PLMA E-Scanner – February 2017

February, 2017
Tesco deal shakes up UK market

A surprise acquisition is shaking up grocery retailing in the UK. The country’s largest retailer, Tesco, announced an agreement to acquire Booker, the country’s largest wholesaler. Booker supplies thousands of convenience stores under the Londis, Premier and Family Shopper brands.

“It would be fair to say the Tesco-Booker deal came as a shock to even the most in-the-know industry watchers,” writes The Grocer. The deal may reflect a new reality for Tesco—that “it is unlikely to squeeze much more growth out of an increasingly crowded market with tough completion from the discounters.”       

The growth of online retailing also may be a factor. “As customers place an increasing emphasis on speed, there is also a compelling argument to tie up with companies that have a strong distribution network,” according to the publication. In another recent deal, Sainsbury’s, acquired Argos, the catalogue retailer, because of its fast-track delivery time of four hours. The Tesco-Booker deal will require approval from regulators and both sets of shareholders.

Retailers post gains

The financial reports are in for Europe’s biggest retailers. While 2016 was a difficult year, retailers managed to post gains.

The newly merged Ahold Delhaize found success in The Netherlands, but struggled in Belgium. The retailer’s like-for-like turnover grew 6% in the Netherlands in the most recent quarter, while it declined by 1% in Belgium. Across all its operations in Central and Southeastern Europe, sales rose nearly 7% at constant exchange rates, while in comparative store terms they were up by 3.4%. The retailer said stores in Romania had enjoyed ‘very strong comparable sales’.

Carrefour has posted its fifth consecutive year of like-for-like sales gains as revenues rose in its key European and Brazilian markets, offsetting the continuing struggles at its lossmaking Asian business. In France, shoppers using several Carrefour formats now represent two-thirds of sales and half of the total client base. The retailer’s hypermarkets continue to struggle, with sales down 1.5%.

In the UK, Tesco also posted strong growth figures for the third quarter in its core business, with like-for-like sales growth of 1.8%, resulting in its first quarterly market share gain since 2011.

Retailers acquire Eurocash

Swedish and Norwegian retailers Axfood and Norgesgruppen have acquired Eurocash AB, the second-largest food retailer on the Swedish-Norwegian border. Axfood is the main supplier for Eurocash through Dagab, its supply chain organisation.

This deal represents a deepening of relations between Axfood and Norgesgruppen. Previously, they collaborated on purchases of private label products. Anders Strålman, president and CEO of Axfood, commented: “The acquisition of Eurocash is part of our strategy to grow sales and strengthen our market share in Sweden. At present Axfood does not have any food retail stores along the border with Norway. We will now gain access to the growing cross-border shopping segment.”

Eurocash will be consolidated into the Axfood Group and will keep its banner name. The acquisition is dependent on antitrust clearance under the Swedish Competition Authority and approval from the European Commission.

EU working on food policy

The European Union is planning to create a Common Food Policy that will replace all existing policies to create a more sustainable, healthy and profitable food system. A group known as the International Panel of Experts on Sustainable Food Systems (IPES) is working to bring all food related EU policies together in a Common Food Policy for Europe. A final report in 2018 to European policy-makers will detail findings and suppositions for a new approach that could be implemented after 2020.

Croatia protects its suppliers

Croatia has adopted a law to protect its national suppliers. While grocery producers support the measure, retailers warn that it could create problems for them. The Croatian Chamber of Economy says that some food products imported from the EU arrive in Croatia at prices that are 50% lower than local products. The Association of Retailers has warned that if the bill is adopted in the existing form it would put retailers at a disadvantage to producers, suppliers and distributors and would encourage further agricultural and food imports.

More private label mergers?

The growth of private label in the UK is creating opportunities for suppliers but also may lead to more consolidation. Michael Collinson, an investment banker with William Blair, writes in The Grocer that “the increasing market share of discount retailers has created growth opportunities for own-label suppliers. In addition to being highly profitable for retailers, which can drive hard bargains with the suppliers, own label has become a more important part of how retailers differentiate and build their own brands.”

Private label suppliers may come under pressure, however, as possible weakness in the British currency may hurt profit margins. While some suppliers will look to increase innovation and product redesign to boost profits, others may look for acquisitions. “The more attractive business environment has driven an increase in investor interest in the sector, not only in the UK,” he believes.

Germans like ready meals

More and more Germans are turning to ready-made food, according to a study by the Federal Food Commissioner. Opinion research institute Forsa found that 41% of respondents said they liked to eat a ready meal or a frozen pizza, compared to only 32% in 2015. More than half of the respondents (55%) now prefer a simple and fast preparation of their food. For the 19 to 29-year-olds it is even higher, 72%. There is a gender difference. Only 46% of men prefer quick and easy food preparation, compared to 63% of women. The number of people that cook every day decreased from 41 to 39%. According to the report, 33% still cook two to three times a week, compared with 37% in 2015.

At the same time, consumers’ expectations for food producers are rising, they are informing themselves on many channels and pay more attention to labeling by seals. When buying food, the taste (97%) is the most important, after which consumers are mainly concerned about regional origin (73%) and the price (57%). At the same time Germans think animal welfare is more and more important. Nearly half of those polled regard animal welfare as an indicator of good animal breeding. In 2015, it was only 36%.

E. Leclerc expands Marque Repère

E. Leclerc is marking the 20th anniversary of its Marque Repère range with plans for more growth in the years ahead. President Michel-Edouard Leclerc outlined plans to add more organic and gluten-free SKUs to the brand and to reduce the pesticide use involved in Marque Repère supply chains by half over the next three years, and to lessen the brand’s carbon footprint by 2020. Marque Repère grew by 2.3% during 2016, selling more than 3.1bn SKUs.

These plans indicate the retailer is looking beyond its traditional reliance on A-brands. “Selling national brands was my father’s obsession," said Leclerc, “so he could prove that he was cheaper.” Overall, Leclerc saw its market share in France grow by 0.4 point to 20.7% last year.

Conad posts private label growth

Italian retailer Conad has reported a 7.5% growth in private label sales during 2016, rising to 3bn euros. The retailer said all Conad brands have seen growth, with above average values for Conad Percorso Qualità (+17%), Verso Natura (+38% including Bio) and Sapori&Dintorni (+10%). At the end of 2017, there will be 70 products in the fresh category (fruit, vegetables and meats), 90 in the grocery and beverage departments and 50 in cool and cold (ice cream and frozen).

For this year, commercial director Francesco Avanzini said the plan is to strengthen and improve the brands in the portfolio through innovation and segmentation, within its over 300 categories. Investments in product quality grew by 10% last year, with about 2,500 inspection visits to establishments of its 620 suppliers.

Selex expands private label

The Selex Group, with more than 2,500 stores in Italy, posted growth of over 3% in private label sales during 2016. The largest increases, over 15%, were in the premium and bio product segments. This year the retail group will introduce a graphic package design to differentiate the different product categories, such as food and beverages, personal care, home care and non-food, pet food and drugstore. New product ranges will include an all-vegetable line, to meet the needs of vegetarian and vegan consumers, and the renewal of the pet food brand Amico Mio Selex, with products adapted to the age, breed and lifestyle of pets.

Discounters offer welfare label

Germany’s top discounters are introducing programmes for their dairy products. Aldi Nord and Aldi Süd are putting the “Für mehr Tierschutz” (For More Animal Protection) label from the German Animal Protection Association for selected products. Meanwhile Lidl announced that it would label its fresh milk of its own regional brand “A good piece of Bavaria” with the  “Für mehr Tierschutz” label. The introduction will take place in the second half of this year. The animal protection label is already used by retailers for pork and chicken products, as well as eggs.

Asda introduces Slimzone

Asda has added a diet-conscious brand, Slimzone, which features a range of frozen meals and meat products, which are free to customers following the Slimming World extra easy plan. Slimming World is a UK weight loss plan and community, with a group membership costing 4.95lb. per week. The retailer said it had identified a gap in the market for consumers who want easy and low price options to help stay on a controlled weight loss programme. The retailer noted that the products had not been endorsed or tested by Slimming World.

Netto adds regional range

Netto in Denmark is expanding its product range to include regional products and has introduced a seal to highlight products from local producers. Around 400 products from 43 suppliers will be marked with the “RegioNah” shelf-marker. Regional products already account for a third of the discounter’s standard range and plans call for adding more.

In the Stores 

Migros reported that sales of its Alnatura range doubled in 2016.

Coop Suisse reported a 7% increase in private label sales.

Colruyt is launching Appetit, a nutrition drink with a resealable bottle.

Billa and Spar report that they are selling more of their S-Budget and Clever private label energy drinks than those of Red Bull, the leading A-brand.

Spar in the UK has introduced a range of four cooking sauces, Bolognese, Tomato and Herb, Tikka Masal and Korma.

Asda in the UK has a matchmaking app that allows suppliers to buy and sell food that would otherwise be dumped.

Spar Hungary has increased its range of organic and 'free-from' products, as well as its range of foods lower in sugar and fat.

Eroski plans to add 83 stores, mostly remodels, under its Contigo banner this year.

Carrefour is testing its Supeco cash and carry format in Italy.

ICA in Sweden is replacing sticky plastic labels with laser marking on some fruits and vegetables.

Auchan is investing 250m euros to revamp its shopping malls in Italy by 2018.

Rema 1000 in Sweden has launched a loyalty app that gives shoppers a 10% discount on their 10 most-shopped items.

Jumbo in the Netherlands will start opening smaller convenience stores in urban areas this year.

Edeka has launched a new service, offering fresh, pasteurized milk, supplied by local producers, through in-store filling stations.

Jerónimo Martins´ drugstore retailer Hebe posted sales gains of 22% last year.

Biedronka reported a 9.5% increase in net sales for the fourth quarter, climbing to 9.8b euros.

Aldi has created a real estate company to prepare for its entry into Italy.

Intermarché has released a beta version of its website intermarche-shopping.fr.

Market Research 
Big retailers are growing

The Top 250 retailers in the world continued to report solid growth, despite challenging conditions in the global economy, according to the latest annual “Global Powers of Retailing” report by Deloitte. It finds these retailers saw their revenues grow by 5.2% year-on-year to $4.31trn in fiscal 2015.

For the third straight year, revenue growth at apparel and accessories retailers outperformed other sectors. However, fast-moving consumer goods retailers continued to be the largest in size (average revenue of $21.6bn) and number (133 of the Top 250). Deloitte noted that two-thirds of the Top 250 operated outside their national borders and had retail operations in more than ten countries (on average) and derived nearly 25% of their retail revenue from foreign operations.

Seniors buy private label

Nielsen reports that senior citizens in Portugal are the most loyal buyers of private label brands in the country, with 24% of those surveyed seeking out such products. This compares to 14% for Portuguese citizens aged between 18 and 65 years, according to a Nielsen study on the habits of senior shoppers. The study also found that virtually half of senior citizens always visit the same store. Shoppers were most loyal Pingo Doce supermarkets followed by Continente hypermarkets.

PLMA News 
“World of Private Label” to be held 16-17 May

The theme for PLMA’s 2017 “World of Private Label” International Trade Show is “Helping Consumers,” focusing on how retailer brands bring value and innovation to shoppers across Europe and beyond. The event will be held 16-17 May at the RAI Exhibition Centre in Amsterdam. Over 4,300 exhibit stands including nearly 60 national and regional pavilions will participate in the trade show.

A special seminar programme will take place prior to the show. Admission to the seminars is complimentary to all registered visitors and exhibitors. The seminars will be presented at the RAI Centre on Monday, 15 May. Presentations are translated into English, French, German, Italian and Spanish. For more information about PLMA’s 2017 “World of Private Label” Trade Show, click here.

Events 
22-23 February

Annual Roundtable Conference
Warsaw, Poland

16-17 May

“World of Private Label” International Trade Show
Amsterdam, The Netherlands