IRI's Weekly News Update - w/c 19th September 2016

Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 23rd September

Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2

• Transformation plan helps drive growth at Kingfisher• Drinks promotions provide summer boost for GB grocery market • Diageo on track to meet growth target• Sainsbury’s closes curtain on digital entertainment business• Majestic Wine issues profit warning• SPAR gets set for Halloween• New Lidl UK boss sheds light on priorities • Shepherd Neame posts robust year end results• Morrisons trialing student discount offer• Co-op reports strong L4Ls in H1 • Sainsbury’s opens new London fulfilment centre• Sainsbury's undeterred by Mary Berry's GBBO departure as it revamps bakery range

Weekly News Summary – 19th September 2016


Transformation Plan Helps Drive Growth At KingfisherKingfisher has reported a rise in half year sales and profits as its progressed with its £800m five-year plan to overhaul the business.

During the six months ended 31 July 2016, the DIY group reported sales up 2.7% to £5.75bn and retail profit growing 8.7% to £464m.

In its UK & Ireland division, sales rose 3.1% to £2.61bn with like-for-like sales jumping 6.7%. Total sales at B&Q slipped 1.9% overall to £2bn due to planned store closure but on a like-for-like basis they were up 4.6%.

Meanwhile, total sales at Screwfix grew by 24% (+14.7% LFL) to £612m, driven by strong growth from its specialist trade desks exclusive to plumbers and electricians, strong digital growth, and the continued roll out of new outlets (20 net new outlets were opened, taking the total to 477).

The group said that following the outcome of the EU referendum result, there had been no clear evidence of an impact on demand so far on its businesses. It added that its ‘ONE Kingfisher’ transformation plan, announced earlier with the aim boosting profits by £500m a year from 2021, was seeing good early progress. The plan includes unifying its product offering across the group, improving its ecommerce capabilities and efficiency, and closing underperforming stores.

Véronique Laury, Chief Executive Officer, said: “It has been a productive first half. We have delivered a good ‘business as usual’ result with both sales and profit growth.

“Looking longer term, we are starting to build solid foundations to enable us to deliver our five year transformation, which is our key growth driver. We are making good progress on our strategic milestones for this first year and we are on track. The level of transformation activity will increase significantly, however given the expertise and energy of our colleagues we continue to feel confident about the challenges ahead.”

Source: NamNews 20th September 2016


Drinks promotions provide summer boost for GB grocery market The latest data release from Kantar Worldpanel reveals that the GB market achieved slight growth in the 12 weeks to September 11th, in line with the previous period. This was despite deflation of -1.1%, the 26th consecutive period that inflation has been negative. The period benefited from an 8.5% surge in alcohol sales over the last four weeks as many retailers ran promotional events to tap into the feel good mood created by Britain's summer of sporting success.

Improving trend for TescoTesco was the best performer among the Big Four, with a year on-year sales decline of -0.2% (up from -0.4% last month and its best result since March 2014). Its performance was boosted by a successful summer Drinks Festival event which saw alcohol sales grow faster than any other category. Kantar also noted that Extra and larger stores delivered a positive contribution to the result, suggesting that Tesco's continuing drive to improve the shopping experience is resonating with its customers

Setback for Sainsbury'sSales at Sainsbury's fell by 1.4%, a deterioration on last month's -0.6%, with this result following the retailer's withdrawal of multi-buys in July and reprioritisation of promotional space in-store to focus more on new products. Sainsbury's will update on its Q2 trading on September 28th.

Promotions lift Waitrose share to new recordWaitrose's market share hit a new record of 5.3%, helped by a half price event across much for the store particularly in household and alcohol. This meant that promotions reached a higher proportion of sales than some of the traditionally more promotion-focused Big Four. These results follow last weeks H1 results which Waitrose revealed gross sales increased by 2.2%, driven by the opening of seven new sites and an additional 250,000 transactions per week.

Strong growth for IcelandIceland's growth of 6.3% is step up on last month's 4.3% and reflects the work the retailer has done to improve its position in its core frozen categories while also making stores better able to meet top-up needs, by for instance expanding its fresh produce offer. Iceland's growth comes as Lidl's growth has dipped into single digits after several months of being the fastest growing retailer. This has allowed Aldi to reclaim its crown as Britain's fastest growing retailer with sales up by 11.6%, from +10.4% last time.

Source: IGD 20th September 2016

http://retailanalysis.igd.com/Hub.aspx?id=23&tid=3&nid=15759


Diageo On Track To Meet Growth TargetIn a brief trading update ahead of its AGM today, Diageo said its new financial year to 30 June 2017 had started well and it was on track to achieve its growth target.

Ivan Menezes, Chief Executive, commented: “The 2017 fiscal year has started well. As expected, the momentum we created last year, strengthening our business through improved marketing, innovation, and commercial execution, has set us up to deliver a stronger performance. Key drivers of improved top line growth are our fiscal 2017 priorities: scotch, US spirits and India.”

He added: “We have made a strong start to our productivity work and are moving at pace. As we no longer take productivity related costs as an exceptional item, in the first half these costs will impact our organic operating profit margin. In the second half productivity related costs will decline and be offset by higher savings as well as the benefits from our targeted reinvestment of those gains. This will contribute to organic margin expansion for the full year.

“Our top line momentum and progress in implementing productivity changes, gives us continued confidence in achieving our objective of mid-single digit top line growth, and over three years ending fiscal 19 delivering 100bps of organic operating margin improvement.”

Source: NamNews 21st September 2016


Sainsbury’s Closes Curtain On Digital Entertainment BusinessSainsbury’s digital entertainment business has succumbed to the intense competition in the sector with the retailer announcing it will shut down the operation by the end of the month.

With Tesco having sold off its digital operations last year, Sainsbury’s said that following a detailed review of its service it had made the “difficult decision” to close Sainsbury’s Entertainment on Demand and focus on its core businesses.

The movies and TV download service has already been shut down, with its eBook, digital magazines, and music services all ending on 1 October. The group said that customers of its eBook store will be able to transfer their purchases to Kobo, the online bookseller and maker of e-readers, owned by Japan’s Rakuten.



Majestic Wine Issues Profit WarningShares in Majestic Wine plummeted 25% this morning after the retailer warned that its profits for its current financial year are now likely to come in below expectations.

The wine retailer cited challenging trading conditions impacting its commercial division and a failed marketing drive for its Naked Wines brand in the US.

However, the group said that trading at Majestic Retail was on track and it was making good progress with its transformation plan designed to boost sales to £500m by 2019. Naked Wines UK and Australia were also said to be performing well and Lay & Wheeler had returned to growth.

Rowan Gormley, Chief Executive, commented: “It is very disappointing that two isolated factors are distracting from the great progress across the rest of the Group. We have always said that we would adopt a test and learn approach, and be quick to redeploy capital from underperforming areas, which is exactly what we are doing. While, this approach is delivering good results in the other business units the scale of the US market means that even a test can have a material effect on profits.”

He added: “The turnaround plan in Majestic Retail is progressing well, the key initiatives are on track to be delivered on time and on budget, and preparations for peak Christmas trading are well in hand.”The group said a further update will be given at the time of its interim results on 17 November 2016.



SPAR Gets Set For HalloweenSPAR UK is bringing shoppers everything they need to create a haunting Halloween this October, with a range of super-spooky digital marketing content.

In the run up to Halloween, SPAR will be launching digital content including Tricks and Treats to make with the kids, and how to make the perfect Halloween pumpkin with a Pumpkin Masterclass video on site.

SPAR’s website will offer consumers a combination of quick and easy how-to guides, videos and quizzes to engage kids and adults, with content such as Halloween Costume Fixes for The Hopelessly Underprepared and Quiz: What Movie Should You Watch This Halloween?

Also available for retailers is the SPAR Brand Halloween range of sweets and drinks, perfect for trick or treaters, and PoS with themed design and colours. Deals will run on brands such as Robinsons, Haribo, Cadburys, Doritos, San Miguel and a range of SPAR brand products.

SPAR Radio will also tune in to the fun, with features on frightening cocktails and party food, themed sound effects and Halloween music.



New Lidl UK boss sheds light on priorities Lidl's new managing director, Christian Härtnagel, has stated his priorities for the discounter just days after taking up the role previously held by Ronny Gottschlich.

Expand store portfolioHärtnagel has promised to invest fresh funds in to the business to continue its expansion at a strong pace. Following the launch of its store of the future concept, it is fair to say that Lidl has a clear strategy for its new stores and continues to actively seek new sites. Härtnagel will play a key role in ensuring that these bold plans are realised, stating that there has been an 'obvious turning point for the business' as it continues to attract shoppers with both quality and price.

Invest in logisticsDeveloping the distribution network to improve product availability is another key priority for Härtnagel as he reflects on the success of the UK business. As of April this year there have been plans to build four new regional distribution centres, and it will be interesting to see if there are any more additions to this as Lidl expands it network, particularly in London as previously announced by the discounter.

New appointments to strengthen teamTo support him in this new role, Härtnagel has brought on new team members from both inside and beyond Lidl. Regional director Robert Ryan and Tim Ulbrich from Lidl Germany have been appointed as joint operations directors. Nan Gibson, previously SVP of People at Virgin Atlantic has joined Lidl UK as director of human resources.

Source: IGD 21st September 2016

http://retailanalysis.igd.com/Hub.aspx?id=13&tid=1&rid=65&nid=14575

http://supplychainanalysis.igd.com/Hub.aspx?id=13&tid=1&rid=72&nid=3731

http://retailanalysis.igd.com/Hub.aspx?id=23&tid=3&nid=14324&app=10


Shepherd Neame Posts Robust Year End ResultsShepherd Neame, Britain’s oldest brewer, has posted record results, boosted by strong performance from its hotels and seaside pubs.

For the 52 weeks ended 25 June 2016, turnover increased by 1.2% to £139.9m with underlying pre-tax profit up 10.7% to £10.3m. Statutory pre-tax profit rose 4.7% to £14.4m.

Like-for-like managed pub and hotel sales were up 4.4%, with liquor up 3.1%, food up 4.2% and accommodation up 11.7%. Like-for-like tenanted EBITDAR grew 2.7%

Its core own and licensed beer volumes (excluding contract brewing) rose 0.3% with “excellent growth” from its Whitstable Bay Collection.

In the 10 weeks of its new financial year, like-for-like managed sales increased 8.2% and like-for-like EBITDAR from Tenanted pubs to 27 August grew 2.2%. Core own and licensed beer volumes were up 1.2%.

The company has recently acquired eight pubs from Enterprise Inns, taking its total number of outlets to 328, of which 61 are managed by the company itself and 267 are rented out to tenants.

Jonathan Neame, Chief Executive, commented: “I am delighted to report a record set of results, with managed pubs our key driver of growth, and an impressive performance against our strategic objectives.

“In recent years, we have worked hard to improve the quality of our pub estate and modernise our brand portfolio. We have created a much stronger business with sustainable cashflows and the skills and ambition for further growth.

“We have made a good start to the new financial year, with a particularly strong performance from our coastal pubs.”

Source: NamNews 22nd September 2016


Morrisons Trialing Student Discount OfferMorrisons has started offering a 10% discount off food and drink in its stores for university students.

The trial scheme has been rolled-out across the group’s 492 stores through a tie-up with student discount provider UNiDAYS. The retailer said that many of its stores were close to university campuses and hoped the move would build loyalty with students. The scheme, which is a first amongst the Big 4 multiples, will run for three months before a decision is made on whether to make it permanent.

Morrisons local solutions director Rebecca Singleton said: “We listened to students and they told us that they’d be more loyal to a supermarket that offered the sort of discounts that they get on rail travel, clothes and eating out.”

Students can sign up to the scheme via the UNiDAYS website or app which will validate students’ ID and generate a unique code that is shown at checkout counters in-store to receive the discount. However, the discount cannot be used for shopping bought on Morrisons online store.

UNiDAYS Chief Executive Josh Rathour said: “Our new partnership with Morrisons allows students to save on their biggest living expense, other than rent, so a huge milestone for UNiDAYS and the student community.”

The Co-op also offers a 10% discount to students who are part of its membership scheme.

Source: NamNews 22nd September 2016


Co-op reports strong L4Ls in H1 Announcing its interim results for the 26 weeks ended 2 July 2016, the Co-operative Group has reported like-for-like sales growth in its food business of +3.1%. Total food retail sales for the period were level with 2015, and as planned, profit was down by 28%; reflecting the extensive ongoing investment in the Group's 'Rebuild' programme, which includes pay increases for frontline colleagues and price reductions to drive competitiveness.

Convenience stores and private label key to growthWithin the food business the Co-op core convenience estate is proving key to driving growth, with like-for-like sales in this part of it store portfolio well ahead of the average. up 4.3%. Investment in private label has been a key focus for improving the range, quality and price of the Co-op offer and this has been rewarded with a 5.1% increase in sales over the period. The total value of its private label ranges hit £1.3bn, representing 37% of the total.

Store estate being rebalanced to build convenience focusThough the Group added 30 news stores over the 26 weeks, it also disposed of 70, as it continues to aim to 'right-size' its overall store portfolio, with the sale of larger underperforming stores outside of its convenience 'sweet-spot'. The first half of 2016 also saw the Group agree to sell 298 of its smallest stores to the McColl's Retail Group, helping to further focus its overall store profile. While this number represents around 10% of its total store numbers, the sales impact is expected to be just -3%.

Richard Pennycook, Group Chief Executive, Co-op commented:"We are able to invest for the long-term, strengthening the appeal of our products and services, because our business model allows us to pursue this unique approach ... This approach is evidenced by the continued reshaping of our Food store portfolio to support our own-brand, convenience-led strategy. This means we can, as necessary, forgo sales growth in order to ensure we have the right stores in the right places for our customers."

Source: IGD 23rd September 2016


Sainsbury’s opens new London fulfilment centre

Sainsbury's has opened a new customer fulfilment centre in London as it predicts that demand in the capital for its online groceries service will double over the next eight years due to more people switching to a mixture of shopping online and in stores.

The 185,000 square foot facility in Bromley-by-Bow has the capacity to fulfil 25,000 customer orders per week. Once Sainsbury’s staff have picked orders from the shelves they are transferred to a giant automated system, the first of its kind in the UK. The automated system operates 1.5km of conveyor belts which can carry over 7,000 crates per hour to Sainsbury’s vans.

The site also has a bakery and its own fuel pumps and van servicing area.

Nearly 500 people have already been recruited to work at the centre and Sainsbury’s expects to recruit another 430 staff by 2020.

Clodagh Moriarty, Sainsbury’s director of online, said: “Operating day and night, this state-of-the-art centre, with its cutting edge technology will enable us to handle exceptional volumes at high speed.

“The additional capacity provided by the centre means that, working with our 30 London stores which pick online orders, we’ll be able to keep up with demand for our service in London, which we expect to double over the next eight years.”Sainsbury’s launched its online grocery business in 1999 and, by 2013, sales had reached £1billion. Last year sales grew by nearly 9% and orders by nearly 15%.

Source: Retail Bulletin 23rd September 2016


Sainsbury's undeterred by Mary Berry's GBBO departure as it revamps bakery rangeSainsbury’s have launched a massive overhaul of its bakery range in an attempt to cash in on the Great British Bake Off.It seems that despite a torrent of headlines speculating over the future of the popular program, supermarkets still see it as a money maker.

Sainsbury's will review its bakery range and introduce 20 new lines and a further 40 improved products. These include fondant fancies, macaroons and madeleines.

Taking direct inspiration of GBBO, the range will include loaf cakes which have featured heavily in this season's recipes.

Customers can also purchase either a slice or a whole cake, with flavours ranging from lemon drizzle to chocolate fudge.“To reflect food trends and global influences on our sweet tooth we are taking influence from across the channel with the rollout of macaroons – a trend that has grown in popularity in recent years,” a spokeswoman from Sainsbury’s said.It was announced today that the program's longstanding judge Mary Berry will not transfer to Channel 4 alongside judge Paul Hollywood.

Following the news that Channel 4 had bought the bakery cash cow from the BBC, the two main hosts Sue Perkins and Mel Giedroyc also announced their departure.

The BBC has said they have a rival in the works to challenge GBBO but many speculate the departure of key figures would damage the prominence of the program.

Source: Retail Gazette 23rd September 2016


Big Four quarterly LFLs over time

Source: Retailers

%

Note: Trading periods vary in their length and dates.

2013 Q1

2013 Q2

2013 Q3

2013 Q4

2014 Q1

2014 Q2

2014 Q3

2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

Asda

Morrisons

Sainsbury's

Tesco

Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 23rd September

IRI's Weekly News Update - w/c 19th September 2016

Food

Transcript of IRI's Weekly News Update - w/c 19th September 2016