would show a Tory majority
government, benefiting from the two German discounters swing to the right.
Just over 40 per cent and almost 45 per cent of consumers said they were voting Conservative in Aldi and Lidl
respectively.
In 2015 shoppers at the pair showed significant support for UKIP, and it is thought that far more of these voters have
swung to the Tories than have to Labour.
Recent pushes into more areas and a changing perception of discount shopping has also seen an influx of more affluent
shoppers visit Aldi and Lidl, pinching market share from places like Waitrose, which posted the highest amount of Tory
support at 46 per cent.
Source: Retail Gazette 7th June 2017

Steinhoff upbeat about Poundland H1 results
Steinhoff International has reported encouraging results for its general merchandise division, which has been boosted by
the acquisition of UK variety retailer Poundland.
Poundland trading 'ahead of expectations'
In the six months to 31 March 2017, Poundland traded ahead of expectations and the positive LFL sales of Q1 - the first
since December 2014 - continued into Q2. Sales for the period were €910m. Adding in contributions from its other
discount focused retail businesses, such as PepCO in Eastern Europe, Steinhoff's European revenues reached €1.4bn for
the half year, up from €310m for H1 2015/16 when Poundland was not part of the business.
Enhancing the Poundland proposition
Focus areas have included the introduction of a multi-price point product range, expansion of the product offer to include
Pep&Co clothing, optimisation of the store network and collaboration with the wider Steinhoff Group on supply chain
initiatives.
Store portfolio rationalised to drive profitability
During the period, Poundland opened 10 stores and closed 57 loss making stores to finish the period with 827 Poundland
and Dealz stores. Poundland also commenced the rollout of its Pep&Co store in-store concept and 50 units were trading
by the end of May. GHM! stores were also converted to the Poundland format while standalone Pep&Co stores also
delivered good growth.

Costco UK results show strong growth in latest year
Financial accounts filed with Companies House show that Costco UK grew sales by 8.0% in the full year 2015/16 (to 28
August 2016), taking its turnover over two billion for the first time, reaching £2,056.6m. Around one third of this growth
came from the first full year of trading of the new warehouse at Sunbury, opened in August 2015. Food and grocery
categories performed especially well, with tobacco, beers & wines and frozen amongst those noted for
outperformance. The business reports that the growth trend continued into H1 of 2016/17, with sales to 12 February
2017 showing 'strong improvement' over 2015/16.
Growth also boosted by new forecourt openings
Over 2015/16 Costco added petrol forecourts to four further existing warehouse locations: Bristol, Sheffield, Thurrock and
Haydock. And following two further forecourts added at Chester in late 2016 and Manchester in early 2017, Costco now
has eight across it portfolio nationally, with more planned to open in the coming months. The expansion of its fuel offer
made a significant contribution to overall sales growth in 2015/16, estimated to represent 18% of the total uplift.
Focus on steady ongoing expansion for the future
Costco UK remains committed to adding 1-2 new warehouses ongoing. Following the opening of its Wembley site in
August 2016 (click here for our detailed insight report) it has 28 warehouses, and ultimately sees potential for a total of
35 to 40. Included in its pipeline for future openings is a site in Stevenage, Hertfordshire, acquired in December 2016.
UK operation supporting European expansion
2015/16 saw Costco moving its central distribution function to Crick, Northamptonshire, where it now occupies a 380,000
sq ft facility, with scope for further expansion. In addition the site supports Costco's online retailing operation, as well as
partially supporting its two warehouses in Spain. Crick will also be involved in supporting distribution to the sites in both
Iceland and the forthcoming opening in France, near Paris.
Online limited in scale, but growing fast
Costco Online, the internet trading business, is reported as wholly separate operation, unconsolidated with the warehouse
division. Sales in this online division reached £59.5m in 2015/16, up 29% on the previous year. Non-food categories
comprise substantially the biggest parts of the division, with the growth being driven above all by gardening and furniture
lines, as well as small appliances. Having achieved a small profit in 2014/15 Costco Online, made a loss of £1.3m in this
latest year, due to an increase in fixed costs linked to the transfer of operations to the new distribution facility at Crick.

Tesco celebrates partnership with British farmers
The supermarket will have a presence at the Royal Cornwall Show, the Royal Highland Show, the Great Yorkshire Show
and the Royal Welsh Show.
At each of the shows, Tesco plans to give visitors the chance to learn about initiatives such as the Tesco Sustainable Dairy
Group, Future Farmer Foundation and Fair For Farmers Guarantee. They will also be able to meet local suppliers, sample a
range of British fruit and vegetables, local cheeses and regional meats, and watch a range of cookery and butchery
demonstrations.
Tesco has reported that a recent survey found that almost 80% of suppliers were happy with their engagement with Tesco
last year and 98% of dairy farmers said they had benefited from being part of the Tesco Sustainable Dairy Group, which
works to help farmers receive a fair price for their milk.
Barney Kay, head of agriculture for Tesco said: “We’re going to celebrate our long-term partnership with British farmers
and suppliers at these agricultural shows by telling the story of how we work together with real experts in their fields to
bring affordable, fresh, quality food that’s fair for all.
“British farmers produce some of the best food in the world, and we believe that if we invest in farming for the long-term,
customers will get better quality, fresh, affordable food today and tomorrow.”
Source: The Retail Bulletin 9th June 2017

Natura Cosmeticos unexpected winner of Body Shop bidding war
Brazilian cosmetics brand Natura Cosmeticos has become the unlikely winner of The Body Shop bidding war as L’Oréal
announced it has entered into exclusive talks this morning.
Following widespread speculation and many interested parties including Chinese group Fosun, Goldman Sachs and CVC,
L’Oréal has picked the Brazilian brand in a deal valuing the retailer at €1 billion (£880 million).
Little else is yet known about the deal, other than it is still subject to approval by Brazilian and US regulators, also being
submitted to L’Oréal’s employee representative body.
“I am very pleased to announce Natura as the potential new “home” for The Body Shop,” L’Oréal chief executive Jean-Paul
Agon said.
“It is the best new owner we could imagine to nurture the brand DNA around naturality and ethics.
“Natura will support The Body Shop development in the long-term and enable The Body Shopto best serve its customers
while respecting its strong commitments towards its employees, franchisees and stakeholders.
“I would like to thank all The Body Shop employees and partners around the world for their contribution to the
development of the brand over the past eleven years and I am confident they will be in the best hands for the future.”

Category News

Sainsbury’s Doubles Its Range Of Non-Dairy Milks
Amid growing consumer demand for alternative milks that don’t continue dairy, Sainsbury’s has doubled its range of such
products in 300 of its stores.
After seeing growth in the category of 11.5% last year, and 28.8% over two years, the retailer has added 18 new plant-
based milks to its aisles. Within the new range, Sainsbury’s is stocking dairy alternatives from the Califia Farm brand,
including iced coffee ‘take home’ packs and cold brew coffees with nut milk. It uses Californian almonds to produce its
products with it being the third-largest such brand in the US. Premium nut-based milks from Plenish are also now
available in Sainsbury’s stores.
James Curtis, Milks Buyer at Sainsbury’s said: “We’re delighted with the performance of our dairy alternative milk range
over the last year. By adding these fantastic quality, great tasting branded lines like Califia Farms, we will be a real
destination shop for customers looking to replace regular milk with non-dairy alternatives. In particular, we expect cold
brew coffees made with nut milks and additional dairy products like Kefir to continue to build in popularity over the
coming months and years.”

Dove Men+Care celebrates all father figures in There to Care
campaign
Dove Men+Care is breaking away from the traditional family structure in its Father’s Day campaign to focus on the
broader concept of a parental figure.
The There to Care campaign is a compilation of four home videos created by consumers, each aiming to capture a
different father figure role.
Nick Soukas, VP Skin Cleansing & Baby Care for Unilever, said the film was sparked by research that caring is a true side
to masculinity and 75% of men believe that it has a positive impact on society.
“That’s why, this Father’s Day, we want to acknowledge the many ways that men are making a significant impact by
caring for others, and create an opportunity to thank them too,” he said.
Dove is asking consumers to join the digital conversation using #ThereToCare.
Source: Cosmetics Business 7th June 2017

Other News

Retail Sales Fell In May Despite Strong Month For Supermarkets
Latest figures from the BRC and KPMG show that UK retail sales fell last month as declining consumer spending power led to non-food sales
hitting a six-year low, which was partly offset by a strong period for supermarkets.
On a like-for-basis, UK retail sales decreased by 0.4% compared to May last year. Meanwhile, on a total basis sales rose 0.2%, which was
the lowest since January, excluding Easter distortions, and well below the 3-month and 12-month averages of 1.9% and 1.2% respectively.
Over the three months to May, food sales increased 3.2% on a like-for-like basis and 4.3% on a total basis, boosted by inflation in the
sector. This was the strongest 3-month average since February 2012, excluding Easter distortions, and pulled the 12-month total average
growth to 2.2%, the highest since January 2014.
Meanwhile, non-food retailers endured a difficult period as shoppers tightened their belts in the face of rising inflation. Non-food retail sales
over the three months to May fell 0.3% on a like-for-like basis and increased 0.1% on a total basis, below the 12-month total average
growth of 0.5%. The BRC said that May’s total non-food performance was the worst recorded since May 2011.
It was also a sluggish month for the online sector with sales of non-food products slumping to the lowest level since records began in
December 2012, growing by 4.3% last month compared to a 13.7% jump in 2016.
Helen Dickinson, Chief Executive of the British Retail Consortium, said May’s weaker sales performance was indicative of a longer term
trend of a decline in consumer spending power, with household budgets increasingly squeezed by rising inflation as a result of Sterling’s fall
in value following the Brexit vote.
Paul Martin, UK Head of Retail at KPMG, commented: “The impact of inflationary pressures on the nation’s purse continues to play out in
this month’s figures, with shoppers evidently spending more on food and drink than on non-food purchases. With inflation continuing to rise
and wage growth stagnating, consumers are starting to feel the pinch – although the highly competitive nature of the UK grocery market
continues to play out in the consumer’s favour.
“Many retailers, particularly fashion stores, will be poised and ready to make the most of the upcoming summer, so hopefully the weather
will play fair. An increased focus on managing costs will dominate the retail agenda. More imminently though, eyes will be firmly placed on
the outcome of the General Election, with close attention being paid to the implications it might have on the industry.”
Meanwhile, commenting on the performance of food & drink sector, Joanne Denney-Finch, Chief Executive at IGD, said: “Food and drink
sales were again strong in May, not quite reaching the heights of average growth from the previous two months, but maintaining the trend
for year-on-year growth. This was mainly attributable to inflation combined with warm weather in the run-up to the late May bank holiday.
The sustained sunshine saw beers, wines and spirits enjoy double-digit growth.
“With no big summer event beyond the regular schedule this year, sales over the next few months will hinge largely on the weather.”

Average grocery basket price continues to fall: online tracker
An online tracker has indicated that the average grocery basket price continued to fall last month, despite warnings
of post-Brexit increases to the cost of imported goods.
According to price comparison website mySupermarket’s Groceries Tracker, a basket of 35 popular items cost £81.33 last
month, 60p cheaper than the month before and £1.26 cheaper than May last year.
Overall, the cost of 18 items fell, 11 increased and six stayed the same.
The news comes a week after the BRC-Nielsen Shop Price Index indicated that the price of grocery shopping continued its
upwards trajectory, with food inflation rising 1.4 per cent in May compared to 0.9 per cent in April.
Today’s Groceries Tracker figures show that most price rises were between one per cent and three per cent, although the
cost of mushrooms rose by seven per cent.
However, bananas saw a four per cent price drop, peppers and tomatoes were down three per cent and two per
cent respectively, while the biggest fall was for onions at per cent.
“The current political climate in the UK will soon start to have an impact on the price of goods as the price of imported
goods will likely increase,” mySupermarket chief executive Gilad Simhony said.
“In these times of economic uncertainty, supermarkets are doing what they can to entice customers into the store.
“This benefits the consumer as the supermarkets engage in a price war, pushing the price of fruit and vegetables down.
“By doing your research before shopping and splitting your shop across multiple stores, you could save up to 30 per cent.”

Consumer spending hits 10-month low
Consumer spending growth slowed to 2.8% year on year in May, new figures from Barclaycard have shown.
The figure is the lowest in ten months, as overall confidence in household spending power cooled in response to rising
inflation, which hit 2.7% in April.
Shoppers spent less on groceries and fuel in particular, with supermarket growth down to 1.5% from 10.3% the previous
month, and petrol growth down from 14.7% to 7.4%.
Just over half (53%) of respondents said they felt confident in their household finances – the lowest level since
Barclaycard started tracking confidence data in 2015.
Barclaycard managing director Paul Lockstone said: “Consumer spending growth was subdued last month as shoppers
paused for breath after an Easter bounce in April.
“With the Consumer Prices Index running at its highest rate since 2013, it’s no surprise that more of us are starting to
‘feel the squeeze’ of inflation and slower wage growth, perhaps prompting small changes to our spending patterns.
“It’s far too early, however, to suggest that this is the beginning of a period of increased caution. As we head into
summer, it will be interesting to see how the spending picture might change after consumers reassess their household
budgets.”
Source: Talking Retail 7th June 2017

IRI's weekly news update - w/c 5th June 2017

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