Nick Downing

Commercial Director

Retail in 2025

Prospects for growth

Grocery market to 2023 (average annual growth)

Page 3© IGD 2019

Good growth prospects in Europe

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Rank Country 2023 €bnAnnual growth

2018-23

1 Russia 304 4.0%

2 Germany 286 2.9%

3 France 258 2.2%

4 United Kingdom 254 2.8%

5 Italy 194 1.7%

6 Turkey 187 13.5%

7 Spain 126 2.4%

8 Poland 75 2.7%

9 Netherlands 60 3.4%

10 Belgium 47 2.6%

Rank Country 2023 €bnAnnual growth

2018-23

11 Switzerland 44 2.5%

12 Romania 43 4.4%

13 Ukraine 39 7.4%

14 Sweden 32 2.3%

15 Norway 32 4.8%

16 Austria 31 3.2%

17 Czech Republic 29 3.5%

18 Denmark 25 3.6%

19 Portugal 22 2.6%

20 Finland 21 2.6%

Europe’s top retailers in 2023

© IGD 2019 Page 5IGD Datacentre. *Lidl/Kaufland and Aldi Süd/Nord plan and implement separate business strategies, so only Lidl and Aldi Süd are reported ˆRanked by grocery formats only in 2022

0%

5%

10%

15%

20%

0

30

60

90

120

UK grocery market, 2018-2023

Source: IGD Research, UK Channel Opportunities, June 2018

175 178 178 180185

195 200206

212

3.5%

1.4%

0.4%0.8%

3.1%

2.8%

2.5%2.7%

2.9% 3.0% 3.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

50

100

150

200

250

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

YO

Y G

row

h(%

)

Gro

ce

ry r

eta

il m

ark

et

siz

e (

£b

n)

Market value (£bn) YOY % Change

£190bn

£219bn

Inflation the main driver of growth

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2018 2023

£190bn

£22bn £4bn £2bn £219bn

INFLATION VOLUME:

POPULATION

GROWTH

VOLUME:

CONSUMPTION /

TRADE-UP

Source: IGD Research, UK Channel Opportunities, June 2018

Sector profitability at the Big Four

Page 8Source: Companies, IGD Research. Operating profits/losses pre-exceptionals. Tesco = UK & Ireland from 2014; UK only previously; excludes Tesco Bank. Sainsbury’s = Underlying retail op profit.

Morrisons = Reported operating profit. Asda = operating profit from Companies House

Full year operating profits / losses £m (UK only)

© IGD 2018

2,272 2,191

498 503803

1,053

831 873

720 635626

625

841 994

1,013 1,046845

735

949

-95

-696

314468 458

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2013 2014 2015 2016 2017

Where we shop is changing

UK grocery, sales by channel, 2018-2023

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9%

47%

21%

12%

6% 5%8%

44%

22%

14%

8%5%

Hypermarkets Supermarkets Convenience Discount Online Other

2017 2022

+£0.2bn +£6.9bn +£7.1bn +£8.5bn +£6.0bn -£0.4bn = +£28bnIncrease over

next 5 years

Europe, grocery sales by channel, 2018-2023

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23%

41%

11%

23%

2%0.3%

21%

38%

11%

26%

3%

0.3%

Hypermarkets Supermarkets Convenience Discount Online Grocery Retail Specialist Stores

2018 2023

UK

9% 8%

UK

47% 44%

UK

21% 22%

UK

12% 14%

UK

6% 8%

Changing shopper missions

© IGD 2019 Source: ShopperVista. Base: 914 food discount grocery shoppers, Apr-Jun’18 Page 12

Discounter? No, supermarket

Page 13Source: ShopperVista, Apr-Jun’18. Base: 5,118 British grocery shoppers. Q. Which words do you associate with these stores?

© IGD 2018 Page 13Source: ShopperVista, Apr-Jun’18. Base: 5,118 British grocery shoppers. Q. Which words do you associate with these stores?

Store drivers on last trip amongst

grocery shoppers

% of shoppers that associate Aldi

and Lidl with the following words

40% 53%

40% 50%

“Discount” “Supermarket”

Helps me save money

Good quality products

More convenient

Good choice of products

Quicker and easier

More convenient

Good choice of products

Quicker and easier

Good quality products

Helps me save money

79%

39%

37%

36%

26%

66%

48%

43%

34%

25%

FOOD DISCOUNTERS SUPERMARKETS

Discounter? Or supermarket?

Format flex New locations

Targeting missions

Value

Changing tastesIntegrating online

Page 14© IGD 2019 Source: IGD Research

High street “discounters” – what we call them in 2025?

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B&M, Bristol

Online grocery in 2023 ($bn)

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2023 Annual growth

2018-23

Online channel

share 2023

China $196 31% 11.2%

USA $60 20% 3.5%

Japan $47 8% 9.9%

United Kingdom $22 9% 7.9%

South Korea $21 17% 14.2%

France $17 8% 6.0%

Australia $4 15% 3.7%

Germany $4 23% 1.2%

Canada $2 21% 1.8%

Spain $2 18% 1.4%

TOTAL $375 20%

Food to go: £18bn and growing twice the rate of grocery

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£1.4bnSupermarkets

&

hypermarkets

£4.9bnFood-to-go specialists

£5.6bnQSRs (Quick Service

Restaurants)

£3.1bnCoffee specialists

£2.8bnConvenience,

forecourt & other

retailers

Source: IGD Research

Food-to-go will grow almost twice as fast as grocery retail

© IGD 2019 Source: IGD Research Page 18

100

110

120

130

140

150

160

170

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Food-to-go market

Food-to-go Retail

+5.0%

Index

CAGR

+2.8%

UK shoppers in 3 key stats

Source: IGD ShopperVista Page 19

12Average number of stores used each

month

5Average number of channels used each

month

26Grocery shopping

trips per month

Shoppers are changing

Meet the “Influencer Shoppers”

© IGD 2019 Page 21Source: IGD ShoppperVista research, May 2018

An emerging group of shoppers. This group has a different outlook and attitude, influenced by their digital lifestyles, and are more vocal with their opinions.

They will replace baby boomers as the generation with the most purchasing power.

Meet the Influencer Shoppers

Future shoppers

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Shoppers will increasingly experiment with their shopping and meal preparation to broaden their repertoires.

Experimental

Health and wellbeing will grow in importance with subtle differences owing to individual motivations

Health conscious

Shoppers will be open to a more personalisedshopping experience, but only if there is a clear benefit with minimal effort.

Individual

Shoppers will want to make sustainable and ethical choices, but only if other needs are also satisfied.

Socially conscious

The shopping experience will have to work harder so shoppers can optimise their time

Time-optimisers

Time optimisers

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Shoppers will be less tolerant about the chore-element of shopping. Some shoppers will look to automate this via smart homes, AI and home delivery

1

2

3

4

Retailers will need to work hard to excite and inspire shoppers in-store. Robotics and in-store tech could free up space to do this

Younger shoppers will also look for tech solutions to speed up the amount of time they spend in-store. Almost 30% think shopping could be more automated and 41% of all shoppers don’t like shopping at all!

Stores will be increasingly influenced by shopper’s desire to experiment, though there will be significant regional variations

Health conscious

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Younger, pre-family and Influencer Shoppers will link healthy lifestyles with looking good. The desire to exercise to maintain weight, sculpt the perfect body and showcase results on social media sets this group apart

1

2

3

4

42% of younger shoppers say they will be more likely to eat healthily to look vs. 24% of all shoppers

Social media will continue to have a significant influence, along with growing government intervention and the growing rate (or perception) of food intolerances

70% of shoppers are looking for healthy food inspiration from the industry

…of shoppers say they are actively trying to improve their

diet.

“I follow quite a few fitness people on social media and that is influencing quite a lot of the

food that I buy”

Young family, south

Individual

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Personalising the shopper journey, from ordering online to shopping in-store can range from targeted loyalty schemes to personalised products. it can drive better conversion rates and improve customer retention

1

2

3

4

But there are barriers, e.g. reluctance to share data, the sheer volume of data and technology, regulation (e.g. evolution of GDPR)

There will be plenty to learn from other sectors e.g. non-food retail

Whatever happens, the smartphone will be central

…of shoppers say they regularly use a food or grocery retailer’s loyalty

card e.g. every trip or every other trip

86%

Experimental

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73% of shoppers welcome new products (58% in 2010), though older shoppers more likely to stick to what they know

1

2

3

4

Travel, population trends and online have seen an explosion in world foods as retailers seek to deliver and differentiate with the “next big thing”

Younger and influencer shoppers more likely to experiment. Expect more growth in niche operators, many online and specialising in fresh or local. Longer term, this is likely to consolidate

Discounters are also playing a key role with country-specific promotions

Socially conscious

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The desire to do the right thing is increasingly “mainstream”. Provided there is no significant economic downturn, shoppers will continue to look for ways to express this

1

2

3

4

75% of shoppers have become more aware of plastic packaging, this issue is unlikely to subside

Basic needs come first for most and incomes are still squeezed. Ethical decisions are often complex, confusing and time-consuming. Often associated with compromise

…of shoppers say recent TV shows, especially David

Attenborough’s Blue Planet, have inspired them to make changes to

support the environment.

54%

“We are now more conscious of plastic and packaging. We used to go to buy big waters bottle in plastic. We don't do that any more. It's more in the media. We did not realise about this before. We want to

do our little bit.” Young family, South

As with health, it may be spurred on by government regulation to end the throwaway culture

The future is here now, go and see it

How will the physical store evolve?

RELEVANT EFFICIENT DIFFERENT

• One store, multiple missions

• Stay ‘on trend’, e.g. FTG

• Provide fun and enjoyment

• Personalisation

• Drive operating efficiencies

• Reduce shopper ‘friction’

• Help save time & money

• Easy to shop any channel

• Ranging

• Experience

• Inspire and interact

• Play to strengths

© IGD 2019

The best stores to see in 2019

© IGD 2019

The future is here now

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Fresh the Good Food Market, Dublin

Retail meets foodservice, in award-winning food for now and food for later

concept

Le 4 Casino, Paris

Food-to-go, core supermarket offer, great fresh and endless-aisle technology

Jumbo Foodmarkt, Tilburg

Food to go and retail, balancing both traditional and new food trends

© IGD 2019

The future is here now

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Coles Local, Victoria, Australia

Over 1,000 new product lines and a new private label brand, Coles Local

Focus on sustainability, zero edible waste policy

habitat by honestbee, Singapore

World’s first automatic, cashless checkout system and robotic collection

point

Fully cashless store where payments, entry and exit is via a mobile app

Carrefour Le Marché, Shanghai

Digital-infused store supported by Tencent, Carrefour’s technology partner

in China

© IGD 2019

A few final thoughts

Be ready for more disruption

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Amazon makes a large retail acquisition 1

2

3

4

Chinese retailers move west, with acquisitions

Further integration between retail and tech and emergence of new retail channels e.g. Air BnB, Uber

Continued cross border between non-competing retailers e.g. buying alliances

5 Discounters go digital

© IGD 2019

Thanks for listening

nick.downing@igd.com

www.igd.com/igdfutures

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