iris weekly fmcg news update - w/c 11th july 2016

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

Stephen Hall

Friday 15th July

Copyright copy 2015 Information Resources Inc (IRI) Confidential and Proprietary 2

bull McBride to post better-than-expected profits as restructuring project pays offbull Waitrose to slash payment terms for small food producersbull Aldi extends partnership with Team GB for another four yearsbull Tesco kicks off summer trading with double Clubcard points weekendbull Disappointing month for retail sales but too early to assess impact of Brexitbull No signs of Brexit blues at Waitrose and John Lewisbull Poundland agrees to pound597m takeover offer from Steinhoffbull Ebay eyes possibility of pop-up stores in Sainsburys outletsbull Iceland to open first dark store bull BampM making good progress in tough marketbull Mothercare continues on path to recoverybull Co-op sells 298 stores to McCollrsquos for pound117mbull Halfords like-for-likes slip as bad weather hits cycling sales

Weekly News Summary ndash 11th July 2016


McBride To Post Better-Than-Expected Profits As Restructuring Project Pays Off

McBride said today that it expects its adjusted operating profit for the full year to 30 June to come in slightly ahead of its previous expectations

In a full trading update Europersquos largest manufacturer of private label household and personal care products said its full year performance had benefited from better than anticipated progress on cost saving initiatives including the final year impact of its UK business restructuring project Purchasing-driven savings in part a result of the decision to reduce the grouprsquos range of products and customers also contributed to the result

McBride added that a simplification programme to reduce the number of small customers served by the group remained on track with full year sales lower by approximately pound6m as a result of this action Additionally the grouprsquos revenues continued to be affected by ongoing price pressures in a number of key markets especially in the UK Consequently on a constant currency basis McBride said that revenues for the year ended 30 June 2016 were 19 lower than the prior year

Meanwhile the group stated that there had been no impact on its day-to-day operations from the outcome of the EU referendum in the UK adding that it remains too early to determine the longer-term effects on McBridersquos activities of which approximately 70 are in subsidiaries based outside the UK

The statement concluded ldquoThe Board remains confident in the execution of the lsquoManufacturing our Futurersquo strategy through the three-stage lsquoRepair Prepare Growrsquo implementation planrdquo

McBride will announce its preliminary results for the year ended 30 June 2016 on 7 September 2016

Source NamNews 11th July 2016


Waitrose To Slash Payment Terms For Small Food Producers

Waitrose has announced that it will reduce its payment terms for all small food producers to a maximum of just seven days

The retailer said the step which will be phased in over the next two months follows an internal review of payment terms for smaller suppliers and will mean that the supermarket now offers industry leading terms

Waitrose has pledged to pay all its small scale suppliers whose business with the retailer is worth less than pound100000 annually within seven days of receipt of a valid electronic invoice It said that more than 600 UK food producers will benefit from the change

Mark Williamson Waitrose Commercial Director commented ldquoThe internal review of how we pay our smallest suppliers was initiated because we wanted to make our good relationships with small suppliers even better by simplifying the payment process

ldquoWe are passionate about supporting and nurturing British producers ndash and this step will help give smaller scale businesses including new start-ups more financial stability by helping with cash flowrdquo

Waitrose has a dedicated buying team for local and regional suppliers and sells over 2500 locally and regionally sourced products from 600 suppliers with plans for further growth



Aldi Extends Partnership With Team GB For Another Four Years

Aldi has announced that it is extending its partnership with Team GB through to the Tokyo Olympic Games in 2020

The discounter became the first official supermarket partner to Team GB in March last year and has been supporting the nationrsquos athletes as they prepare for next monthrsquos Rio Olympic Games

To mark the extension of the partnership with the British Olympic Association (BOA) for another four years Aldi launched a new TV advertising campaign profiling its support of Team GB last night on ITV1

Matthew Barnes Chief Executive Officer for Aldi UK and Ireland said ldquoWe have built our business on making long-term commitments to British products and suppliers in order to offer our customers outstanding quality at unbeatable pricesldquoAs the athletes begin making their final preparations for Rio 2016 we want them to know that we will be supporting them in the long-term too All the way to Tokyo in factrdquo

Aldi first announced its sponsorship of Team GB as part of its 25th anniversary in the UK in 2015 Since then it has worked with the BOA on its youth engagement programme Get Set to Eat Fresh and Homegrown Heroes an initiative to connect athletes with their local communities

The renewed partnership with Team GB will see Aldi continue to support athletes as they enter a new Olympic cycle and partner with the BOA on future key initiatives in the community

Bill Sweeney Chief Executive Officer of the British Olympic Association said ldquoAldi has been a great support for the countryrsquos athletes on the road to Rio 2016 and we look forward to extending that partnership over the coming years

ldquoLike us Aldi has a strong track record of investing in Britain and has really captured the British imagination in recent years As this yearrsquos athletes prepare themselves to do extraordinary things in Rio we are looking forward to working with Aldi again as we begin the journey to Tokyo 2020rdquo



Tesco Kicks Off Summer Trading With Double Clubcard Points Weekend

Following the recent shake-up of its Clubcard loyalty scheme Tesco has announced that card holders will be able to earn double points this weekend on purchases in store and online

Back in April Tesco announced that it was ending its popular Clubcard Boost events as part of moves to make its loyalty scheme simpler and more rewarding all-year round The group said it planned to do more to help customers get the most out of the scheme such as double points events to help them grow their points balance faster and improving its Boost Partners offer

Ahead of the summer holiday season this weekendrsquos promotion will see customers earn two points per pound1 spent in store and online and two points per pound2 spent on fuel Tesco added that it was also working with a range of Clubcard Partners this summer to provide its customers with a broader choice of offers

Robin Terrell Chief Customer officer commented ldquoWe know that our customers find Tesco Clubcard helpful ndash itrsquos one of our unique ways of saying thank you and is the leading loyalty scheme in retail

ldquoAs part of our ongoing plans to serve Britainrsquos shoppers a little better every day we want to help them get the most out of Clubcard by making it more simple straightforward and appealing offering our customers even more value ndash and helping us to say an even bigger thank you for shopping with usrdquo



Disappointing Month For Retail Sales But Too Early To Assess Impact Of Brexit

The latest BRC-KPMG Retail Sales Monitor shows that sales were down 05 in June on a like-for-like basis although the poor weather rather than the result of EU referendum was blamed on the disappointing figures

Total sales edged up 02 with weak clothing sales offset by demand for furniture and home accessories as consumers attention shifted indoors to escape the wet weather The BRC said that while sales slowed towards the end of the month following the EU referendum it was too early to define this as a trend

BRC Chief Executive Helen Dickinson commented ldquoBritainrsquos retailers remain open for business The EU referendum vote has not changed their relentless pursuit of delivering for customers day in day out or their investment in meeting the needs of fundamental changes in the way people shop driven by digital and technology Despite the fall in the pound the time it takes for any input price increases to translate into higher shop prices will depend on a combination of factors including further changes in the pound commodity prices and the challenge for retailers to move pricing given the intensity of competition So there wonrsquot be any instant shocks as any changes would take time to feed throughrdquo

David McCorquodale head of retail at KPMG added ldquoWhile the ramifications from the Brexit vote may well affect consumer confidence retailers will be hoping the long-promised heatwave and potential stay at home holidays will be enough to drive shoppers back to the high-streets over the months aheadrdquo

Meanwhile Euro 2016 gave the grocers a bit of a boost with sales improving 08 in the three months April-June However like-for-likes continued to decline suggesting food and drink sales continue to be dragged down by the deflationary tide in the sectorCommenting on the performance of the food amp drink sector Joanne Denney-Finch Chief Executive of IGD said ldquoThe surprise result of the referendum appeared to trigger an immediate drop in food and drink spending which more than offset some modest sales growth earlier in the month Hopefully this will prove to be a short-lived shock and calmer waters lie aheadrdquo



No Signs Of Brexit Blues At Waitrose And John Lewis

Waitrose and John Lewis have recovered from a lacklustre week following the EU referendum result both reporting robust sales growth in the seven days to 9 July

At Waitrose sales rose 21 compared with the previous weekrsquos fall of 28 The group said trade was boosted by sporting events with tennis and football fans helping drive sales of sparkling wine which were up by 27 and champagne which rose 19 Shoppers also put more fresh fruit and vegetables in their baskets with total fresh produce sales up by 46

Meanwhile at sister chain John Lewis sales were up 47 compared to a 21 rise the week before Trade was boosted by its ongoing clearance sale and good sales of warm weather products



Poundland Agrees To pound597m Takeover Offer From Steinhoff

Steinhoff International is set to acquire discount chain Poundland in pound597m deal

The South African retail conglomerate made its first official approach for Poundland on the 15 June after buying a 23 stake in the single-price retailer However the board of Poundland subsequently snubbed Steinhoffrsquos proposal regarding a possible cash offer for the rest of the business

However in a statement this morning Poundlandrsquos board said it would recommend Steinhoffrsquos improved all-cash bid of 222p per share to its shareholders The offer which values the business at pound597m is a premium of 39 on Poundlandshares on 13 June before Steinhoff made its interest known Its share price has fallen from 418p in February 2015 to below 200p in recent months amid slowing sales growth and disruption caused by its takeover of 99p Stores

Commenting on the offer Darren Shapland Chairman of Poundland said ldquoThe Poundland Board believes that SEAGrsquos all-cash offer presents Poundland shareholders with an opportunity to realise their shareholding at a certain and attractive price securing earlier delivery of the Poundland Grouprsquos medium term value than could be expected from the ongoing turnaround process against a background of increasing economic uncertainty in the UK and a more challenging trading environmentrdquo

He added ldquoSteinhoff is a well-capitalised international business with a clear and proven commitment to value retailing They share our vision for the growth and expansion of Poundland and as such we believe they are a suitable and appropriate partner for our colleagues our suppliers and stakeholdersrdquo

Markus Jooste CEO of Steinhoff commented ldquoThe Board of Steinhoff and its management team are enthusiastic about the opportunities that this transaction brings we believe that there is significant merit in bringing Poundland into Steinhoffrsquos global network Steinhoff is developing a fast-growing price-led retail business across the UK and the rest of Europe Poundland would be a complementary fit to this growth storyrdquo

Steinhoff already owns Harveys Pep and Bensons for Beds in the UK as well as France-based furniture chain Conforama It lost out in the takeover battle for the Home Retail Group earlier this year to Sainsburyrsquos Analysts think Steinhoff will look to turn Poundland from a single-price retailer into a multi-price chain along the lines of BampM and Home Bargains



Ebay eyes possibility of pop-up stores in Sainsburys outlets

Ebay is reportedly looking the possibility of opening pop-up or click-and-collect points at some of Sainsburys estates

The news as the supermarket giant powers ahead with its pound13 billion acquisition of the Home Retail Group the parent company of Argos which could see some Argos outlets become concessions within Sainsburys larger stores

Ebay currently has a partnership with Argos in which it allows UK sellers to drop off sold products at the latter brands estates for buyers to collect or for Argos to deliver

Ebayrsquos EU advertising strategy product and operations director Phuong Nguyen told Marketing Week that the Sainsburyrsquos deal could open a lot of doors including the possibility of Ebay pop up stores or a click and collect set-up within Sainsburyrsquos 1200 estatesWe have to be wherever they are and wherever they want to shop If that means eBay being more present in locations around the UK then thatrsquos where we will be Nguyen told Marketing Week

ldquoThe retailers that will win can offer world class ecommerce and world class physical retail

You can be the best on digital but sometimes a consumer just wants to touch and feel a product ndash thatrsquos the power of pop-up locationsrdquo

This would not be the first time online auction retailer launched pop-up stores having done so in London back in 2012

Source Retail Gazette 13th July 2016


Iceland to open first dark store

Iceland is preparing to open its first online fulfilment centre as its ecommerce business continues to grow

18000 sq ft site in TiptonIceland is set to open its first dark store next month in the West Midlands town of Tipton Its central UK location and position just off the A41 in Link One Trading Estate give the new site strong access links making it an ideal location for Iceland to serve its deliveries which have grown to c200000 per week

Relieving pressure on storesThe centre will enable Iceland to fulfil all online orders in turn relieving current pressures on the 860+ store estate to serve both online and offline customers Iceland relaunched its online service in 2013 and it went national in 2014 reflecting the growing trend of online shopping in the UK Ever since Iceland has seen this part of the business strengthen to reach pound100m in sales

Key areas of focus online and Food Warehouse formatAlong with its larger Food Warehouse format the new dark store will play a role in strengthening Icelands struggling sales performance which saw like-for-like sales in the year ending 26 March 2016 at -27 Online and the new larger stores helped to moderate decline so it is key for Iceland to maintain focus on these and drive them harder to deliver a better performance this year It is also important that Iceland improves its offer in-store to meet more shopper needs and missions as the competition continues to remain strong in the UK grocery industry

Source IGD 13th July 2016


BampM Making Good Progress In Tough Market

BampM said today that it remains on track to meet its full year profit expectations after it reported a strong rise in quarterly sales despite the ldquochallenging trading conditionsrdquo

During the 13 weeks to 25 June total sales at the multi-price value retailerrsquos UK outlets jumped 213 to pound5081m boosted by new store openings Like-for-like sales were flat although excluding stores that are within a three mile radius of a recent new BampM store opening the group said underlying sales had risen 17

The group revealed that the quarter had a slow start to like-for-like sales due to the poor weather and the timing of Easter compared to last year but rebounded sharply in May It added that current trading was stable despite the changeable weather conditions impacting sales of outdoor and garden products

BampM opened 12 net new stores during the quarter with 511 outlets trading in the UK at the end of the period The group reiterated its longer term target of 850 stores with 50 openings expected by the end of this financial year

In Germany the grouprsquos Jawoll chain saw sales rise 235 to pound467m The business started the year with 56 stores with the group saying it is on target to reach 75 stores by the year end

Simon Arora Chief Executive commented ldquoAgainst a highly competitive backdrop our robust and compelling retail business model delivered 21 growth over this first quarter We have a well-defined and clear strategy for further growth and for BampM it remains lsquobusiness as usualrsquo despite broader general economic uncertainty Our outstanding value for money proposition to customers leaves us well-placed to continue to win market sharerdquo



Mothercare Continues On Path To Recovery

Mothercare has reported a 12 rise in UK like-for-like sales in its first quarter to 9 July boosted by its decision to bring its end-of-season sale forward by one week to clear stock following the adverse weather during the period

Total UK sales were down 21 reflecting its strategy of closing underperforming stores The group ended the quarter with 170 stores (162 Mothercare and eight ELC) and continued with its store refurbishment programme

Moves to grow its online business continued to pay-off with sales up 64 Online now accounts 355 of its total UK sales compared to 327 last year

However Mothercare warned of ldquocontinued volatilityrdquo in its overseas business after reporting a 39 fall in sales during the quarter impacted by the earlier timing of Ramadan

Looking ahead to the effects of the EU referendum result Chief Executive Mark Newton-Jones said ldquoWe have not seen any immediate consumer reaction to the Brexit vote but it is too early to call as we went into the end-of-season sale early We hedge both dollar purchases and royalty receipts and we expect limited impact on our financial results this yearrdquo



Co-op Sells 298 Stores To McCollrsquos For pound117m

The Co-op Group has announced that it is selling 298 of its smaller food stores to McCollrsquos Retail in a deal worth pound117m

The society said the move was part of its turnaround strategy of refocusing its store estate on larger convenience outlets that can accommodate a wider range particularly its own brand products The sale proceeds will be re-invested in the business and fund its store opening programme In the last two years the Co-op has opened nearly 200 new outlets with it planning to make 100 new store acquisitions during 2016 It recently bought six outlets from My Local the convenience chain that went into administration last month

The sale of the stores which are 1700 sq ft in size on average is subject to approval from the CMA and McCollrsquos shareholders The stores will continue to trade immediately after handover (expected from November 2016) and all staff will transfer to McCollrsquosCommenting on the sale Steve Murrells CEO of Co-op Food said ldquoTodayrsquos announcement is completely in line with our strategy as these stores did not allow us to provide a sufficiently compelling own-brand offer for our members going forwardsrdquo

The deal will significantly boost McCollrsquos existing portfolio of 933 convenience stores in line with its strategy to grow this part of its business as its moves away from operating newsagent outlets

Jonathan Miller McCollrsquos Chief Executive commented ldquoI am delighted to announce the acquisition of 298 quality convenience stores in a transformational deal for McCollrsquos This opportunity substantially accelerates our growth strategy and expands our neighbourhood presence for the benefit of our customers

ldquoThese stores are profitable well invested and the perfect size for our operating model We expect the transaction to be significantly earnings enhancing for our shareholdersrdquo



Halfords like-for-likes slip as bad weather hits cycling sales

bull Group like-for-likes slip 06bull Retail like-for-likes fall 12bull Motoring sales up 06

Cycling LFLs slide 4 due to poor weather and timing of Easter Halfords has posted a 06 drop in first-quarter group like-for-likes as it blamed bad weather for a slide in sales in its cycling division

The retailer said ldquopoorrdquo weather in April and late June and the timing of Easter led to a 4 drop in cycling like-for-likes in the 13 weeks to July 1 However Halfords reported ldquogoodrdquo sales growth for premium bikes without offering more detail

In its motoring division like-for-likes rose 06 led by the sales of bulbs blades and batteriesHalfords Autocentres business reported its 11th consecutive quarter of growth with like-for-likes up 31 driven by tyre sales and longer opening hours

Halfordsrsquo total group sales rose 21 in the quarter

It comes after the retailer last month reported a drop in full-year profitsChief executive Jill McDonald branded the first-quarter a ldquosolidrdquo performance and said she looked forward to the ldquopeakrdquo summer season for cycling

On Brexit she added ldquoWhile the recent decision to leave the EU does create uncertainty we are well-positioned as a business and focused on delivering sustainable long-term growthrdquo

Halfords has 75 of its purchases hedged but warned there could be a ldquosmallrdquo impact for the full-year if the sterling exchange rate against the dollar stays below 145

In May the retailer acquired online cycling specialist Tredz Today it said the business has ldquoperformed wellrdquo since the deal

Source Retail Week 14th July 2016


Channel forecast

Source IGD Research 2016 Channel Forecasts years to April

2016 2021

Discount channel value

pound179bn pound249bn

Share of UK grocery market

100 127

UK Discount Snapshot July 2016

Behind the headline numbers

bull By 2021 the channel will increase by pound71bn

bull Discounters will claim pound1 in every pound8 on grocery by 2021

bull Online will be the fastest growing channel and together with discount will account for 80 of market growth in the five years to 2021

bull Growth drivers include store openings and format development

1 Aldi onlinebull Aldi UK expanded its online offer to include its non-food Specialbuys less than two months after the discounter

launched online with wine

2 New discounter GHMbull GMH (Guess How Much) launched its first store in Hinckley Leicestershire aiming to be a one-stop shop for

mums selling general merchandise ambient grocery and clothing from Pep amp Co (also by parent company Pepkor UK)

3 End of Netto UK bull Sainsburys and Dansk Supermarked are ending their joint venture to bring the Netto fascia back to the UK

The stores are expected to trade throughout July and close during August incurring costs of pound10m for Sainsburyrsquos

4 Poundland takeover bull Poundland has reached an agreement with South African group Steinhoff International to accept a cash offer

of pound597m This move fits with Steinhoffs strategy as it aims to become a leading value and discount retailer within the markets that it serves

Source IGD Research

Whatrsquos happening


Stephen Hall

Friday 15th July


bull McBride to post better-than-expected profits as restructuring project pays offbull Waitrose to slash payment terms for small food producersbull Aldi extends partnership with Team GB for another four yearsbull Tesco kicks off summer trading with double Clubcard points weekendbull Disappointing month for retail sales but too early to assess impact of Brexitbull No signs of Brexit blues at Waitrose and John Lewisbull Poundland agrees to pound597m takeover offer from Steinhoffbull Ebay eyes possibility of pop-up stores in Sainsburys outletsbull Iceland to open first dark store bull BampM making good progress in tough marketbull Mothercare continues on path to recoverybull Co-op sells 298 stores to McCollrsquos for pound117mbull Halfords like-for-likes slip as bad weather hits cycling sales

Weekly News Summary ndash 11th July 2016






















































































































Channel forecast


2016 2021




100 127















Source IGD Research



Stephen Hall

Friday 15th July






















































































































Channel forecast


2016 2021




100 127















Source IGD Research



Stephen Hall

Friday 15th July


Stephen Hall

Friday 15th July