PLMA E-Scanner – August 2017

August, 2017
Private label will grow in Germany

Private label sales in Germany will continue to grow in the years ahead, according a report from IGD. It says: “As the home of the discounters, which typically have up to 90% share of private label products, Germany’s shopper is used to private label goods and looks for them in a wide variety of categories. Share of private label is rising and we expect that to continue, as retailers drive innovation and extend their ranges, particularly in the growing areas of organic (bio), free from, vegetarian, vegan and ready meals.”

The German grocery market is forecast to be worth 259bn euros by 2021, a growth rate of 11%. The report forecasts that all of the major German grocery channels will grow over the period, primarily driven by inflation combined with population growth, plus retailer investments. IGD says new retail concepts are emerging across Germany’s grocery market, which until recently has been traditionally dominated by discounters and supermarkets.

A-brands are suffering

A new study confirms that the A-brands are in trouble. The 2017 OC&C/Grocer Global 50 report reveals sales across the fast moving consumer goods’ 50 biggest companies dropped by 0.7% in 2016, the first decline since 2003. Last year, growth stood at 0.3%. Even during the depths of the global recession in 2009, the sector still recorded growth of 0.6%.

OC&C said:”Without a rising tide of inflation or rapid growth of major emerging markets, the global giants are facing a fundamental growth challenge in core markets, with consumer spending shifting from consumer goods towards other technology and leisure uses, and a plethora of small insurgent competitors attracting the interest of fragmenting consumer segments.”

These pressures have forced international players to shift focus to the bottom line, where there is more cause for optimism as gross margin across the Global 50 increased by 1.1ppts to a multi-year high of 46%.

Lidl speeds up UK expansion

Lidl plans to accelerate its expansion in the UK. The discounter announced that it intends to open another 60 stores per year in the UK and has amassed a war chest to fund the programme. Lidl opened 30 shops last year and now has 670, but there are many locations where shoppers do not have a store close by, UK chief executive Christian Härtnagel told The Telegraph.

He said the retailer aims to open “at least one shop a week” and said that Lidl has already agreed locations for between 50 and 60 shops a year for the next two years, compared with 30 last year. “That is the fastest we have ever grown in the UK,” he told the newspaper.

The grocer’s market share now stands at 5%. He noted that Lidl’s profits will be lower this year “because of the huge investment figure and the effect of Brexit”. However, he said “we are privately owned and we are still focused on our long-term profitability”.

Carrefour opens new formats

Carrefour is testing new store formats. In France the retailer is trialing a convenience store format specialising in food for immediate consumption. The format is called Bon’App, which is the name of its own snack brand. The format carries about 600 items: ready-made products for any time of day, from breakfast to dinner. It sells hot and cold drinks, hot snacks, salads, sandwiches, sliced fruit and vegetables, cake and candy. Consumers can also sit at the bar and eat their order in the store. Carrefour had already tried Bon’App shop-in-shop formulas in several hypermarkets. Bon’App stores are small, 50-60sqm, and located in busy city centres,

In Italy Carrefour has introduced two store formats, Carrefour Market Attrazione 2.0 and Carrefour Express 3 Minuti. The Attrazione 2.0 store is open 24 hours a day, seven days a week and offers more than 16,000 items over a surface area of 2,500sqm. In the food segment, a 60sqm section is dedicated to the Bio area, with over 800 products, including organic, gluten-free, vegetarian, and vegan. The store also features a perfume shop, seasonal non-food, and textiles. The Carrefour Express 3 Minuti is a 160sqm store that features prepared foods.

Sainsbury’s aims for Nisa takeover

Another big UK grocer is looking to acquire a convenience retailer. Sainsbury’s is proposing a 130m pound deal to acquire Nisa as the industry moves to consolidate following Tesco’s 3.7bn pound attempt to acquire Booker. The board of Nisa, which is owned by its shopkeeper members, has hired bankers to advise on its strategic options in light of the proposed Tesco-Booker alliance, which some regard as a major shift in UK convenience retailing.

The Guardian reports that following talks with potential suitors, which included the Co-op and Morrisons, Nisa is recommending Sainsbury’s to its members as its preferred bidder. Nisa’s 1,400 members operate 2,500 shops, and some entrepreneurs run small retail groups. The group’s biggest customer is the McColl’s convenience chain.

Retailers investing in online programmes

Grocery retailers across Europe keep increasing their investments in online programmes.

Rewe in Germany plans to expand its online marketplace, offering products grouped around the themes of food, kitchen and household. In addition to their weekly purchase, customers can also order products from other retailers.

Dia is working with Amazon to bring its groceries to more cities in Spain through the Amazon Prime Now service.

In the UK Tesco is merging its grocery and general merchandise click and collect services so customers can collect everything in one trip. The retailer also has rolled out a one-hour grocery delivery service to customers in London.

In Denmark, Dansk Supermarked Group says that its online retail platform Wupti now offers more than 60,000 products in collaboration with other online markets.

Musgrave in Ireland says it will “invest heavily” in online grocery shopping programmes.

European Court rules

The European Court of Justice has ruled that purely plant-based products cannot be marketed with terms such as 'milk', 'butter', or 'cheese', as these are reserved for animal products.

The ruling came after German vegan food company TofuTown was accused of infringing the EU legislation on designations for milk products. The company, which manufactures and distributes plant-based products such as 'Soyatoo tofu butter' and 'veggie cheese', said that the way in which consumers understand these terms has 'changed considerably' in recent years.

The court concluded that these terms cannot be legally used to designate purely plant-based products, even if the plant origin of the product is clearly indicated. It said that the addition of descriptive or explanatory terms 'cannot completely exclude the likelihood of confusion on the part of consumers'.

EC acts against Polish tax

The European Commission has said a Polish retail tax that would hurt big supermarket retailers was a breach of European state aid rules. The tax was progressively structured so that small groups with low sales would be exempted while retailers with higher turnover would pay more.  Poland’s parliament approved the law introducing the tax last July and it came into force last September.

Chinese bid for Esselunga

Chinese property and energy investment group Yida International has offered 7.5bn euros for Italian supermarket retailer Esselunga. The bid is 25% above the highest valuation offered last September by private equity firms Blackstone and CVC, who had assessed the retail company before the death of founder Bernardo Caprotti. La Repubblica reports that the proposal was sent to all the shareholders of Supermarkets Italiani, which operates the Esselunga chain, and real estate company Villata.

In the Stores 

Rewe and Penny are reducing the salt and sugar content in their brands.

Albert Heijn is reducing the amount of sugar in its AH Frisse Fruitdrank and AH Djoezz juice drinks by up to 30%, and is providing healthier alternatives for children with 14 new products.

Sainsbury’s in the UK is undertaking a broad review of its procurement processes for the sourcing of private label packaging.

Lidl sales are up in Romania, climbing 18% in fiscal 2016.

Continente in Portugal has expanded its Fácil & Bom meat range with the rollout of over 30 SKUs.

Système U has introduced a gluten-free beer that carries organic certification.

Lidl has introduced its My Best Veggie range in Italy. The line features of over 20 vegetarian and vegan products.

Eurelec, the purchasing alliance of the Rewe Group and the French retail association Leclerc, is starting the negotiations with manufacturers for the year 2018.

Kesko reports that its joint venture with Oriola has been approved by Finland’s Competition and Consumer Authority. The joint venture plans to open 15 health and beauty stores by the end of this year.

Waitrose in the UK has introduced a range of bag-in-box wine, with boxes holding the equivalent of up to three bottles of wine.

Monoprix has opened three stores specialising in vegan organic products under the Naturalia banner in Paris and Vincennes.

Woolworths in Australia has revamped its private label food offering in order to place greater emphasis on health and nutrition.

Costco, the US warehouse club retailer, has opened its first store in France.

The X5 Retail Group in Russia has begun a nationwide roll-out of a new loyalty programme for its Pyaterochka banner.

Auchan is rebranding its Nasha Raduga (Our Rainbow) hypermarkets in Russia to Kashdy Den (Every Day). The retailer also is acquiring Karavan, which operates nine hypermarkets and large grocery stores in Ukraine.

Tesco is relaunching its Clubcard with a new look and contactless technology designed to save customers time at the checkouts and get more from the loyalty scheme.

Market Research 
Private label gains in Portugal

Private label keeps gaining market share in Portugal. A report by Centromarca reports that private label accounted for half the market (49%) in the first quarter of 2017. This is a significant increase from the 40% share posted for 2016, according to the Nielsen statistics reported in PLMA’s Private Label Yearbook.

The Centromarca report also indicated that hypermarkets in the country are losing sales. It found that the decline is especially notable in terms of volume in the food category (-6%), pet food (-5.3%), personal hygiene and beauty (-3.1%), and home cleaning (-2.5%), with beverages showing zero growth.

Online grocery sales climb

New industry reports show that online grocery sales are climbing in two very different retail markets: the UK and Italy. Mintel predicts the continued growth in the UK online grocery market with sales forecast to increase 12% this year to 11.1bn euros.  The proportion of households who do all their grocery shopping online has also doubled since 2014.

As many as 14% of people in the UK currently do all of their grocery shopping online, up from 7% in 2014. Meanwhile, the proportion claiming to do most of their grocery shopping online has risen to 13%, up from 10% in 2014.

Although Italians are increasingly buying food and drink products online, these purchases lag behind other countries and only account for 0.5% of total retail purchases in Italy. The online food and grocery market in Italy is currently worth 812m euros, a 37% increase on 2016, according to the Osservatori digital group. Out of the total figure, food accounts for 708m euros (+39%), and the remaining 104m (+26%) comes from health and personal care products.

PLMA News 
Executive Education Programme to be held 24-26 October

Registration is now open for PLMA’s Executive Education programme to be held 24-26 October at Nyenrode Business Universiteit in Amsterdam, The programme is devoted entirely to private label and the curriculum includes private label strategy, manufacturer-retailer relations, supply chain management, product development, scenario planning, innovation management, promotion and trends around the world.

The curriculum is designed for both manufacturers and retailers. Classes combine interactive teaching techniques with traditional lectures and case studies. The faculty is drawn from both the university and industry.

For more information or to register for PLMA’s 2017 Executive Education Programme contact PLMA at telephone +31 20 575 3032 or click here.

Events 
24-26 October

PLMA’s Executive Education Programme
Amsterdam, The Netherlands

12-14 November

US Private Label Trade Show
Chicago, USA