UK Neighbourhood Retailing 2010

Introduction

UK Neighbourhood Retailing 2010: Examines the latest developments in neighbourhood retail, providing comprehensive analysis of the location to identify the key issues impacting it and how opportunities for growth can be exploited. The size of the market is detailed, 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 neighbourhood retail: sales growth, space, store numbers, store sizes and sales densities.
• Analysis of convenience stores and small grocers, off-licences, CTNs, food specialists and pharmacies.
• 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, recommending strategies for success

Highlights

The neighbourhood market is becoming dominated by the convenience stores & small grocers channel. With the expansion of the multiples, improved propositions from the symbol groups and the Co-op, uncompetitive players are being forced out of the market. With the market consolidating into the hands of stronger players, competition is intensifying.The comprehensive offers provided by the multiples and other convenience store operators are diminishing the need for traditional neighbourhood retailers. As the multiples all look to exploit the growth opportunities available, the race for space is hotting up, making format flexibility and development key to success.As the market becomes saturated by the expansion of the multiples convenience formats, profit margins will suffer as duplicate presence in certain neighbourhoods cannibalise sales and 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
Multiples transform neighbourhood market dynamics
Main conclusions
Traditional neighbourhood retailing diminishing as make-up of location changes
Neighbourhood market consolidates
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 location benefitting from 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 wider array of retailers
Click & collect at convenience stores to increase footfall
Symbol groups are competing effectively, benefitting from growing membership …
…and widespread proposition improvements
CTNs lose relevance
Need for off-licences diminishing
Outlook
Spend consolidating fast
Competition intensifying as space and spend falls into hands of fewer, but stronger, players
The neighbourhood location is becoming increasingly lucrative for multiples
Competition hotting up as all look to exploit opportunities for growth available
Space expansion and range development drivers of multiples success in the neighbourhood location
Independents club together
Symbol groups gain new members as independents seek refuge from the multiples onslaught
Multiples to develop convenience formats further
Easy opportunities for organic expansion and profitability will have been picked off
Market Analysis
Definition
Major grocers push growth
Expansion of the multiples and improved propositions from symbol groups boosts sales in neighbourhood
Neighbourhood Location Comparisons and Forecasts
Retailers exploit opportunities for growth in the neighbourhood
Convenience food retailing makes location resilient;
Growth dented by easing food inflation;
Space decline slows thanks to grocers and symbol groups;
Density growth slows but productivity still bests OOT and town centres;
Vacancy rates low in neighbourhood as battle for space intensifies;
Neighbourhood forecast to outperform town centre;
Falling space to bottom out as multiples target convenience growth.
Retail sales by location
Convenience food retailing makes neighbourhood resilient
Space by location
Neighbourhood space decline slows thanks to grocers and symbol groups
Sales densities by location
Neighbourhood density growth slows but productivity still bests OOT and town centres
Store numbers by location
Vacancy rates low in neighbourhood as battle for space intensifies
Forecast
Neighbourhood to outperform town centre
Expenditure
Space
Neighbourhood Company Comparisons
Analysis of major neighbourhood retailers
Tesco dominates the location
Top ten neighbourhood retailers market shares
Convenience Stores & Small Grocers
Convenience stores & small grocers drive growth in the neighbourhood location
Recent key events
Top-ups drive convenience food segment
Growth of multiples convenience formats
Multiples cover dining in and take-aways
Strong defensive moves by symbol groups …
…as independents struggle to survive
Co-ops
Forecast
Growth in online and m-shopping will boost top-up
Multiples will dominate
Asda's acquisition of Netto will have a significant impact
Independents market share will gravitate to symbol groups …
…as unaffiliated independents continue to disappear
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 – neighbourhood
Market shares
Outlook – Somerfield integration and c-store competition challenge management
Costcutter
Good performance but disputes make future uncertain
Recent key events
Financials
Stores
Sector performance – neighbourhood
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 – neighbourhood
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 – neighbourhood
Market shares
Outlook – in prime position to win share of neighbourhood market
Sainsbury's
Faster growth driven by space expansion
Recent key events
Financials
Space
Sector performance – neighbourhood
Market shares
Outlook – aggressive growth
SPAR
Performance improves dramatically
Recent key events
Works hard to improve offer
Financials
Space
Sector performance – neighbourhood
Market shares
Outlook – rising standards help performance
Tesco
Leads in innovation and expansion
Recent key events
Financials
Space
Sector performance – neighbourhood
Market shares
Outlook – market share gains set to continue
Other key symbol groups
Best-one (Bestway)
Lifestyle (Landmark Group)
Mace (Palmer & Harvey McLane)
Nisa-Today’s
Traditional Retailing
Neighbourhood pharmacies
Steadily gain share of neighbourhood sales
Recent key events
Outlook
Alliance Boots - Recovers market share in 2010
Recent key events
Financials - Strong growth in 2009/10
Own label boosts sales
Space
Sector performance – neighbourhood
Market shares
Outlook – strong position in strong market
Lloydspharmacy
Increased footfall raise sales
Recent key events – reshuffles investments to raise margin
Financials
Space
Sector performance – neighbourhood
Market shares
Outlook – well positioned through authority of offer
Traditional CTN operators
CTNs slowly suffocate
Recent key events
Demise of traditional CTN operators continues
Decline in printed media
Consolidation of distribution
CTNs diversify
Outlook
The future is bleak for traditional CTNs
More will join symbol groups
Ban on tobacco display …
… an opportunity for new ranges
Martin McColl
Converting into convenience chain
Sector performance – neighbourhood
Market shares
Outlook – extends convenience base
Off-licenses
Off-licenses threatened on all sides
Recent key events
Outlook
Off-licenses: Key players
Bargain Booze
First Quench
Laithwaites
Majestic Wine
Oddbins
Wine Cellar
Traditional food specialists
Multiples food-to-go threat builds
Recent key events
Outlook
Only the unique will survive
APPENDIX
List of abbreviations
Ask the analyst
Verdict consulting
Disclaimer

TABLE OF FIGURES
Figure 1: Neighbourhood market – channel shares 2005 and 2010e
Figure 2: Neighbourhood market – sales grow as store numbers decline 2000–14e
Figure 3: Why multiples are focusing on neighbourhood convenience store 2010
Figure 4: Neighbourhood market – food specialists band together online 2010
Figure 5: Diminishing opportunities for profitability and organic expansion 2010
Figure 6: Convenience stores to develop food-to-go offers 2010
Figure 7: Neighbourhood market sales 2005–11e
Figure 8: Neighbourhood breakdown of market share by type of retailer 2010e
Figure 9: Composition of neighbourhood retail market 2009 and 2010
Figure 10: Neighbourhood sales density, space & stores growth 2000–11e
Figure 11: Growth of retail sales by location (excluding non-store) 2000–11e
Figure 12: Y-o-y change % in retail space by location 2000–11e
Figure 13: Growth of sales densities by location 2000–11e
Figure 14: Y-o-y change % in store numbers by location 2000–11e
Figure 15: Retail spending by location 2009 and 2014e
Figure 16: Neighbourhood spending growth vs retail overall 2000–14e
Figure 17: Components of convenience food market sales 2014e
Figure 18: Neighbourhood space 2009–14e
Figure 19: Neighbourhood store numbers 2009–14e
Figure 20: Neighbourhood market share changes of Top Ten retailers 2010e on 2005
Figure 21: Convenience stores & small grocers in the neighbourhood 2005–11e
Figure 22: Convenience stores & small grocers neighbourhood market share % 2005–11e
Figure 23: Spending growth via convenience stores & small grocers vs neighbourhood overall 2009–14e
Figure 24: Co-operative Group
Figure 25: Co-operative Group food retail UK sales and growth to * Jan/Dec 2005–10e
Figure 26: Co-operative Group food retail operating profit to *Jan/Dec 2005–10
Figure 27: Co-operative Group neighbourhood sales incl VAT (calendar years) 2005–10e
Figure 28: Co-operative Group share of neighbourhood market 2005–10e
Figure 29: Costcutter
Figure 30: Costcutter UK sales and growth to April 2005–10
Figure 31: Costcutter neighbourhood sales 2005–10e
Figure 32: Costcutter share of total neighbourhood market 2005–10e
Figure 33: Musgrave
Figure 34: Musgrave UK sales of all retailers and growth 2005–10
Figure 35: Musgrave neighbourhood sales including VAT 2005–10e
Figure 36: Musgrave share of neighbourhood market 2005–10e
Figure 37: Premier
Figure 38: Premier UK sales and growth to March 2005–10e
Figure 39: Premier neighbourhood sales 2005–10e
Figure 40: Premier share of total neighbourhood market 2005–10e
Figure 41: Sainsbury's
Figure 42: Sainsbury's UK sales and growth to March 2005–10
Figure 43: Sainsbury's operating profit to March 2005–10
Figure 44: Sainsbury's neighbourhood sales (incl VAT) calendar years 2005–10e
Figure 45: Sainsbury's share of neighbourhood market 2005–10e
Figure 46: SPAR
Figure 47: SPAR UK sales and growth to April 2005–10
Figure 48: SPAR neighbourhood sales including VAT (calendar years) 2005–10e
Figure 49: SPAR share of neighbourhood market 2005–10e
Figure 50: Tesco
Figure 51: Tesco UK sales and growth to February 2005–10
Figure 52: Tesco group operating profit to February 2005–10
Figure 53: Tesco neighbourhood sales 2005–10e
Figure 54: Tesco share of neighbourhood market 2005–10e
Figure 55: Neighbourhood pharmacy store sales 2005–11e
Figure 56: Pharmacy stores neighbourhood market share % 2005–11e
Figure 57: Spending growth via neighbourhood pharmacies vs neighbourhood overall 2009–14e
Figure 58: Alliance Boots
Figure 59: Alliance Boots UK sales and growth to March 2005–10
Figure 60: Alliance Boots UK operating profit to March 2005–10
Figure 61: Alliance Boots neighbourhood sales (incl VAT) 2005–10e
Figure 62: Alliance Boots share of total neighbourhood market 2005–10e
Figure 63: Lloydspharmacy
Figure 64: Lloydspharmacy retail sales and growth, year to December 2005–10e
Figure 65: Lloydspharmacy operating profit to year end December 2004–09
Figure 66: Lloydspharmacy neighbourhood sales (incl VAT) 2005–10e
Figure 67: Lloydspharmacy share of total neighbourhood market 2005–10e
Figure 68: Traditional CTN operators sales 2005–11e
Figure 69: Traditional CTN operators neighbourhood market share 2005–11e
Figure 70: Spending growth via CTNs vs. neighbourhood overall 2009–14e
Figure 71: Martin McColl neighbourhood sales (incl VAT) calendar years 2005–10e
Figure 72: Martin McColl neighbourhood market share 2005–10e
Figure 73: Off-licences sales 2005–11e
Figure 74: Off-licences neighbourhood market share 2005–11e
Figure 75: Spending growth via off-licences vs neighbourhood overall 2009–14e
Figure 76: Neighbourhood food specialists sales 2005–11e
Figure 77: Neighbourhood food specialists share of neighbourhood market 2005–11e
Figure 78: Spending growth neighbourhood food specialists vs total food specialists 2005–11e
Figure 79: Spending growth via neighbourhood food specialists vs n'hood overall 2009–14e
Figure 80: Spending growth via n'hood food specialists vs total food specialists 2009–14e

TABLE OF TABLES
Table 1: Neighbourhood market definition and methodology 2010
Table 2: Sales via neighbourhood location 2000–11e
Table 3: Sources of growth for neighbourhood retailing 2000–11e
Table 4: Retail distribution of neighbourhood expenditure 2009 and 2010e
Table 5: Neighbourhood sales, space, density & store numbers 2000–11e
Table 6: Retail location definitions 2010
Table 7: Retail spending by location at current prices 2000–11e
Table 8: Floorspace neighbourhood vs all stores 2000–11e
Table 9: Sales densities by location 2000–11e
Table 10: Store numbers by location 2000–11e
Table 11: Retail sales neighbourhood vs total retail spending 2000–14e
Table 12: Retail distribution of neighbourhood expenditure 2009 and 2014e
Table 13: Revenue of Top Ten neighbourhood retailers 2005–10e
Table 14: Neighbourhood market shares of Top Ten retailers 2005–10e
Table 15: Convenience stores & small grocers in the neighbourhood 2005–11e
Table 16: Convenience stores & small grocers in the neighbourhood 2009–14e
Table 17: Co-operative Group company overview 2010
Table 12: Co-operative Group food retail key operating statistics 2005–10e
Table 13: Co-operative Group food retail trading record 2001–11e
Table 14: Co-operative Group food retail UK store portfolio 2000–11e
Table 21: Co-op neighbourhood retail trading record (calendar years) 2005–10e
Table 22: Costcutter company overview 2010
Table 23: Costcutter UK key operating statistics 2005–10e
Table 24: Costcutter UK trading record 2000–10e
Table 25: Costcutter UK store portfolio 2002–10
Table 26: Costcutter neighbourhood retail trading record (calendar years) 2005–10e
Table 27: Musgrave company overview 2010
Table 28: Musgrave UK key operating statistics 2005–10
Table 29: Musgrave UK sales to retail partners 2000–10e
Table 30: Musgrave UK retail sales of partners 2000–10e
Table 31: Musgrave UK store numbers 2004–10e
Table 32: Musgrave neighbourhood retail trading record (calendar years) 2005–10e
Table 33: Premier company overview 2010
Table 34: Premier UK key operating statistics 2005–10e
Table 35: Premier UK trading record 2000–10e
Table 36: Premier UK store portfolio 2002–10e
Table 37: Total neighbourhood retail trading record (calendar years) 2005–11e
Table 38: Sainsbury's company overview 2010
Table 39: Sainsbury's key operating statistics 2005–10
Table 40: Sainsbury's trading record 2000–10
Table 41: Sainsbury's UK store portfolio 2000–10
Table 42: Sainsbury's store profile March 2010
Table 43: Sainsbury's neighbourhood retail trading record (calendar years) 2005–10e
Table 44: SPAR company overview 2010
Table 45: SPAR UK key operating statistics 2005–10e
Table 46: SPAR UK trading record 2000–11e
Table 47: SPAR UK store portfolio 2002–10
Table 48: Total neighbourhood retail trading record (calendar years) 2005–10e
Table 49: Tesco company overview 2010
Table 50: Tesco UK key operating statistics 2005–10
Table 51: Tesco UK trading record 2000–10
Table 52: Tesco UK store portfolio 2000–10
Table 53: Tesco store profile February 2010
Table 54: Tesco neighbourhood retail trading record (calendar years) 2005–10e
Table 55: Profile of other key symbol groups 2010
Table 56: Neighbourhood pharmacy market 2005–11e
Table 57: Neighbourhood pharmacy market 2009–14e
Table 58: Alliance Boots company overview 2010
Table 59: Alliance Boots UK key operating statistics 2005–10
Table 60: Alliance Boots UK retail trading record 2006–10
Table 61: Boots UK trading record 2000–2006
Table 62: Alliance Pharmacy trading record 2000–05
Table 63: Alliance Boots UK pro forma store profile 2006–10
Table 64: Boots store portfolio 2000–06
Table 65: Alliance Pharmacy store portfolio 2000–05
Table 66: Alliance Boots neighbourhood retail trading record (calendar years) 2005–10e
Table 67: Lloydspharmacy overview 2010
Table 68: Lloydspharmacy key operating statistics 2005–10e
Table 69: Lloydspharmacy UK trading record 2000–10e
Table 70: Lloydspharmacy UK store portfolio 2000–10
Table 71: Lloydspharmacy neighbourhood retail trading record (calendar years) 2005–10e
Table 72: Traditional CTN operators market 2005–11e
Table 73: Traditional CTN operators market 2009–14e
Table 74: Martin McColl key operating statistics 2005–10e
Table 75: Off-licences market 2005–11e
Table 76: Off-licences market 2009–14e
Table 77: Neighbourhood food specialists market 2005–11e
Table 78: Total food specialists sales 2000–11e
Table 79: Total food specialists sales by type of specialist 2005–10e
Table 80: Neighbourhood and total food specialists sales breakdowns 2010e
Table 81: Neighbourhood food specialists market 2009–14e

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