Tomorrow’s food shopperVerdict Consulting

Agenda

What we’ll talk about

1 2 3what we’ve

gothow we

shopwhat itmeans

But first

A short story…

1

what we’ve got

What we’ve got

A squeeze

incomings outgoings

prices

What we’ve got

The impact

Before recession(2007)

During recession(2009)

After recession(2011)

Disposable

£29,982Disposable

£29,625Disposable

£29,005

Discretionary

£9,301Discretionary

£12,903Discretionary

£8,788

lack money

I can’t spend

lack willI won’t spend

lack spontaneity

I think, then spend

What we’ve got

Changing mindsets

1.6%

1.8%

2.4%2.7%

2.9%

2010 2011 2012 2013 2014

2.8%

2015

What we’ve got

Total retail spending growth

Total retail consumer spending growth

1.3% 1.7% 0.9% 0.8% 0.6%

0.3%

0.1% 1.5% 1.9% 2.3%1.6%

1.8%

2.4%2.7%

2.9%

Inflation growth

Volume growth

0.4%

2.6%

2.8%

2010 2011 2012 2013 2014 2015

What we’ve got

Volume and inflation

Total retail consumer spending growth

2.4%

+3.9% +4.0%

ClothingTotal Beauty

+3.4%

Food

+0.7%

Furniture

+0.6+0.6

ElectricalsHomewares

+0.4

DIY

What we’ve got

Sector growth

Average annual growth (2010-15)

What we’ve got

Food and grocery growth

Food and grocery growth (inflation and volume)

6.4

4.5

2.43.2 3.0 2.9 2.7

-0.9

0.9

1.10.6 0.7 0.5 0.6

2008 2009 2010 2011 2012 2013 2014

Inflation growth

Volume growth

2

how we shop

How we shop

Price sensitivity

42.1

48.7

44.9 45.8

48.6

50.9

47.1 46.8

42.6 42.1

48.247.3 48.0

30

35

40

45

50

55

60

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Percentage of food consumers mentioning price as a driver of store choice

How we shop

Price sensitivity links

Annual change in inflation and in price as a driver of store choice

Food inflationPrice mentions as driver Real household disposable income

-0.3

-4.2

-0.5 -0.9

0.7

6.1

-6

-4

-2

0

2

4

6

8

2005 2006 2007 2008 2009 2010 2011

0.4

2.13.0

4.5

2.43.2

6.4

2.01.5

0.41.1 1.1

-0.5-1.5

How we shop

Price more important

Forecast of price sensitivity for this year

2007 2008 2009 2010 2011

42.1% 48.2% 47.3% 48.0% 50.5%

Food inflation Real household disposable income

How we shop

Dynamics of sensitivity

Differences in those concerned about price (2003 v 2010)

2003 2010

24.6%

9.8%

32.2%

22.5%

How we shop

It’s not all bad news

Factors driving demand

Cinemaattendance

Pubgoing

Diningout

Foreignholidays

UKholidays

How we shop

The premium honeypot

Growth segments in food retail (2011 to 2012)

Premium Mainstream Value

6.7%

2.2%

5.1%

How we shop

The premium honeypot

Competitors will put effort behind ‘best’

(5%) (20%) (16%)

How we shop

It’s easier to go down, than to go up

What do attributes mean?

Price Quality

How we shop

The great balancing act

The parable of Neil’s shopping trip (based on a true story)

What Neil wanted What Neil also purchased

£21.94 £42.69

How we shop

In a nutshell

Constrained Frugal Save money Trade up

Market share

Volume

3

what it means

What it means

Everyday value

What it means

Innovation

What it means

Clarity

Layouts

Ranges

Promotions

Stores

What it means

Segmentation

What it means

Stimulation

Customer shares over Christmas 2010

Level 1

Level 2

Level 3

Level 4

Level 5

Level 6

Level Players operating at this level Usual shop Xmas shop

3.6% 6.9%

16.9% 15.5%

37.1% 34.7%

35.7% 33.4%

1.5% 1.6%

4.1% 3.2%

What it means

The recipe for success

Empathy Editing Emotion Excitement

the end