IRI's Weekly FMCG News Update - w/c 27th February 2017

IRI
Weekly News update
Your window on the latest trends
in Packaged Groceries
Stephen Hall
Friday 3rd March

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• Sales up at McColl’s but Co-op acquisition dents profits
• Redundancies announced as Budgens stores close
• Consumer confidence drops amid inflation fears
• Good year for SuperValu, with plans to open three new stores
• Asda data shows slowdown in consumer’s disposable income growth
• Aldi opens 700th store
• Food prices edge up as clothing prices continue falling
• Poundland delivers positive Q1
• Boots to close 220 in-store photo labs
• Waitrose trials video-enabled shelf-edge labelling
• Nisa to celebrate 40th anniversary with series of special events and promotions
• Strong performance of Wickes and Toolstation drives growth at Travis Perkins
• Mobile contactless payments boosted by food-to-go sales
Weekly News Summary – 27th February 2017

Sales Up At McColl’s But Co-op Acquisition Dents Profits
McColl’s Retail has hailed its sixth consecutive year of sales growth, although its recent acquisition of 298 Co-op stores hit profits.
For the year ended 27 November 2016, the convenience and newsagent store retailer saw its total revenue grow 1.9% to £950.4m,
although like-for-like (LFL) sales fell 1.9%.
LFL sales in its premium convenience and food and wine stores were down 1%, whilst LFL sales in newsagents and standard
convenience stores slipped 3.3%. However, LFL sales in recently acquired and converted stores grew by 0.8%.
Pre-tax profits were down 16.1% to £17.7m, impacted by exceptional costs of £3.1m related partly to its Co-op purchase. It added
that the integration of the Co-op stores during 2017 was “on track” with the first converted outlet opened in Canvey Island on 31
January and over 20 stores are now trading as McColl’s.
At the year-end, McColl’s had a total of 1,001 convenience stores having acquired 58 new outlets.
The group added that 59 food and wine conversions (formerly newsagents) were completed in year, whilst “excellent progress” was
made with its food-to-go offering (over 30 new units rolled out and double-digit LFL growth). McColl’s also introduced a further 12
Subway franchises to its estate and said its pilot convenience store refresh project was seeing encouraging early performance.
Jonathan Miller, Chief Executive, commented: “2016 has been a pivotal year for McColl’s during which we were firmly established as
a leading convenience retailer, delivered good financial performance in line with expectations and laid the foundations to deliver
significant growth in the years ahead. With new appointments to our management team and a refreshed strategy in place, we are
ready to begin the next stage of our journey to become your neighbourhood’s favourite shop.”
He added: “2017 promises to be an exciting year for McColl’s. We remain very confident about achieving further progress against our
strategy.”
Meanwhile, in the first quarter of its new financial year, McColl’s revealed that total LFL sales were down by 1.3%, representing a
fourth consecutive quarter of improvement. Total revenue for the quarter was up 2.1%.
The group added that the outcome of the EU referendum last June had created some uncertainty for the sector and the economy as
a whole. However, it said that it was committed to working proactively with its suppliers to ensure that it can remain competitive.
Source: NamNews 27th February 2017

Redundancies announced as Budgens stores close
Almost 180 people have been made redundant following the closure of nine Budgens stores that were part of the troubled
Food Retailer Operations business.
The company went into administration earlier this month (February), putting the fate of the 34 Budgens stores in its
estate at risk.
Administrator PwC has been assessing interest in the business, but it closed nine stores over the weekend. Mike Denny,
joint administrator at PwC, said: “Unfortunately, we have been unable to find buyers for these nine stores and it is not
commercially viable to continue trading them.
“We are working with the Co-op, USDAW [shop workers’ union] and the relevant government agencies to ensure that the
employees affected receive the maximum levels of practical and financial support through the redundancy process.
“We are continuing to trade the rest of the stores, with a focus on engaging with interested parties and assessing
options,” he said.
The Food Retailer Operations business bought the stores from the Co-op in July 2016, but it has “experienced difficult
trading conditions”, according to PwC.
The closed stores are at Aberystwyth, Blackburn, South Benfleet (Essex), Ludlow, Weoley Castle (Birmingham), Norwich
and the London stores at Dagenham, Greenwich and Sydenham.
Source: Talking Retail 27th February 2017

Consumer Confidence Drops Amid Inflation Fears
Consumer confidence decreased one point this month to -6 in February amid fears that the predicted rise in inflation will
impact shopper’s finances and spending power in the months ahead.
GfK’s Consumer Confidence Index showed that three of the five measures used to gauge overall confidence saw decreases
during the month, whilst two measures saw increases.
The index measuring changes in personal finances during the last 12 months decreased by two points, whilst the figure
for the next 12 months decreased by four points to +3 – five points lower than February 2016.
Consumers also appear to be becoming increasingly cautious about making major purchases, with this index decreasing
five points to +5 – seven points lower than this time last year.
Meanwhile, the measure for the General Economic Situation of the country during the last 12 months increased three
points this month to -21, although this was 11 points lower than February last year. Expectations for the next 12 months
increased three points to -20 – eight points lower than last year.
Joe Staton, Head of Market Dynamics at GfK, commented: “Against a backdrop of rising food and fuel prices, sterling
depreciation, nominal earnings growth and a burgeoning fear of rapid inflation, concern about our personal financial
situation for 2017 has contributed to a drop in UK consumer confidence this month.”
He added: “Any momentum behind the post-Brexit, debt-fuelled, consumer-spending boom now appears to be softening.
Mounting pressures on disposable income are starting to bite as witnessed by two months of falling retail sales (ONS) and
a further drop in the Major Purchase Index. Consumer spending continues to drive economic growth in the UK so any
further fall in confidence could support forecasts for a slowdown of the overall economy this year.”

Good Year For SuperValu; Planning To Open Three New Stores
Leading Irish grocery chain SuperValu has revealed that its sales rose 2.4% to €2.67bn last year, with plans to continue
its expansion in 2017.
The Musgrave-owned retailer said its focus on “fresh, quality Irish produce with a tailored, local offer in every store”
continued to act as a core driver of its performance. Meanwhile, its ‘Health & Wellness’ range, introduced in 2015,
delivered sales of over €36m last year, underlining consumers increasing focus on health and whole foods.
SuperValu also expanded of its ‘Real Rewards’ loyalty scheme last year with over 1 million members now signed up. The
scheme has six national partners including Aer Lingus, Bank of Ireland and Electric Ireland, with plans for further
partnerships this year.
Meanwhile, online shopping was another key sales driver for the business, growing by 22% in 2016. SuperValu said the
shift to mobile was a key trend, with visits from customers browsing its website on smartphones up by 180%.
SuperValu ended the year with year 219 outlets with plans to open three new stores in 2017 as part of a €35m
investment, which is also aimed at revamping existing stores.
Martin Kelleher, Managing Director of SuperValu, hailed the chain’s record sales last year and pledged to continue to
invest in new product ranges and services.
He added: “As Ireland’s leading food retailer, we pride ourselves on delivering an unrivalled shopping experience with a
unique and tailored offer of locally-sourced, quality Irish produce complemented by in-store experts. SuperValu
independent retailers continue to set us apart and drive the success of the brand.”
75% of everything on SuperValu’s shelves is sourced in Ireland with Kelleher commenting: “As the number one supporter
of the Irish agri-food industry, SuperValu sources from over 2,200 Irish suppliers – more than any other grocery retailer
in the Irish market – equating to an annual economic contribution of €2.19bn.”

Asda Data Shows Slowdown In Consumer’s Disposable Income
Growth
Latest figures from the Asda Income Tracker show that families had £205 of disposable income available each week
during January, a rise of 3.5% from the same period last year. However, the £7 per week uplift in spending power was the
slowest rate of growth recorded by the tracker since August 2014.
Asda said that increasing petrol prices (+16.8% year-on-year) had the largest impact on the rise in the cost of living for
families. Prices have also spiked upwards in restaurants and hotels, communication, alcohol, and tobacco. Whilst
mortgage interest rates, gas prices and food and drink still saw deflation compared to January 2016, Asda stressed that
there is still an increased pressure on consumers as inflation edges towards the bank of England’s target rate of 2%.
Scott Corfe, Economist at Cebr, the firm that gathers the data, said: “The party is starting to fizzle out for consumers in
2017, with growth in discretionary spending fading fast. The latest Income Tracker sets the scene for next month’s
Budget, when the Chancellor will be under pressure to deliver some tax cuts for the ‘just about managing’ at a time when
incomes are under the cosh. He will have a delicate balancing act between providing these tax cuts, and needing to boost
spending on the NHS and care.”

Aldi opens 700th store
Aldi has just opened its 700th store in the UK, just weeks after it officially became the country's fifth-largest grocer.
The German discount supermarket chain also confirmed have 1000 UK stores by 2022.
The 700th store opened in Whitstable, Kent, and is one of the 70 stores the supermarket retailer plans to open this year.
As part of its expansion, the company said it was investing £450 million towards improvements of and increased store
capacities and distribution networks.
Aldi’s ninth UK distribution centre in Cardiff, Wales, takes up 460,000sq ft and will become fully operational by the end of
the month.
“During the last five years we have invested £1.7 billion in new stores and distribution centres to bring Aldi to the 14
million customers that now regularly shop with us,” Aldi UK boss Matthew Barnes said.
“But there are many more potential customers who don’t shop at Aldi because there isn’t a store near where they live. We
want to change this by having a store in every major town and city across Britian.”
Last month, grocery market share figures from Kantar Worldpanel showed that Aldi’s sales grew by 12.4 per cent in the
12 weeks to January 29, boosting its market share to 6.2 per cent and ovetaking the Co-op to become the UK's fifth-
largest supermarket retailer.
Source: Retail Gazette 1st March 2017

Food prices edge up as clothing prices continue falling
Food prices edged up by 0.4 per cent last month as the continuing depreciation of the sterling started to impact import costs, driving
up the cost of grocery shopping.
However, an average 1.8 per cent price drop in the non-food sector meant that overall, shop prices fell by one per cent, according to
the latest BRC-Nielsen Shop Price Index.
While this was a sharp deceleration of the 1.7 per cent overall price drop recorded in January, February’s figures continued a trend of
year-on-year price falls that has lasted nearly four years.
The index also marks the first rise in food prices since April last year and is a contrast to the 0.8 per cent drop recorded in January.
The price of fresh food climbed 0.1 per cent while and ambient food prices went up by d 0.8 per cent, compared to the previous
month’s 0.2 per cent dip.
Meanwhile, the 1.8 per cent year-on-year drop in non-food prices was a marked slowdown compared to the 2.3 per cent decline in
January.
British Retail Consortium (BRC) chief executive Helen Dickinson said it was “clear” that cost pressures that have built over the last
year were starting to show in shop prices.
“Global food prices were on average 16 per cent higher at the beginning of this year compared to last, whilst over the same period
the value of the pound fell around 15 per cent,” she said.
“Despite this, February saw an increase of just 0.4 per cent in the prices of food sold in shops; proving retailers’ resilience in
managing to largely shield consumers from cost increases.
“For the time being, consumers continue to benefit from an annual fall in non-food prices, which were down 1.8 per cent on the
previous year. However, the rate of deflation has eased considerably from a monthly perspective, which can be explained in part by
an end to the promotional activity in January, after a weak festive sales performance in some non- food categories.
“Looking further ahead, retailers, who operate in a highly competitive market with narrow margins, will be increasingly hard pushed
to protect their customers from the inevitable impact of these rising cost pressures.
“We can therefore expect this impact to start manifesting in shop prices over the course of the year.”
Source: Retail Gazette 1st March 2017

Poundland delivers positive Q1
Steinhoff International has reported positive Poundland results for the three months ended December 2016.
Results 'ahead of expectations'
According to Steinhoff's latest financial results, the newly-acquired Poundland business performed positively, contributing
£448m to the South African conglomerate. In his webcast, Steinhoff CEO Marcus Jooste revealed that this is the first time
since December 2014 that Poundland has seen positive like-for-like sales.
Confident regarding future growth
Jooste sees this performance as a positive signal, following a couple of turbulent years following the acquisition of 99p
Stores and the change of management. Confident about future growth, he is happy with Andy Bond and his team, saying
'we will find our way as we go on', indicating there is much to learn about the business and work on. A couple of ways in
which Steinhoff has had an influence in the UK discounter so far is with the introduction of Pep&Co clothing within some
Poundland stores and the conversion of GHM! to Poundland.
Management priorities
Poundland has now reached a significant scale in terms of stores and operations so the business will focus on initiatives
beyond store openings. Priorities for the rest of the year will include executing a value creating plan which involves
introducing a larger multi-price point range, optimising stores and collaborating with the extended Steinhoff group to
improve supply chain initiatives.
Source: IGD 1st March 2017

Boots To Close 220 In-Store Photo Labs
Boots has revealed that it is planning to close 220 of its 320 in-store photo processing labs, putting around 400 jobs at
risk.
The health & beauty retailer said the move was in response to changing consumer demands with a decline in traditional
photo printing and increase in digital photography. It has also faced fierce competition from online printing services.
However, Boots plans to continue offering photo services through around 3,000 instant photo kiosks in over 1,000 of its
UK stores and focus on growth areas such as personalised photo gifts.
The 220 labs will be closed over the next five months with impacted staff to be offered retraining and redeployment to
other roles where possible. However, the group added that some roles may be made redundant.
Source: NamNews 2nd March 2017

Waitrose trials video-enabled shelf-edge labelling
Twelve week trial will introduce new opportunities for shopper engagement
Next generation digital shelf-edge ticketing
Taking place in Waitrose's Trumpington store in Cambridge until the end of April, the trial builds on existing electronic
shelf-edge labelling systems, which have made it significantly easier to centrally coordinate price changes at the shelf
edge. Waitrose is the first UK supermarket to trial this technology.
Full colour, video-enabled shelf-edges will enable Waitrose and its suppliers to build deeper shopper engagement.
Categories where shoppers tend to linger at the shelf-edge and seek inspiration, guidance and education are the most
natural beneficiaries. For example in BWS, this opens the door to creating and delivering tasting notes and
recommendations which are seasonally and geographically relevant, as well as targeting specific times of the week and
even day.
Shopper Marketing
But the use of graphics and rich imagery could also enhance customers' shopping experience across the whole store,
particularly in lower engagement categories. Media rich labelling unlocks the possibility for better in-store brand
engagement at a time when price and promotions have become over-emphasised as point of purchase differentiators.
This speaks to a growing focus on Shopper Marketing, by which marketers look to form more meaningful propositions
with shoppers at the point of purchase. Historically, a huge amount of effort and investment has been focused on growing
consumers' need/demand for a category or brand outside of the store. The challenge is how to effectively communicate
those messages in-store.
This is further heightened by the fact that consumers and shoppers are often two separate people and even when they
are the same person, consumption and purchase mindsets and motivators can be very different. Without stimulus to
remind shoppers of a brand's equity and attributes, we risk encouraging shoppers to make purchase decisions based on
price.
In the future, video-enabled shelf messaging could make significant difference in this area, not least because of its ease
of implementation and maintenance. This is a a development which we will be watching with great interest.
Source: IGD 1st March 2017

Nisa To Celebrate 40th Anniversary With Series Of Special Events
And Promotions
Nisa Retail has announced plans for a series of special events and promotions across the year to mark 40 years since the
business was formed by entrepreneurs Dudley Ramsden and Peter Garvin.
Activity will begin to roll out in stores and across Nisa’s various online platforms through a planned schedule of
anniversary marketing campaigns, featuring specially created POS kits and gondola end displays, and supported through
national newspaper, online and TV advertising. This will culminate in a month of celebrations during October – the actual
month the business launched back in 1977.
The activity during the Summer push will give consumers the chance to win prizes such as a family holiday. This will then
be ramped up as October approaches with a member facing promotion offering 40 deals and a consumer campaign
inviting shoppers to open a present a day for 40 days, with a Heritage own label hamper on offer to winners.
“This is a milestone year for Nisa and we’re very much focused on using it to recognise and celebrate who and what Nisa
was built on; loyal, independent retailers and the communities they serve,” said Nisa’s sales director Steve Leach.
“From our regional meetings, annual exhibition at Stoneleigh, through to the POS and promotions in store, this year’s
activities will carry this common theme, allowing Nisa to champion its long standing members while delivering offers,
promotions and competitions that by extension reward their customers.”
Source: NamNews 3rd March 2017

Strong Performance Of Wickes and Toolstation Drives Growth At
Travis Perkins
Travis Perkin’s has reported a rise in annual turnover, boosted by a strong year for its consumer division, which includes
Wickes and Toolstation.
In the 12 months to 31 December, the division’s total sales rose 9.5% to £1.52bn with like-for-like sales up 6.4%.
Operating profit increased 6.4% to £101m.
The group said the continued roll-out of its new Wickes store format helped buoy the figures, with 46 revamped outlets
opened during the year. The new format now covers 62 outlets with further revamps planned for the coming year.
Online was also a key driver with Wickes posting internet sales of over £100m for the first time. Meanwhile, savings were
made with the rationalisation of the Wickes distribution centre network, taking it down to a single centre in Northampton,
which now serves all store and direct to customer deliveries.
Meanwhile, the Toolstation network continued its rapid expansion with a further 36 openings in the UK, and seven shops
in the Netherlands. Online only ranges were also introduced for the first time with over 1,000 products available to
customers along with improved marketing campaigns.
Across the wider Travis Perkins group, revenues were up 4.6% to £6.22bn with like-for-like sales growing 2.7%. However,
adjusted operating profits fell by 1% to £409m after the group was impacted by a weak performance at its plumbing and
heating division.
Travis Perkins Chief Executive John Carter said: “2016 was another solid year for the group, with continued strong
performances from the consumer, contracts and general merchanting divisions, which together contributed 90% of Group
adjusted operating profit. These businesses continued to benefit from the investments made in the branch network and
customer propositions over the last three years, which provides a strong base for future growth.”
Source: NamNews 3rd March 2017

Mobile contactless payments boosted by food-to-go sales
Food-to-go transactions including meal deal offers in-store accounted for 54% of all mobile ‘tap and pay’ transactions
processed by global payments firm Worldpay last year.
The number of contactless payments made using mobile devices surged by 247% in 2016, driven by the introduction of
new payment methods like Android Pay and the rising popularity of Apple Pay, with tap and pay spending on mobiles now
topping £288m.
Worldpay said total contactless spending exceeded £10bn for the year in 2016, with shoppers spending an average of
£10.39 per transaction in December.
Worldpay UK chief marketing officer James Frost said: “Already more than half of UK shoppers say they’d happily leave
their wallet at home and pay for everything on their smartphone instead.
“As people get more used to paying for goods on their smartphone, mobile’s ability to bridge more effectively across
online and offline retail channels will increasingly threaten the future of the traditional payment card.”
Meanwhile, figures from Barclaycard show overall contactless spending increased by 166% in 2016, with touch and go
payments in convenience stores soaring by 87%.
Source: Talking Retail 3rd March 2017

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IRI's Weekly FMCG News Update - w/c 27th February 2017

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