The Twin Disruptors: How Aldi and Lidl are Poised to Shake ... · The Twin Disruptors: How Aldi and...
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The Twin Disruptors:
How Aldi and Lidl are Poised to
Shake Up the US Retail
Landscape
PLMA 2017 Private Label Trade
Show
Mike Paglia, Director
14 November 2017
Kantar Retail © 2017
Agenda
2
Surveying the Macroeconomic Backdrop
Aldi and Lidl’s Five Pillars of Disruption
How Manufacturers Should Respond
Kantar Retail © 2017
A ‘Post-Recovery’ Macro Environment
Mixed indicators relative to pre-recession
3Source: U.S. Department of Labor, gasbuddy.com, Kantar Retail analysis
4.4%
10.0%
4.2%
$0
$40,000
$80,000
$120,000
2004 2008 2012 2016SS
Tailwinds
Benefiting Retail
Unemployment Rate
Household Net Worth
0.0%
2.0%
4.0%
6.0%
2003-2007 2010-2015 2016
Re
ce
ssio
n
Headwinds
Dampening Retail
Wage and Salary Growth
Uneven Regional Job Trends
0%
1%
2%
3%
4%
5%
2013 2014 2015 2016 2017
Renewed/Sustained
Challenges
Growth in Healthcare Costs
Gasoline Prices
Kantar Retail © 2017
The “Big Middle” Gets Smaller as Demographic, Economic, and Retail Trends Bifurcate
4Source: Kantar Retail
Middle income
suburban family
RETAIL FORMAT
Online
Small box,
limited assortment
consumables retailers
Big Box Mass
HOUSEHOLD
Empty nesters/
Retiring boomers
Millennial households
without children
Families
INCOME BIFURCATION
Have
Have Not
Middle Income
GEOGRAPHY
Big city/urban
Small city/Rural
New Suburbs
Kantar Retail © 2017
‘Shopper DNA’ Continues to Evolve
Demand for stress-free shopping and value essentially now equal
5Source: Kantar Retail ShopperScape®, April 2016-March 2017
65%
64%
60%
48%
44%
37%
27%
19%
16%
11%
11%
Minimizing spending
Feeling like I got a "good deal"
Stress-free shopping
Shopping in one place
Completing shopping quickly
Purchasing high-quality products
Having fun/enjoying myself
Employee interaction
Discovering new products/brands
Having acccess to info
Shopping to reflect my values
What Matters to Shoppers(% ranking factor among top four most important when shopping in general)
Engagement
Convenience
Value
Note: Arrows indicate direction of change vs. previous year.
Kantar Retail © 2017
How Will the Value Shopper Change Over Time?
6Source: Kantar Retail
Income Growth
5.5% 4.0%
Slower than prerecession
Core Goods
Spending
5.3% 3.3%Slower
Value Brands:
Private label, limited
assortment, single-price
point, large/small pack size,
versatility/utility
Fragmentation
Divides Shoppers’
Brand Choice
• Have/Have Not
• Big City/Small City
• Boomer/Millennial
• B&M/Online
Traditional
Brands
Premium Brands:
Unprocessed/natural,
exclusivity, authenticity,
solution oriented, reflects
personal affiliation & values
Almost three out of every
four dollars spent on
services, automobiles,
and gasoline by 2022
Kantar Retail © 2017
Agenda
7
Surveying the Macroeconomic Backdrop
Aldi and Lidl’s Five Pillars of Disruption
How Manufacturers Should Respond
Kantar Retail © 2017
Aldi and Lidl Are Growing at a Time that Maximizes Their Disruptive Potential
8Source: Kantar Retail
$14,477 $16,184
$17,913 $19,791
$21,770 $23,997
1,757
1,902 2,032
2,167
2,307
2,447
-
500
1,000
1,500
2,000
2,500
3,000
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
2017E 2018E 2019E 2020E 2021E 2022E
Sales Stores
US
D M
illio
ns
ALDI US
$122 $653
$2,493
$3,776
$5,415
$7,080
25
120
230
330
430
530
0
100
200
300
400
500
600
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2017E 2018E 2019E 2020E 2021E 2022E
Sales Stores
LIDL US
US
D M
illio
ns
Kantar Retail © 2017
Both Retailers Are Riding Global Momentum
9Source: Kantar Retail
^Walmart ex. Sam’s Club
Rank RetailerRetail Sales in $US Billions
Sales Added
($US Billions)Sales CAGR
% of KR
Total Added
% of Global
Retail Growth
2012 2017E 2022E '12-'17E '17E-'22E '12-'17E '17E-'22E '12-'17E '17E-'22E
1 Walmart^ $ 397 $ 457 $ 507 $ 60 $ 50 2.8% 2.1% 3% 1%
2 Amazon.com $ 59 $ 155 $ 248 $ 96 $ 94 21.3% 9.9% 6% 2%
3 Schwarz Group $ 89 $ 138 $ 191 $ 49 $ 53 9.2% 6.7% 3% 1%
4 Costco $ 99 $ 126 $ 172 $ 27 $ 46 4.9% 6.4% 3% 1%
5 Carrefour $ 115 $ 123 $ 136 $ 8 $ 12 1.4% 1.9% 1% 0%
Top 5 Retailers $ 759 $ 999 $ 1,253 $ 240 $ 254 5.6% 4.6% 16% 4%
6 Kroger $ 92 $ 115 $ 142 $ 23 $ 27 4.6% 4.2% 2% 0%
7 Aldi $ 78 $ 111 $ 145 $ 33 $ 34 7.4% 5.5% 2% 1%
8 Seven & I $ 94 $ 101 $ 116 $ 7 $ 15 1.5% 2.9% 1% 0%
9 Home Depot $ 74 $ 99 $ 125 $ 25 $ 26 6.0% 4.7% 2% 0%
10 Walgreens Boots Alliance $ 70 $ 98 $ 125 $ 28 $ 27 7.1% 5.0% 2% 0%
Top 10 Retailers $ 1,166 $ 1,523 $ 1,907 $ 357 $ 384 5.5% 4.6% 24% 7%
All Other KR Chains $ 4,356 $ 5,202 $ 6,451 $ 845 $ 1,249 3.6% 4.4% 76% 22%
Total KR Chains $ 5,522 $ 6,725 $ 8,358 $ 1,202 $ 1,633 4.0% 4.4% 100% 28%
Global Formal Sales $ 16,381 $ 20,133 $ 25,941 $ 3,753 $ 5,808 4.2% 5.2% n/a 100%
Kantar Retail © 2017Source: Kantar Retail
Let’s Look Beyond the Buzz
What do Aldi’s and Lidl’s presence really mean?
Kantar Retail © 2017
Five Pillars of Disruption
11Source: Kantar Retail
Trip
Missions
Price
PointsFormats
Quality
ExpectationsAssortment
Kantar Retail © 2017Source: Kantar Retail
Blurring the Lines Between Formats
Lidl is one box that can “be” multiple formats
12
Frozen Foods Beer/Wine
Lidl surprises
Lidl surprises
Packaged Goods
Packaged Goods
Packaged Goods
Packaged Goods
Meat Meat Packaged Goods
Chilled Items
Dairy
Fro
ze
n F
oo
ds
Freezer Theme Weeks
Household
Household
Essentials
Household
Essentials
Household
Essentials
Checkout
Produce
Bakery
Flowers
Entrance
Kantar Retail © 2017Source: Kantar Retail
Blurring Lines Between Formats
Look how Aldi has elevated the discounter in-store experience
13
Kantar Retail © 2017Source: Kantar Retail
Format Takeaway:
14
On the One
Hand….
….But on the
Other Hand
Food Non food
Big box Small box
Supermarket Discounter
✓ “Hybrid” stores
✓ Defies classification
✓ Multiple behaviors and capabilities
✓ Historical channel/format taxonomy is
being challenged
Kantar Retail © 2017Source: Kantar Retail, company circular
Resetting Price Points
Core items, organics, and high quality general merchandise
15
Kantar Retail © 2017Source: Kantar Retail
Punctuated Discounting Impacts the Entire Box
16
-57%
-51%
-43%
-31%
-26%-23%
-21% -20% -19%
-14%-11% -10%
-4%-2%
0% 0%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Lidl Cheaper/Pricier By:
Lidl is less expensive than WMT
Lidl is more expensive than WMT
Kantar Retail © 2017Source: Kantar Retail
Pricing Takeaway:
Pricing becomes more than just a number
17
✓ Lowering pricing benchmarks
✓ Changing how pricing is
merchandised
✓ Reshaping shopper
expectations
✓ increased pressure on suppliers to lower
prices
✓ Even if you don’t sell to Lidl or Aldi, your
customers will be impacted
✓ Develop new ways to capitalize on
“stoppage” points
Kantar Retail © 2017Source: Kantar Retail
Elevating Quality Expectations
Private label stress tests the traditional value equation
18
Kantar Retail © 2017Source: Kantar Retail
Lidl and Aldi Extend the Private Label Value Equation
No tradeoffs
19
PRICE x xQUALITY CONVENIENCEFrozen Foods Beer/Wine
Lidl surprises
Lidl surprises
Packaged Goods
Packaged Goods
Packaged Goods
Packaged Goods
Meat Meat Packaged Goods
Chilled Items
Da
iry
Fro
ze
n F
oo
ds
Freezer Theme Weeks
Household
Household
Essentials
Household
Essentials
Household
Essentials
Checkout
Produce
Bakery
Flowers
Entrance36,000 sq ft
Kantar Retail © 2017Source: Kantar Retail
Quality Expectations Takeaway:
20
✓ Suppliers will have to meet elevated
expectations at the minimum
✓ Branded differentiation more
important than ever
✓ Invest in innovation
A small store (i.e. Lidl/Aldi) can now offer:
A curated, easy to shop assortment
AND
Low prices
AND
High quality products
Kantar Retail © 2017Source: Kantar Retail
Lidl and Aldi are Assortment Rotators
Nothing lasts forever
21
Time
Sales
Assumes item meets/exceedsvelocity hurdles
Time
Sales
Launchand investment
Ramp-up
Begin to recoup investment
“Soft landing” exit
Traditional
Lidl
Item #1 Item #2 Item #3
Kantar Retail © 2017Source: Kantar Retail
A Small Format Treasure Hunt
Creates excitement, generates repeat traffic
22
General merch
Private label
Urgency
Cross category
Kantar Retail © 2017Source: Kantar Retail
Assortment Takeaway:
The clock is ticking
23
Some long held truths being
challenged:
✓ You only have to sell the item
in once
✓ “Set it and forget it”
✓ Items have an indefinite
lifespan in the store
✓ Newness, surprise, and
discovery will matter more than
ever
✓ Applies to marketing, pricing,
promotion, even packaging
✓ Apply your rotational strategy
Kantar Retail © 2017Source: Kantar Retail, company circulars
Blurring Lines Between Trip Missions
Versatility drives value for shoppers
24
Fill in
Stock up
Kantar Retail © 2017Source: Kantar Retail
Lidl and Aldi Can Bridge Multiple Divides
25
TRIP TYPE
SH
OP
PE
R G
RO
UP
Kantar Retail © 2017Source: Kantar Retail
Trip Mission Takeaway:
Trip missions and formats will become decoupled
26
Aldi and Lidl can fulfill which trip mission?
A. Stock up
B. Fill in
C. Immediate consumption
D. Treasure hunt
E. Planned
F. Impulse
G. All of the above
Trip mission versatility will become a new
capability
Your items will have different roles…
…for different trip missions
…for different shoppers
…at different times
Link portfolio to new trip and shopper types
Kantar Retail © 2017
Five Pillars of Disruption
27Source: Kantar Retail
Trip
Missions
Price
PointsFormats
Quality
ExpectationsAssortment
Kantar Retail © 2017
Agenda
28
Surveying the Macroeconomic Backdrop
Aldi and Lidl’s Five Pillars of Disruption
How Manufacturers Should Respond
Kantar Retail © 2017
So, What Do Aldi and Lidl REALLY Mean for U.S. Retail?
Canaries in the coal mine?
29Source: Kantar Retail
“Multilingual”, multi-capable retailers Reshaping shopper expectations More innovation, agility, and
flexibility from suppliers
Kantar Retail © 2017
Supplier Action Items
For today and tomorrow
30Source: Kantar Retail
Trip Missions:
• Identify & classify
every item in your
portfolio
• Understand how the
role of your
category at either
retailer redefines
your competitive set
Quality
Expectations:
• Invest in
innovation
• Raise the bar
for branded
suppliers
Formats:
• What is your
playing field?
• Map your role in
the box
Price Points:
• Take price
reduction on
selected non-
core items that
Lidl doesn’t sell
• Reconsider
what the “right
price” is for your
item
Assortment:
• Create a sense of
newness,
excitement,
unexpected delight
around your items
• Treat Lidl and Aldi
like a small club
Kantar Retail © 2017 31
For further information please refer to
www.kantarretailiq.com
Contact:
Mike Paglia
Director
T: +1 (617) 912 2855
@kantarretail
@KanRetMP
www.kantarretail.com
Kantar Retail © 2017
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