UK Convenience Food Retailing 2010

Introduction

UK Convenience Food Retailing 2010: Examines the latest developments in convenience retail, providing comprehensive analysis of the location to identify the key issues impacting it and how opportunities for growth can be exploited. Details the size of the market, with five year forecasts and analysis of emerging trends. Key retailers in the sector are fully profiled and critically assessed.

Features and benefits

• Key metrics of nconvenience store retailing: sales growth, space, store numbers, store sizes and sales densities.
• Analysis of co-operatives, multiple grocers, unaffiliated independents, symbol groups and forecourt retailing.
• Profiles of key players operating in the location, including operating statistics, recent key events and outlook and market shares for 2005 to 2011.
• Comprehensive analysis of the issues impacting the market, identifying emerging trends and growth opportunities, recomending strategies for success.

Highlights

Expenditure via the convenience food market will rise by 3.7% to £31.6bn in 2010, despite significant market consolidation and the continued outperformance of the online. In addition, the comprehensive offers provided by the multiples and other convenience store operators are diminishing the need for off-licences, CTNs and food specialists.The composition of the market is changing, with uncompetitive players being forced out of the market by the multiples, and improved propositions from the symbol groups and the Co-op. Competition is intensifying and with all looking to exploit the growth opportunities available, the race for space is hotting up.As retailers race to compete for space and spread across the convenience sector profit margins will suffer as a result of expansion costs and duplicate presence in certain locations as the focus on market share and volumes takes emphasis away from profitability.

Your key questions answered

• Benchmark retailer performance against the market. Understand the dynamics of the location, its composition and prospects for each channel.
• Identify the growth prospects of key players in neighbourhood retailing.
• Analyse the key issues impacting the location and identify the strategies for success.

Table of contents

Executive Summary
Key findings
Main conclusions
The convenience food market is experiencing rapid consolidation
Asda and Waitrose join Tesco and Sainsbury's in hunt for growth as Morrisons plans convenience trial
Many independents can't stand the pace
Not everyone will gain from the growing consumer demand for convenience
Multiples evolve ranges to match polarised demand
Profitability will become more elusive as competitive pressures intensify
The growth of drive-thru concepts at larger supermarkets has the potential to close the convenience gap
Widening propositions mean multiples will threaten a broader array of retailers
Click & collect at convenience stores to increase footfall
Symbol groups are competing effectively, benefitting from growing membership …
…and widespread proposition improvements
Forecourt convenience set to increase share of convenience food retailing
Outlook
Market consolidation is coming at the expense of independent convenience stores
Spend grows in spite of long term decline in store numbers
Multiples and symbol groups claim a rising proportion of convenience expenditure
Convenience food lucrative for multiples
Fragmented convenience market
Weak neighbourhood property market
Narrowing opportunities for OOT expansion
Emerging consumer trends
Space expansion and range development drivers of multiples success in convenience food market
Independents club together in symbol groups in response to multiples onslaught
Symbol groups focus on recruitment…
…and proposition enhancement
Multiples to develop convenience formats further
Easy opportunities for organic expansion and profitability will have been picked off
Intensifying competitive pressures
Increasing regulation and opposition
Format flexibility essential
Food-to-go
Multichannel
Convenience Food Market Analysis
Definition
Convenience food spending growth beginning to outpace wider food & grocery market
Store numbers
Recent key trends
Top-ups drive convenience food segment
Growth of multiples
Multiples cover dining in and take-aways
Strong defensive moves by symbol groups …
…as independents struggle to survive
Co-ops
Forecourt outlets
Forecast
Growth in online and m-shopping will boost top-up
Multiples will make further inroads
Asda's acquisition of Netto will have a significant impact
Independents market share will gravitate to symbol groups …
…as unaffiliated independents continue to disappear
Convenience Food Market Company Comparisons
Tesco and Sainsbury's benefit from aggressive convenience expansion
Co-op faces challenge to maintain market share
Musgrave will struggle to maintain market share growth
The Co-operative Group
Getting to grips with Somerfield
Recent key events
Continues pace of development after Somerfield merger
Financials
Margin slips back in 2009
Space
Sector performance – convenience food market
Market shares
Outlook – Somerfield integration and c-store competition challenge management
Multiples – Convenience Formats
Convenience formats have become a key focus for multiple grocers
Recent key trends
Multiples focus on convenience sector
Gain foothold
Multiples tap into emerging top-up shopping trend
Supermarkets create convenience ranges based on existing offers
Dine-in convenience at premium end
Convenience formats also cater for cooking from scratch
Food-to-go propositions open up another market segment
Outlook
Asda's purchase of Netto will increase competition
Cannibalising sales and the profitability of convenience space
Loyalty will remain a key differentiator
Flexible approach to expansion essential in race for space
Multichannel forms integral part of convenience offer
Multiples: Key players
Sainsbury's
Faster growth driven by space expansion
Recent key events
Financials
Space
Sector performance – convenience food market
Market shares
Outlook – aggressive growth
Tesco
Leads in innovation and expansion
Recent key events
Financials
Space
Sector performance – convenience food market
Market shares
Outlook – market share gains set to continue
Forecourt Convenience Formats
Forecourt stores benefit from top-up shopping
Service stations continue to gain market share in the convenience food market
Recent key trends
Investment in forecourt formats generates growth
Big oil companies are convenience players
Shop makes the profit
Growth rate slides
Motorists use cars less
Proportion of forecourts with a shop drops
Majority of service stations are operated by dealer groups in a franchise arrangement
Oil companies continue to seek convenience store and food-to-go joint ventures
Waitrose on trial on Shell forecourts in Birmingham
Outlook
Forecourt channel to remain in growth due to top-up shopping …
… but at a slowing rate due to declining fuel consumption and retail space
Motorists need less fuel due to vehicle efficiency
Shop sales should hold up because forecourts being closed are ones without shops
Gazprom or Greenenergy could buy TOTAL network
Bibby Line could buy Murco
UK forecourts heading to US model
Forecourt Convenience Formats: Key players
Of the Top Five BP, Shell and Esso have developed convenience store propositions …
Symbol Groups
Symbol groups gain greater share of market, but holding on to it will be a challenge
Recent key events
Symbol groups gain market share
Symbol group sales grow at fastest rate in the convenience food market
Premier and SPAR battle to be top dog
Pool of unaffiliated independents reduces
Retailing improvements attract shoppers and retailer members
Provide greater support
New store designs
Outlook
Competition among symbol groups will intensify
Symbol Groups: Key players
Costcutter
Good performance but disputes make future uncertain
Recent key events
Financials
Stores
Sector performance – convenience food market
Market shares
Outlook – growing turbulence in tie-up with Nisa-Today’s
Musgrave
Potential victim of its own success
Recent key events
Financials
Stores
Sector performance – convenience food market
Market shares
Outlook – limit to how much more it can do to stay ahead of competition
Premier (Booker)
Focus on growing store numbers
Recent key events
Financials
Stores
Sector performance – convenience food market
Market shares
Outlook – in prime position to win share of the convenience food market
SPAR
Performance improves dramatically
Recent key events
Works hard to improve offer
Financials
Space
Sector performance – convenience food market
Market shares
Outlook – rising standards help performance
Other key symbol groups
Best-one (Bestway)
Lifestyle (Landmark Group)
Mace (Palmer & Harvey McLane)
Nisa-Today’s
APPENDIX
List of abbreviations
Ask the analyst
Verdict consulting
Disclaimer

TABLE OF FIGURES
Figure 1: Convenience food market – sales grow as store numbers decline 2005–14e
Figure 2: Convenience food market rising and falling components of market share % 2005–14e
Figure 3: Why multiples focus on the convenience food market 2010
Figure 4: Convenience food market shares – symbol groups vs. unaffiliated independents 2005–11e
Figure 5: Opportunities for growth in convenience store retailing 2010
Figure 6: Convenience stores to develop food-to-go offers 2010
Figure 7: Tesco's Click & Collect for groceries - UK and Auchan's Click & Drive- France 2010
Figure 8: Convenience food market 2005–11e
Figure 9: Spending growth convenience food segment vs. total food & grocery 2005–11e
Figure 10: Components of convenience food market sales 2010e
Figure 11: Trend in convenience food store numbers 2005–11e
Figure 12: Convenience food stores split by type of format 2010e
Figure 13: Convenience food market 2009–11e
Figure 14: Convenience food spending growth vs. food & grocery overall 2009–14e
Figure 15: Components of convenience food market sales 2014e
Figure 16: Convenience food market share changes of Top Seven retailers 2010e on 2005
Figure 17: Co-operative Group
Figure 18: Co-operative Group food retail UK sales and growth to * Jan/Dec 2005–10e
Figure 19: Co-operative Group food retail operating profit to *Jan/Dec 2005–10
Figure 20: Co-operative Group convenience sales incl VAT (calendar years) 2005–10e
Figure 21: Co-operative Group share of convenience food market 2005–10e
Figure 22: Multiples convenience formats sales 2005–11e
Figure 23: Multiples convenience formats share of convenience food market 2005–11e
Figure 24: Sales growth via multiples convenience formats vs. conv food 2009–14e
Figure 25: Multiples multichannel focus 2010
Figure 26: Sainsbury's
Figure 27: Sainsbury's UK sales and growth to March 2005–10
Figure 28: Sainsbury's operating profit to March 2005–10
Figure 29: Sainsbury's convenience food sales (incl VAT) calendar years 2005–10e
Figure 30: Sainsbury's share of convenience food market 2005–10e
Figure 31: Tesco
Figure 32: Tesco UK sales and growth to February 2005–10
Figure 33: Tesco group operating profit to February 2005–10
Figure 34: Tesco convenience sales incl VAT (calendar years) 2005–10e
Figure 35: Tesco share of convenience food market 2005–10e
Figure 36: Forecourt convenience formats sales 2005–11e
Figure 37: Forecourt convenience formats share of the convenience food market 2005–11e
Figure 38: Forecourt shops penetration of petrol stations 2005–10
Figure 39: Spending growth via forecourts vs convenience food market 2009–14e
Figure 40: Leading oil companies forecourt sites with a shop 2008–10
Figure 41: Petrol station fuel brands & shares of shop sites 2009
Figure 42: Symbol group affiliates share of convenience food market 2005–11e
Figure 43: Symbol group affiliates sales 2005–11e
Figure 44: Spending growth via symbol affiliates vs total n'hood and convenience food 2009–14e
Figure 45: Costcutter
Figure 46: Costcutter UK sales and growth to April 2005–10
Figure 47: Costcutter convenience sales 2005–10e
Figure 48: Costcutter share of food convenience market 2005–10e
Figure 49: Musgrave
Figure 50: Musgrave UK sales of all retailers and growth 2005–10
Figure 51: Musgrave convenience sales including VAT 2005–10e
Figure 52: Musgrave share of convenience food market 2005–10e
Figure 53: Premier
Figure 54: Premier UK sales and growth to March 2005–10e
Figure 55: Premier convenience sales 2005–10e
Figure 56: Premier share of total convenience market 2005–10e
Figure 57: SPAR
Figure 58: SPAR UK sales and growth to April 2005–10
Figure 59: SPAR convenience sales including VAT (calendar years) 2005–10e
Figure 60: SPAR share of convenience food market 2005–10e

TABLE OF TABLES
Table 1: Convenience food market definition and methodology 2010
Table 2: Convenience food market vs total food & grocery market 2005–11e
Table 3: Retail distribution of convenience food market expenditure 2009 and 2010e
Table 4: Convenience food store numbers 2005–11e
Table 5: Retail distribution of convenience food stores 2009 and 2010e
Table 6: Convenience food market vs total food & grocery market forecasts 2005–14e
Table 7: Retail distribution of convenience food market expenditure 2009 and 2014e
Table 8: Total revenue of Top Seven retailers in convenience market 2005–10e
Table 9: Convenience revenue of Top Seven retailers in convenience market 2005–10e

46 Table 10: Convenience market shares of Top Seven retailers 2005–10e 46 Table 11: Co-operative Group company overview 2010 48 Table 12: Co-operative Group food retail key operating statistics 2005–10e 50 Table 13: Co-operative Group food retail trading record 2001–11e 53 Table 14: Co-operative Group food retail UK store portfolio 2000–11e 54 Table 15: Co-op convenience trading record (calendar years) 2005–10e 55 Table 16: Multiples convenience formats market 2005–11e 58 Table 17: Multiples convenience formats market 2009–14e 62 Table 18: Sainsbury's company overview 2010 66 Table 19: Sainsbury's key operating statistics 2005–10 68 Table 20: Sainsbury's trading record 2000–10 71 Table 21: Sainsbury's UK store portfolio 2000–10 72 Table 22: Sainsbury's store profile March 2010 73 Table 23: Sainsbury's convenience food market trading record (calendar years) 2005–10e 73 Table 24: Tesco company overview 2010 77 Table 25: Tesco UK key operating statistics 2005–10 79 Table 26: Tesco UK trading record 2000–10 82 Table 27: Tesco UK store portfolio 2000–10 83 Table 28: Tesco store profile February 2010 84 Table 29: Tesco convenience trading record (calendar years) 2005–10e 85 Table 30: Forecourt convenience formats market 2005–11e 88 Table 31: Forecourt convenience formats market 2009–14e 93 Table 32: Symbol group affiliates market 2005–11e 100 Table 33: Symbol group affiliates market forecasts 2009–14e 103 Table 34: Costcutter company overview 2010 106 Table 35: Costcutter UK key operating statistics 2005–10e 109 Table 36: Costcutter UK trading record 2000–10e 110 Table 37: Costcutter UK store portfolio 2002–10 111 Table 38: Costcutter convenience trading record (calendar years) 2005–10e 112 Table 39: Musgrave company overview 2010 115 Table 40: Musgrave UK key operating statistics 2005–10 117 Table 41: Musgrave UK sales to retail partners 2000–10e 118 Table 42: Musgrave UK retail sales of partners 2000–10e 119 Table 43: Musgrave UK store numbers 2004–10e 121 Table 44: Musgrave convenience trading record (calendar years) 2005–10e 122 Table 45: Premier company overview 2010 126 Table 46: Premier UK key operating statistics 2005–10e 129 Table 47: Premier UK trading record 2000–10e 131 Table 48: Premier UK store portfolio 2002–10e 132 Table 49: Total convenience trading record (calendar years) 2005–11e 133 Table 50: SPAR company overview 2010 137 Table 51: SPAR UK key operating statistics 2005–10e 140 Table 52: SPAR UK trading record 2000–11e 142 Table 53: SPAR UK store portfolio 2002–10 143 Table 54: Total convenience trading record (calendar years) 2005–10e 144 Table 55: Profile of other key symbol groups 2010 149

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By sector: Retail (in Off-trade)

By market: United Kingdom (in Europe)