supermarkets - uk - november 2015 - executive summary

7/24/2019 Supermarkets - UK - November 2015 - Executive Summary

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SUPERMARKETS

UK, NOVEMBER 2015

EXECUTIVE

SUMMARY

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SUPERMARKETS, UK - NOVEMBER 2015 2

Mintel Group Ltd. All rights reserved.

THE GROCERY SUPERSTORES ARE LOSING MARKET SHARE AND THE MAIN FOCUS OF THIS REPORT IS TO EXAMINE

WHY. WE THINK THAT THERE ARE UNDERLYING SOCIO-ECONOMIC CHANGES TAKING PLACE WHICH ALLIED

TO THE GROWTH OF THE HARD DISCOUNTERS, ALDI AND LIDL, IS LEADING TO GROWTH IN MORE FREQUENT

SHOPPING TRIPS AND SMALLER BASKET SIZES. THESE CHANGES ARE NOT REVERSIBLE IN THE FORESEEABLE

FUTURE AND WE THINK THAT THE UNDERLYING DECLINE IN SUPERSTORES WILL CONTINUE.

Richard Perks, Director of Retail Research

The market

Consumer condence has stabilised, even

though real incomes have been rising.

FIGURE 1: CONSUMERS: STATE OF FINANCES, 2009-15

Base: 2,000 internet users aged 16+

Source: Lightspeed GMI/Mintel

Ination has been falling. The food

retailers are having to cope with deation.The main drivers for that are a succession

of good harvests, falling oil prices and the

strength of sterling. None of those are

likely to reverse in the short term and we

think there will be deation in the market

for several months.

Spending on food and drink has held up

well, though in value terms it has fallen as

ination has fallen.

Food retailers sales

Food retailers sales are expected to be

some 158 billion in 2015.

FIGURE 2: FOOD RETAILERS: BREAKDOWN OF SECTOR, 2015 (EST)

Source: Ofce for National Statistics/Companies/Mintel

We forecast that growth will be muted

over the next ve years as the growth in

convenience stores and hard discounters

is offset; perhaps more than offset

because of falling non-food sales, by the

decline in superstores.

We estimate that food and drink account

for 69% of all food retailers sales and

that the superstores of the market leaders

account for just over half of all food and

drink sales.

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FIGURE 3: ALL FOOD RETAILERS: SALES, 2010-20

Source: Ofce for National Statistics/Mintel

FIGURE 4: CHANNELS OF DISTRIBUTION FOR FOOD AND DRINK, 2014

Source: Mintel

Socio-economic changes

The major change in the market is the

growth in renting and the trend back

to living in inner cities. This is seen

most clearly in the proportion of people

renting their homes. The speed of this

development for what one would think of

as a long-term socio-economic trend is

unprecedented seven percentage points,

an increase of a quarter in just 10 years.

Prices

Following a complaint by Which?(a

consumer magazine) about supermarket

pricing practices, the Competition and

Markets Authority (CMA) produced a

report. It left open the possibility that some

retailers may be open to prosecution and itwent some way to agree with Which?that

some pricing practices are misleading.

The rst result which could perhaps be

traced back to the report is Tescos relaunch

of its Price Promise (Brand Guarantee)

with any discount given directly at the till

rather than through vouchers.

Online

Online may attract a lot of media attention,

but it is still only 5% of food retailers sales. It

is growing steadily, by around 0.5 percentage

points of market share each year, but it is still

very small and we estimate that over 95% is

through the websites of the market leaders

(and specialists such as Majestic), if one

treats Ocado as an online arm of Waitrose.

Leading retailers

We make much in this report of the

beginnings of a decline in the superstores,

but they are still absolutely dominant in

the marketplace. We can see the growth

of Aldi and Lidl, but the majority of main

grocery shops are still done at one of the

Big Four and that will not change, even

though the trends in the market place

favour smaller, convenience stores and

that includes Aldi and Lidl.

The problems of the superstores are

evident in the sales per square metre

statistics. All have seen a decline with

Morrisons now almost 20% below its peak

level and even the best performer (Asda)

4% below.

Market shares

The Big Four account for almost 60% of

sector sales (after adjusting for Ocado and

M&S which are not included in the ONS

data). But their share has been slipping

and we estimate that in 2015 it will be

three percentage points below the peak

level of 2012.

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FIGURE 6: RETAILER MOST MONEY SPENT IN DURING THE LAST MONTH, AUGUST 2015

In a typical month, which grocery retailer do you think you spend the most money with? Please select one.

Base: 1,823 internet users aged 16+ who are responsible for grocery shopping


FIGURE 5: LEADING FOOD RETAILERS: SALES MIX, 2014

Note: Food includes drink

Source: Mintel

Space allocation and product mix

We have surveyed the leading retailers

and used the space allocation data to

help estimate the retail product mix for the

majors. We estimate that food accounts for

just over 60% of sales of all of the market

leaders. Of the remainder, fuel is by far the

largest single element over 20% in the

case of Morrisons. Non-foods are important

as an attraction to the stores and as

products in their own right, but their share of

sales is small compared with food.

The consumer

Tesco dominant

Tesco still attracts more main shoppers

than Asda and Sainsburys combined, but

the groups to have put on most growth

in the last year are Aldi and Lidl. Lidl

breached the 5% penetration level for the

rst time this year.

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FIGURE 7: PROPORTIONS OF GROCERY SHOPPERS WHO HAVE CHANGED THE WAY THEY SHOP IN THE LAST YEAR,

AUGUST 2015

Do you think you are doing more, the same or less of the following types of shops compared to a year ago? Please

select one per type of shop.



What do people want from their

supermarket?

In this question people could choose

ve factors, though they had to list them

in order of importance. Lowest prices

received the highest response, though

Main shop vs convenience

While we know that superstores are losing

market share, only 10% of the population

only do top-up shopping and they are

predominantly older and from lower socio-

economic groups. But this chart clearly

illustrates the trend in the market.

overall convenience (in the sense of being

the closest store on one that is passed

regularly) got more. After those two,

promotions, availability (products being in

stock) and speed of getting in and out are

the most important.

FIGURE 8: MOST IMPORTANT FACTOR IN CHOOSING WHERE TO SHOP, AUGUST 2015

Which of the following, if any, best describes why you spend most at the following grocery retailers? Please select up to 5

and rank in order of importance where 1 = most important and 5 = least important.

Base: 1,823 internet users aged 16+ who are responsible/jointly responsible for grocery shopping


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Key factors by supermarket used

Looking at what those who use a particular

store think is most important highlights

some of the retailers strengths and

weaknesses. It is an indictment of Tesco

at the moment that its highest rating is for

its loyalty card. Sainsburys is highly rated

for the quality of its fresh products. Asda is

rated for low prices, but its prole is very

similar to that of Aldis and it should be

doing more to differentiate itself.

Satisfaction

A similar picture emerges from asking

people how satised they are with key

aspects of supermarket operations. In

general people are reasonably satised

with their usual supermarket, because ifthey were not they would go elsewhere.

But they are more satised with some

aspects than others.



One can go on to examine how retailers

perform on each measure. Sainsburys

does well on fresh food, but Asda

does worst and Aldi comes second to

Sainsburys. Aldi outperforms Lidl on all

the key measures. Tesco does best on

speed at the checkout, but is beaten by

Aldi there as well.

Opening hours

The Chancellor has proposed allowing

local councils to relax trading hours, so

we asked people whether they would like

that. The reaction was overwhelmingly in

favour.

FIGURE 10: ATTITUDES TOWARDS SUNDAY OPENING, AUGUST 2015

Thinking about grocery retailers, to what extent do you agree or disagree with

the following statements? Please select one option per statement.

FIGURE 9: OVERALL NET SATISFACTION WITH MAIN RETAILER BY CRITERIA,

AUGUST 2015

To what extent are you satised or dissatised with each of the following at [the

retailer you spend most money with].



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FIGURE 11: ATTITUDES TOWARDS GROCERS PRICING, AUGUST 2015

Thinking about grocery retailers, to what extent do you agree or disagree with the following statements? Please select

one option per statement.



FIGURE 12: ATTITUDES TOWARDS BUYING NON-FOODS AND SERVICES FROM GROCERY RETAILERS, AUGUST 2015

Thinking about grocery retailers, to what extent do you agree or disagree with the following statements? Please selectone option per statement.



Pricing

We also asked about supermarket pricing

in the light of the Competition and Markets

Authority (CMA) report. Two conclusions

stand out people want everyday low

pricing ( EDLP) (in spite of the evident

popularity of promotions) and people think

that supermarkets charge much the same

price anyway.

Non-foods

Theres no doubt that non-foods are

important and half of the sample said that

they sometimes make a special trip to the

supermarket just for non-foods. But it is

clear from the key factors that non-foods

come well down the list of priorities in

choosing a supermarket.

What we think

Superstores are still the dominant force in

the food retail market and they will continue

to be so. They face an uncomfortable few

years until their market share stabilises,

but that will happen in due course. There is

some evidence to suggest that the changes

in trading style at the hard discounters has

led to a step change in their market share

and over the next few years growth will slip

back to be more in line with store openings.

The present focus on price is self-defeating.

The cost base of the superstores does not

allow them to compete head on with the hard

discounters. The future of the superstore

lies in capitalising on what they are best

at breadth of range, great service and

a more pleasant shopping environment.It is signicant that the worst performer at

present is the most price focused Asda. The

consumer research hints at why this might be

so satisfaction is weak in the quality of fresh

food, store dcor and cleanliness, speed at

the checkout and availability. All these are

areas where Asda could have cut costs in

order to nance lower prices.

On the other hand Tescos performance

is improving and all these areas that Asda

is weak in are known to be the focus for

investment at Tesco, though the effects

of that do not yet show up clearly in the

consumer research.

We think that the most important factor for

food retailers is to offer value for money.

That is what Aldi and Lidl have in common

with M&S and Waitrose and those four are

the best performers in the marketplace atpresent.

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2015 Mintel Group Ltd. All rights reserved.

Confdential to Mintel.

Published by Mintel Group Ltd

www.mintel.comemail: [email protected]

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