3 rd pasta world congress changing competitive dynamics in food retailing lamberto biscarini...

3rd PASTA WORLD CONGRESS

Changing Competitive Dynamics In Food Retailing

Lamberto Biscarini

Barcelona - October 24, 2005

3rd PASTA WORLD CONGRESS

Changing Competitive Dynamics In Food Retailing

Lamberto Biscarini

Barcelona - October 24, 2005

THE BOSTON CONSULTING GROUP

© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil] TTHEHE B BOSTONOSTON C CONSULTINGONSULTING G GROUPROUP

TurkeyTurkey

Germany

FranceFrance

Argentina

Peru

Venezuela

Source: UNIPI, Countries statistics offices

RussiaRussia

USUS

BrazilBrazil

ItalyItaly

TODAY PASTA IS AN INTERNATIONAL BUSINESSMain pasta countries according to Unipi

TODAY PASTA IS AN INTERNATIONAL BUSINESSMain pasta countries according to Unipi

GermanyGermany

SpainSpain


72%

65%

65%

25%

21%

21%

19%

15%

38%

29%

0% 10% 20% 30% 40% 50% 60% 70% 80%

France

Germany

Spain

United States

Italy

Argentina

Turkey

Brazil

Peru

Venezuela

Russia

(1) In the Moscow and St Petersburg area, the only 2 with tangible modern retail presence(2) Top 100 US Metropolitan Statistical areas (60% of population)Source: M+M Planet Retail, BCG analysis

TRADE INTERFACE IS BECOMING CRITICALIN MOST PASTA COUNTRIES

Top 5 retailers cumulated market share, 2004

TRADE INTERFACE IS BECOMING CRITICALIN MOST PASTA COUNTRIES

Top 5 retailers cumulated market share, 2004

Mature

retail markets

Developing

retail markets

30% (Moscow, St. Petersburg)

62%(2)

10%


1

3

1

1

3

1

2

2

1(1)

2

(1) Including C&C businessSource: M+M Planet Retail, BCG analysis

TOP 3 GLOBAL RETAILERSBUILDING SOLID POSITIONS BY COUNTRY

# Ranking in each market (only if in top 3)

TOP 3 GLOBAL RETAILERSBUILDING SOLID POSITIONS BY COUNTRY

# Ranking in each market (only if in top 3)

France

Germany

Spain

United states

Italy

Argentina

Turkey

Brazil

Peru

Venezuela

Russia


Discounters' growth, behind a trading-down shift in consumer behaviour

Price-focused horizontal competition among retailers

Repositioning of Private Labels towards lower price levels, shifting from margin generators to price leadership vehicles

• Additional pressure on Branded players

Shrinking of # of suppliers, particularly in mid size surfaces

• Max 1-2 players in each category

4 MAIN TRENDS EMERGING IN MATURE RETAIL MARKETS4 MAIN TRENDS EMERGING

IN MATURE RETAIL MARKETS

1

2

3

4


9 9,210,2

11,9

17,116,5

18

19,920,3 20,2 20,419,5

0

5

10

15

20

25

2000 2001 2002 2003

Frequency rate

Loyalty index

Value SoM Groceries - Chilled

16.1 16.3

Average ticket €

%18.3 20.7

Source: Consoscan, TNS

DISCOUNTERS GAINING CONSUMER LOYALTY...Example France

1


"I don't shop Lidl because I can't afford to shop in a supermarket, it's just that if I can save money on shopping I will"Consumer interview, Madrid, July 2005

"I don't shop Lidl because I can't afford to shop in a supermarket, it's just that if I can save money on shopping I will"Consumer interview, Madrid, July 2005

Consumers evaluation

-1 -0,5 0 0,5 1

1 Price

Avg. supermarket

2 Convenience

3 Innovation

4 Affinity

5 Trust

6 Product range

7 Service

8 Advertising

Advantage on price, convenience, and affinity

No major disadvantage on trust, product range, and service

Source: 6 000 consumers interviews across Europe, 2005

... REFLECTING A CHANGEIN CONSUMER PERCEPTION

Example: Spain

... REFLECTING A CHANGEIN CONSUMER PERCEPTION

Example: Spain

1


HORIZONTAL COMPETITION MAINLY BASED ON PRICE

Real food prices in Western Europe, 1999-2004, index

HORIZONTAL COMPETITION MAINLY BASED ON PRICE

Real food prices in Western Europe, 1999-2004, index

90

92

94

96

98

100

102

104

106

108

110

1999 2000 2001 2002 2003 2004

Real food price (index)

Note: Real food price index is defined as consumer price index for food / consumer price indexSource: Eurostat; Planet Retail; Press; BCG analyses

CAGR02–04

(2.9%)

(0.9%)

(0.4%)

(1.4%)

0.0%

(1.6%)

CAGR99–04

0.6%

0.0%

(0.4%)

0.4%

(0.6%)

(1.2%)

Sweden

France

UK

Italy

Germany

Netherlands

2


Premium

Mainstream

Value/first prices

# SKUs

240-500

2.100-6.500

350-400

Margin overbranded products

+3%

+3% - (-5%)

(-5%) - (-15%)

Role to retailer

• Image of innovator, exclusivity, solution provider (e.g. diet, allergy)

• Increasingly used as loss leaders in traffic building categories

• Low price image

• Defense from Discounters

Source: Websites; BCG Experience

CHANGING ROLE OF PRIVATE LABELFew examples

CHANGING ROLE OF PRIVATE LABELFew examples

3


Hyper

Hyper

Super

Super

Discount

Discount

-

RATIONALIZATION OF SUPPLIER PORTFOLIOExample, Spain store checks, major dry pasta brands

RATIONALIZATION OF SUPPLIER PORTFOLIOExample, Spain store checks, major dry pasta brands

Format Gallo Barilla Ardilla El Pavo PL/ 1st pricesBrand

Pasta brands

"Brands have to tell me why I should have them all in my portfolio"Pasta buyer, leading retailer in Spain

"Brands have to tell me why I should have them all in my portfolio"Pasta buyer, leading retailer in Spain

Source: Store checks, Oct '05

4


EVEN FASTER TRENDS IN DEVELOPING MARKETS1. Retail consolidation - Turkey

EVEN FASTER TRENDS IN DEVELOPING MARKETS1. Retail consolidation - Turkey

2002Market shares

4.2%

3.1%

2.3%

2.2%

2.1%

13.9%

2005Market shares

7.4%

4.8%

3.5%

3.1%

2.6%

21.4%

Acquisition of G

ima

Acquisition of Tansas

Share of top 5+7.5 p.p. in less than 3 years

"We aim to become either leader or # 2 in each Country we decide to invest in"Carrefour Investors report, October 2005

"We aim to become either leader or # 2 in each Country we decide to invest in"Carrefour Investors report, October 2005

Source: M+M Planet Retail, BCG analysis


80

90

100

110

120

Jan-04

Feb-04

Mar-04

Apr-04

May-04

Jun-04

Jul-04

Aug-04

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Jul-05

Aug-05

Sep-05

CarrefourMetroMigrosBimYimpas

+0.8%

(2.2%)

+1.5%

(3.4%)

(2.4%)

Source: October 2005, BCG analyses

EVEN FASTER TRENDS IN DEVELOPING MARKETS2. Price competition – Turkey (grocery sample products)

EVEN FASTER TRENDS IN DEVELOPING MARKETS2. Price competition – Turkey (grocery sample products)

Delta %


# Stores

~ 1 200

~ 290

~ 200

Market Share (%)

3.5% (3° player)

2.4%

1.1%

Over 1 800 Discount stores today in TurkeyOver 1 800 Discount stores today in Turkey

Source: Datamonitor, M+M Planet Retail, retailers data, BCG analysis

EVEN FASTER TRENDS IN DEVELOPING MARKETS3. Discounter penetration - Turkey

EVEN FASTER TRENDS IN DEVELOPING MARKETS3. Discounter penetration - Turkey


EVEN FASTER TRENDS IN DEVELOPING MARKETS4. PL role and supplier portfolio – Quotes from Trade interviews

EVEN FASTER TRENDS IN DEVELOPING MARKETS4. PL role and supplier portfolio – Quotes from Trade interviews

"We will get to more than 20% PL share quite soon, and brands know it... at our last on-line tender [for PL production] we got an incredible battle"

Food Buying Director, Russia

"PL penetration will grow rapidly... we are investing resources and would like to see at least 20% of sales"

Food Buying Director, Brazil

"Portfolio rationalization is not yet a hot topic in Pasta, as it is still growing very fast for us. But it will soon happen "

Pasta Buyer, Russia

Source: Interviews, October 2005


Clear business strategy

• Strong leading brands ?

• Private label manufacturing?

• No long term space left in between

Local market know-how and product customization capabilities

• Food retail expectations still local

Partnership with retail country leaders

• Coherently with all channels you want to access (Ho.re.ca.?)

Cost leadership

• To face fiercer Trade Margin requests

KEY CHALLENGES FOR PASTA SUPPLIERSKEY CHALLENGES FOR PASTA SUPPLIERS

3 rd pasta world congress changing competitive dynamics in food retailing lamberto biscarini...

Documents

b oston c onsulting

epmil t

planet retail

unipi germany spain

mature retail markets

consumer loyalty

service source

consumer interview