UK Food & Grocery Retailers 2011

Expenditure in food & grocery is expected to grow 3.2% in 2011, driven mainly by inflation. As consumers remain highly price sensitive and the market remains competitive, grocers have taken much of the impact of this inflation – with promotions becoming embedded in the market. Volume sales growth has slowed substantially, however grocers' expansion continues at the expense of sales densitiesProvides data and insight on the market size, sales and growth rates for the UK food & grocery sector, overall and at category levelIt presents thorough profiles of key players operating in the sector: including operating statistics and market share analysisAnalysis of the key issues impacting the sector – inflation, polarisation, space expansion, online, promotions & integrating new technologiesInflationary pressures and the impact on volumes have not halted grocers expansion plans. In fact, they plan to significantly increase space – opening almost twice the amount in the next five years as was opened between 2005 and 2010. As a result we expect sales densities at constant prices (excluding inflation) to decline from 2011 to 2015Promotional activity is intensifying in the quest to win share, as a culture of promotions becomes embedded in the market. Multibuys and price focused comparisons will push retailers to the limit of price cutting potential, and become unsustainable. Gaining loyalty and creating more complex value propositions will be necessary to differentiateOnline sales for food continue to grow along with increased competition. Limited delivery slots and associated charges are the key concerns preventing usage of the online shopping channel – click & collect may provide the solution to both of these issues. The focus on click & collect in non-food should extend to food to address these concernsWho are the top performing grocers in terms of UK turnover, profitability, sales densities and market share?What proportion of spend is online, and how does online sales growth compare to overall market growth?How much new space is forecast over the next five years, and how will this impact space productivity?

Table of contents

EXECUTIVE SUMMARY
•Key findings
Market growth mainly driven by inflation as volumes suffer;
Tough economic conditions result in market polarisation to value and premium ends;
Growing space not always the answer…
… with scope for further market consolidation;
Sales densities at risk;
Tesco has most to lose from increased competition;
Building customer loyalty will continue to be a focus
Online and delivery process remains a focus;
Innovation in promotions vital to drive share;
New technology will play a greater role in customer engagement.
•Main conclusions
(Untitled sub-section)
OUTLOOK
•Space race continues as market conditions toughen
Inflation impacts volume growth
Impact on volumes
•Consumer trends
Polarisation of demand
Food & grocery retailers increasingly stretched
•Space race damages sales densities
Space expansion plans continue unabated despite difficult economic outlook
Large store expansion also continues
New space starts to impact on real sales densities
Grocers must manage expansion plans carefully
•Online shopping provides respite from space race
Online growth continues ...
… but simply transfers sales from stores
Shopper numbers online grow, as do expectations
Improving delivery process will benefit food & grocery retailers
•Promotions
Culture of promotions embeds itself in retail environment
Multibuys becoming unsustainable
Multi-buys extend across categories as meal deals become ubiquitous
Price focused comparison is a win/win for shoppers
Shopper focused innovation in promotions will win share
Innovation in promotions will be vital
•Integrating new technology to understand and engage with the consumer
Investment in new technology must be high on the agenda
Tesco leads in m-Commerce
Social media changes the way grocers engage with customers
Brand communities develop
New technologies set to change retailer interaction with customers
•Summary – focus must be on retaining profits
Growing space not always the answer …
… with scope for further market consolidation
Efficient business management vital
Building customer loyalty will continue to be a focus
MARKET ANALYSIS
•Growth improves, though volumes suffer for grocers and food specialists
Grocers continue to grow share, while off-licences and specialists lose out
Small stores see the highest growth rate
Space growth driven by supermarket expansion …
… though small stores increase productivity
Consolidation sees multiples take on larger proportion of store numbers
•Food & grocery expenditure
Volume growth slows
Essential nature of food makes it the key driver
COMPANY DATA ANALYSIS
•Market shares
Smaller players squeezed as winners continue to leverage operational efficiencies
•Key operating statistics
Sales and operating profit
Space
Space allocation – grocers retreat from non-food to focus on core offer
•Advertising
Grocers up spend as fight for market share escalates
ASDA
•Increased focus on quality, while it looks to smaller stores for expansion opportunities
•Recent key events
Conveying quality key to growth
•Proposition
•Financials
Sales growth slows down
Price positioning drives footfall and sales
•Space
Netto stores will boost numbers significantly
Space allocation
Sales mix
•Sector performance – food & grocery
Sales pick up but 2011 will remain tough
•Market shares
Netto purchase gives boost
•Outlook
Improving and not just expanding offer will prove challenging
THE CO-OPERATIVE GROUP
•Settling down after Somerfield acquisition
•Recent key events
Ethical trend sets agenda
•Proposition
•Financials
Sales growth levels as Somerfield integration continues
Growth settles to comfortable level
•Space
Ambitious expansion plans ahead
Sales densities dip in 2011
Space allocation
•Sector performance – food & grocery
Food and grocery sales settle as integration nears completion
•Market shares
Steady after leap in 2009
•Outlook
Future expansion must be tactical
ICELAND
•Signs of slowdown in recovery
•Recent key events
Despite questions over future ownership, Iceland expands
•Proposition
•Financials
Margins remain high as growth begins to slow
Slowdown in sales growth highlights trading pressures
•Space
Steady growth with usual format
Space allocation
•Sector performance – food & grocery
Food and grocery sales continue to grow
•Market shares
Market share continues to grow at slow pace
•Outlook
Increasing pressure will test Malcolm Walker's determination
MARKS & SPENCER
•Evolution not revolution for premium grocer
•Recent key events
Bolland pursues evolutionary change
•Proposition
•Financials
Healthy growth as promotions drive sales
•Space
Steady rise in floorspace
Space allocation
•Sector performance – food & grocery
Food & grocery sales rise 19.0% in five years to 2011
•Market shares
Steady as Waitrose diversifies
•Outlook
Gradualist long term approach but consumer climate to get harder
MORRISONS
•Morrisons moves to catch up with rivals
•Recent key events
Morrisons begins catch up in order to win share
•Proposition
•Financials
Trading performance defies recession
Fair growth in both sales and profit
•Space
Sustains space growth despite recession
Space allocation
Sales mix
•Sector performance – food & grocery
Further growth in sector sales
•Market shares
Steady as Morrisons plans to expand
•Outlook
Expansion required to increase market share
OCADO
•Sales growth limited by capacity constraints
•Recent key events
Extending range and capacity to reach new customers
•Proposition
Carrefour link adds interest to range
•Financials
Sales growth continues as profits start to emerge
Capacity constraints limit sales growth
Profits begin to emerge as sales make their mark
•Sector performance – food & grocery
Gains basket size while others are losing
•Market shares
•Outlook
New distribution centre will alleviate pressure in capacity
SAINSBURY'S
•Rebranding to offer customers affordable indulgence
•Recent key events
Innovates in value while maintaining values
•Proposition
Added value widens proposition
•Financials
Expansion feeds sales
Steady increase in margins as sales continue to grow
•Space
Ambitious expansion continues with new locations providing solid growth
Space allocation – fresh focus emerges
Sales mix
•Sector performance – food & grocery
Quality and value builds food spend
•Market shares
Space drives share growth
•Outlook
Repositioning brand as expansion continues
TESCO
•Looks to new ranges and Express store rollout for food & grocery sales growth
•Recent key events
Tries to differentiate as competition intensifies
•Proposition
•Financials
New space drives sales growth
Non-stop sales and profit growth
•Space
Sustains space growth despite recession
Space allocation
Sales mix
•Sector performance – food & grocery
Growth picks up after slowing in 2009
•Market shares
Convenience store rollout generates small rise in share
•Outlook
Organic growth remains tough, but Tesco expands ranges and rolls out even more stores
WAITROSE
•Flexes formats as reach extends
•Recent key events
New stores and renewed online services spur growth
•Proposition
Adapting to polarisation to premium and value ends of the market lets customers indulge or save
•Financials
Building on sales growth through ongoing expansion
Building profits steadily as expansion restrains growth rates
Slight fall in operating margin as expansion pressurises profitability
•Space
Convenience and new territory adds space
Space allocation
Sales mix
•Sector performance – food & grocery
Growth gathers pace as offer hits the right note
•Market shares
Balance of affordable indulgence wins share
•Outlook
Ambitious plans will provide potential to build on growth
HARD DISCOUNTERS
•Aldi
Aldi's profitability under threat as Big Four step up competitiveness
Trading record
Store portfolio
Market shares
Outlook
•Lidl
Value credentials should prove popular as economic recovery falters
Trading record
Store portfolio
Market shares
Outlook
SMALLER GROCERY PLAYERS
•Booths
Niche upmarket appeal provides continued growth
Recent key events
Financials
Stores
Outlook
•Farmfoods
Impressive growth underlines appeal of frozen food
Financials
Stores
Outlook
SYMBOL GROUPS
•Benefits from local shopping as independents seek refuge from grocers
(Untitled sub-section)
•Costcutter
Rebranding imminent as tensions with Nisa Today's continue
Recent key events
Financials
Outlook
Tie-up with Nisa-Today’s mutually destructive
•Musgrave
Growth slows as Waitrose & Morrisons threaten
Recent key events
Financials
Outlook
•Premier (Booker)
Develops range to continue expansion
Recent key events
Financials
Outlook
•Spar
Own brand development bolsters success of store refurbishments
Recent key events
Financials
Outlook
•Smaller players
Best-one (Bestway)
Lifestyle (Landmark Group)
Nisa-Today’s
Mace (Palmer & Harvey McLane)
APPENDIX
•Definitions
•Methodology
Financial Statistics – VAT
Trading Profile
Physical Development
Computer Rounding
•Further reading
•Ask the analyst
•Verdict consulting
•Disclaimer
TABLES
•Table: Retailer charges for online grocery shopping 2011
•Table: Grocers & food specialists definition 2011
•Table: Sales via grocers & food specialists 2001–11e
•Table: Channels of distribution 2006–11e
•Table: Total grocery market size by retailer type 2001–11e
•Table: Total grocery space by retailer type 2001–11e
•Table: Annual sales densities by retailer type 2001–11e
•Table: Total grocery store numbers by retailer type 2001–11e
•Table: Total food & grocery market consumer expenditure 2001–11e
•Table: Total food market consumer expenditure 2001–11e
•Table: Non-durable household goods consumer spends 2001–11e
•Table: Soft drinks market consumer expenditure 2001–11e
•Table: Alcoholic drinks consumer expenditure 2001–11e
•Table: Tobacco products consumer expenditure 2001–11e
•Table: Shares of the total market held by food & grocery specialists 2006–11e
•Table: Leading grocery retailers operating statistics 2010/11
•Table: Leading grocery retailers store profiles 2010/11
•Table: Grocery space allocation – retailers A–F 2011
•Table: Grocery space allocation – retailers A–F (continued) 2011
•Table: Grocery space allocation – retailers G–M 2011
•Table: Grocery space allocation – retailers G–M (continued) 2011
•Table: Grocery space allocation – retailers N–W 2011
•Table: Grocery space allocation – retailers N–W (continued) 2011
•Table: Advertising media expenditure 2005–10
•Table: Retailers advertising spend across all media 2010
•Table: Asda company overview 2011
•Table: Asda retail proposition 2011
•Table: Asda UK key operating statistics 2006–11e
•Table: Asda store portfolio 2001–11e
•Table: Converted Netto stores opened as at August 18, 2011
•Table: Converted Netto stores scheduled openings (as at August 18) for 2011
•Table: Asda space allocation 2011
•Table: Asda space allocation ( continued ) 2011
•Table: Asda estimated sales mix 2010
•Table: The Co-operative Group company overview 2011
•Table: The Co-operative Group retail proposition 2011
•Table: The Co-operative Group UK key operating statistics 2006–11
•Table: The Co-operative Group trading record trading record 2002–11
•Table: The Co-operative Group store portfolio 2001–11
•Table: The Co-operative Group space allocation 2011
•Table: The Co-operative Group space allocation ( continued ) 2011
•Table: Iceland company overview 2011
•Table: Iceland retail proposition 2011
•Table: Iceland UK key operating statistics 2006–11
•Table: Iceland trading record trading record 2001–11
•Table: Iceland store portfolio to March 2001–11
•Table: Iceland space allocation 2011
•Table: Iceland space allocation ( continued ) 2011
•Table: Marks & Spencer company overview 2011
•Table: Marks & Spencer retail proposition 2011
•Table: Marks & Spencer UK key operating statistics to March 2006–11
•Table: Marks & Spencer UK trading record 2001–11
•Table: Marks & Spencer UK store portfolio 2001–11e
•Table: Marks & Spencer UK store portfolio (food) 2001–11e
•Table: Marks & Spencer store breakdown by type at March year end 2009/10 and 2010/11
•Table: Marks & Spencer space allocation 2011
•Table: Marks & Spencer space allocation (continued) 2011
•Table: Morrisons company overview 2011
•Table: Morrisons retail proposition 2011
•Table: Morrisons UK key operating statistics 2006–11
•Table: Morrisons trading record 2001–11
•Table: Morrisons store portfolio to January 2001–11
•Table: Morrisons space allocation 2011
•Table: Morrisons space allocation ( continued ) 2011
•Table: Morrisons estimated sales mix 2010/11
•Table: Ocado company overview 2011
•Table: Ocado retail proposition 2011
•Table: Ocado UK key operating statistics 2006–11e
•Table: Ocado trading record 2002–11e
•Table: Sainsbury's company overview 2011
•Table: Sainsbury's retail proposition 2011
•Table: Sainsbury's UK key operating statistics 2006–11e
•Table: Sainsbury's trading record trading record 2001–11
•Table: Sainsbury's UK store portfolio 2001–11e
•Table: Sainsbury's space allocation 2011
•Table: Sainsbury's space allocation ( continued ) 2011
•Table: Sainsbury's estimated sales mix 2010/11
•Table: Tesco company overview 2011
•Table: Tesco retail proposition 2011
•Table: Tesco UK key operating statistics 2006–11
•Table: Tesco UK trading record 2001–11
•Table: Tesco UK store portfolio 2001–11
•Table: Tesco space allocation 2011
•Table: Tesco space allocation ( continued ) 2011
•Table: Tesco estimated sales mix 2010/11
•Table: Waitrose company overview 2011
•Table: Waitrose retail proposition 2011
•Table: Waitrose UK key operating statistics 2006–11
•Table: Waitrose trading record trading record 2001–11
•Table: Waitrose store portfolio 2001–11
•Table: Waitrose space allocation 2011
•Table: Waitrose space allocation ( continued ) 2011
•Table: Waitrose estimated sales mix 2010/11
•Table: Aldi UK key operating statistics to December 2006–11e
•Table: Aldi UK sales record to December 2001e–11e
•Table: Aldi UK store numbers to December 2001e–11e
•Table: Aldi space allocation 2011
•Table: Aldi space allocation ( continued ) 2011
•Table: Lidl UK key operating statistics 2006e–11e
•Table: Lidl UK sales record 2001e–11e
•Table: Lidl UK store numbers 2001e–11e
•Table: Lidl space allocation 2011
•Table: Lidl space allocation ( continued ) 2011
•Table: Booths overview 2011
•Table: Booths planned store openings 2011–13
•Table: Farmfoods overview 2011
•Table: Costcutter overview 2011
•Table: Musgrave overview 2011
•Table: Booker (Premier) overview 2011
•Table: SPAR overview 2011
•Table: Grocers & food specialists definition 2011
FIGURES
•Figure: Key issues in food & grocery 2011
•Figure: Food & grocery price inflation vs Volume growth 2009–13e
•Figure: Food & grocery volume growth forecasts 2009–13
•Figure: Polarisation in food & grocery 2011
•Figure: Factors influencing choice of grocer 2011
•Figure: Waitrose Love Life marketing campaign 2011
•Figure: Real household disposable income 2009–15e
•Figure: Sales growth of Aldi and Lidl vs Big Four average 2006–11e
•Figure: Iceland – More for your Money marketing 2011
•Figure: Grocers space – 2005, 2010 and 2015e
•Figure: Morrisons convenience store concept 2011
•Figure: Grocers superstores (25,000sq ft and above stores) space growth 2006–15e
•Figure: Growth in space and decline in sales densities % 2010–15e
•Figure: Online impact on food & grocery expenditure growth 2006–15e
•Figure: Growth in online spend per head on food & grocery 2010–2015e
•Figure: Factors that would make customers more likely to use home delivery 2011
•Figure: Evolution of promotions 2011
•Figure: Tesco twitter offers 2011
•Figure: M&S Dine in for £10 deal – the original grocer meal promotion 2011
•Figure: Sainsbury's Brand Price Match sample voucher 2011
•Figure: Sainsbury's Feed your Family for £50 campaign 2011
•Figure: Tesco fuel promotion 2011
•Figure: Key issues in integrating new technology for the food & grocery sector 2011
•Figure: Tesco mobile app 2011
•Figure: Waitrose Christmas QR promotion 2010
•Figure: Sainsbury's Facebook page with back to school marketing 2011
•Figure: Asda's twitter account 2011
•Figure: Total grocers & food specialists retail sales and year-on-year change 2001–11e
•Figure: Channels of distribution – share of grocers & food specialists market by retail sales 2006–11e
•Figure: Change % in total grocery market sales by retailer type 2011e on 2006
•Figure: Change % in total grocery space by retailer type 2011e on 2006
•Figure: Change % in annual sales densities by retailer type 2011e on 2006
•Figure: Change % in total grocery store numbers by retailer type 2011e on 2006
•Figure: Sources of growth in food &grocery expenditure 2001–11e
•Figure: Change % in food & grocery expenditure by category 2006–11e
•Figure: Shares of the total market held by food & grocery specialists 2011e
•Figure: Retailers share of total market held by food & grocery retailers 2006 and 2011e
•Figure: Retailers share of market in food & grocery products 2006 and 2011e
•Figure: Change in operating profit % 2010/11 on 2009/10
•Figure: Change in sales area % 2010/11e on 2009/10e
•Figure: Average space allocation by category 2011 vs 2010
•Figure: Asda fascia 2011
•Figure: Converted Netto store South Harrow 2011
•Figure: Asda UK sales and growth 2006–11e
•Figure: New store interior of former Netto store 2011
•Figure: Conversion of Netto stores 2011
•Figure: Asda sales density to December 2006–11e
•Figure: Asda food & grocery sales (incl VAT) in calendar years 2006–11e
•Figure: Asda share of total market held by food & grocery retailers 2006–11e
•Figure: Asda share of market in food & grocery products 2006–11e
•Figure: Asda Clapham Junction store interior July 2011
•Figure: The Co-operative Group fascia 2011
•Figure: Join the revolution website 2011
•Figure: New Truly Irresistible range 2011
•Figure: The Co-operative Group UK sales and growth to January 2006–11
•Figure: The Co-operative Group operating profit to January 2006–11
•Figure: The Co-operative Group sales density to January 2006–11
•Figure: The Co-operative Group food & grocery sales (incl VAT) in calendar years 2006–11e
•Figure: The Co-operative Group share of total market held by food & grocery retailers 2006–11e
•Figure: The Co-operative Group share of market in food & grocery products 2006–11e
•Figure: Selection of The Co-operative's value range 2011
•Figure: Iceland fascia 2011
•Figure: Iceland revised advertising campaign 2011
•Figure: Iceland UK sales and growth to March 2006–11
•Figure: Iceland operating profit to March 2006–11
•Figure: Iceland sales density to March 2006–11
•Figure: Iceland food & grocery sales (incl VAT) in calendar years 2006–11e
•Figure: Iceland share of total market held by food & grocery retailers 2006–11e
•Figure: Iceland share of market in food & grocery products 2006–11e
•Figure: Iceland free home delivery 2011
•Figure: Marks & Spencer Simply Food fascia 2011
•Figure: Marks & Spencer UK sales and growth to March 2006-2011
•Figure: Marks & Spencer UK operating profit to March 2006–11
•Figure: Y-o-y change % in M&S quarterly divisional sales in UK Q1 2010/11–2011/12
•Figure: Marks & Spencer sales density (food) to March 2006–11e
•Figure: Marks & Spencer food & grocery sales (incl VAT) in calendar years 2006–11
•Figure: Marks & Spencer share of total market held by food & grocery retailers 2006–11e
•Figure: Marks & Spencer share of market in food & grocery products 2006–11e
•Figure: Marks & Spencer plan 2013–15
•Figure: Innovative food items, M&S Marble Arch store 2011
•Figure: Morrisons fascia 2011
•Figure: Morrisons family butcher offers 2011
•Figure: Morrisons pay-day price crunch promotion 2011
•Figure: Morrisons UK sales and growth to January 2006–11
•Figure: Morrisons operating profit to January 2006–11
•Figure: Morrisons sales density to January 2006–11
•Figure: Morrisons food & grocery sales (incl VAT) in calendar years 2006–11e
•Figure: Morrisons share of total market held by food & grocery retailers 2006–11e
•Figure: Morrisons share of market in food & grocery products 2006–11e
•Figure: Concept of M local store design 2011
•Figure: Ocado logo 2011
•Figure: Reflets de France range 2011
•Figure: Ocado UK sales (ex VAT) and y-o-y growth in years ending in November 2006–11e
•Figure: Ocado operating profit to end November 2005–10
•Figure: Ocado food & grocery sales (incl VAT) in calendar years 2006–11e
•Figure: Ocado share of total market held by food & grocery retailers 2006–11e
•Figure: Ocado share of market in food & grocery products 2006–11e
•Figure: Sainsbury's fascia 2011
•Figure: Sainsbury's Switch the Fish campaign with Jamie Oliver 2011
•Figure: Feed your family for £50 meal planner 2011
•Figure: Fresh Kitchen – Sainsbury's food-to-go concept 2011
•Figure: Sainsbury's UK sales and growth to March 2006–11e
•Figure: Sainsbury's operating profit to March 2006–11
•Figure: Sainsbury's sales density to March 2006–11e
•Figure: Sainsbury's food & grocery sales (incl VAT) in calendar years 2006-11e
•Figure: Sainsbury's share of total market held by food & grocery retailers 2006–11e
•Figure: Sainsbury's share of market in food & grocery products 2006–11e
•Figure: Sainsbury's 2011 tagline 'Live well for less'
•Figure: Sainsbury's UK coverage 2011
•Figure: Tesco fascia 2011
•Figure: Flash in the Pan concept 2011
•Figure: Tesco UK retail sales (ex VAT) and growth to February 2006–11
•Figure: Tesco UK operating profit to February 2006–11
•Figure: Tesco sales density to February 2006–11e
•Figure: Tesco food & grocery sales (incl VAT) in calendar years 2006-11
•Figure: Tesco share of total market held by food & grocery retailers 2006–11e
•Figure: Tesco share of market in food & grocery products 2006–11e
•Figure: Waitrose brand 2011
•Figure: little Waitrose fascia 2011
•Figure: Waitrose Brand Price Match marketing 2011
•Figure: Waitrose Brand Ambassadors & Heston's Christmas Pudding 2010
•Figure: Waitrose UK sales (incl VAT) and growth 2006–11
•Figure: Waitrose operating profit 2006–11
•Figure: Waitrose sales density to January 2006–11
•Figure: Waitrose food & grocery sales (incl VAT) in calendar years 2006-11
•Figure: Waitrose share of total market held by food & grocery retailers 2006–11e
•Figure: Waitrose share of market in food & grocery products 2006–11e
•Figure: Marketing campaign backs expansion inside M25 2011
•Figure: John Lewis filter on waitrose.com HomeDirect tab 2011
•Figure: The Waitrose way – corporate social responsibility 2011
•Figure: Aldi fascia 2011
•Figure: Like brands only cheaper ad campaign 2011
•Figure: Aldi share of total market held by food & grocery retailers 2006–11e
•Figure: Aldi share of market in food & grocery products 2006–11e
•Figure: Lidl fascia 2011
•Figure: Selection of Lidl product reviews and awards 2011
•Figure: Lidl share of total market held by food & grocery retailers 2006–11e
•Figure: Lidl share of market in food & grocery products 2006–11e
•Figure: Dedicated MediaCity UK website 2011
•Figure: Booths partnership with Slow Food UK 2011
•Figure: Farmfoods new store branding 2011
•Figure: Farmfoods new location requirements 2011
•Figure: Costcutter fascia 2011
•Figure: Local Saver loyalty card 2011
•Figure: Budgens & Londis fascias 2011
•Figure: Budgens Price Crash meal solution 2011
•Figure: Budgens fresh fish offer – sea to shelf in 36 hours 2011
•Figure: Premier fascia 2011
•Figure: Euroshopper 2011
•Figure: SPAR fascia 2011
•Figure: SPAR Our very own range 2011

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