The Changing Retail Landscape
The analyses, forecasts and projections contained in this report represent Kitchener Partners’ considered opinion based on the sources as cited. Kitchener Partners has taken reasonable care in the preparation of this report, but does not and will not warrant that the estimates, future events or projections herein can or will be achieved. Whilst reasonable care has been taken to confirm the reliability of the information and opinions expressed herein, no warranty is made as to the accuracy or completeness of this document. Kitchener Partners and its affiliates and/or any related corporation (as defined in the Corporations Act 2001), its officers, directors and employees accept no liability for the information or findings contained in this report or any other communication be it written or otherwise in relation to the subject matter of this report.
TRISTAN KITCHENER | +61 407 827 738
[email protected] | www.kitchenerpartners.com.au
AGENDA THE CHANGING RETAIL LANDSCAPE THE CHANGING CONSUMER THE OPPORTUNITIES
DEFINITION OF THE AUSTRALIAN FOOD MARKET BY CHANNEL 396 stores 776 stores
990 stores
8 stores >3,000 stores
RETAIL SUPERMARKETS 72%
5,700 stores
10.5 million Main Grocery Buyers in Australia
20,000 stores
100,000 food and beverage outlets
FOOD SERVICE 25%
6,500 stores
35,000 stores
15,000 stores
Source: ABS, IBIS, Company Reports, FOODmap, DAFF (2014)
ONLINE ?
SALES GROWTH BY CHANNEL FY14-15 25% 21% 20%
15%
10%
5%
5% 4%
5%
0% -1% Hard Discounters Major Supermarkets -5%
Source: ABS, Company reports, UBSe
Independents
Specialists
Total Market
RETAILER SALES TRANSFER FY15e $296m
+$802m $259m
-$351m
$212m
$247m $267m
-$718m Source: ABS, Company reports, UBSe
+$267m
$259m
RETAILER GROCERY MARKET SHARES (%) 37.9 38.6
Woolworths 30.0 29.7
Coles ALDI
8.6 7.9
Metcash (IGA)
7.7 8.3 3.5 3.5
Other OtherSupermarkets Supermarkets
12.3 12.1
Non-Supermarkets Non-Supermarkets 0
5
10
15
MAT TO 18/04/2015
20
25
30
MAT TO 19/04/2014
35
40
45
HALF-YEAR RESULTS TO DEC2015
Source: Woolworths and Coles Half-Year Reports 2016
THE “DOUBLE LOOP”” A large retailer uses its power to Market share ofnegotiate the powerful retailer increases a lower price from a supplier
Lower prices to increase volumes
Price differential The supplier re-coups its loss by reaches a point charging a higher price to its other whereby retail customers consumers switch retailer
Invest scale benefits These retailersinto lower prices have to sell the
products at higher retail prices
COLES: LOWERING PRICES FOR 6 YEARS AND COUNTING…
-5.9% ABS Food Price Inflation
Source: Wesfarmers Annual Report (August, 2015)
Coles F&L Price Inflation
ALDI FACTS
SMALLER STORES
PRIVATE LABEL (HIGH QUALITY)
TIGHTER PRODUCT RANGE
Source: Choice, June 2015
ALDI’S GROWTH…
+12% YOY
Key success factors for ALDI: 1. Availability: Always in-stock 2. Service: Fast & efficient check-outs 3. Quality: Especially fresh foods
2016 30 stores $600m sales
2016 25 stores $500m sales
ALDI advertising spend doubled to $29m in 2015 (Coles $54m ,Woolworths $88m)
FROM... What does it take for ALDI
to enter a new market link NZ?
…TO
GLOBAL LEARNING – THE IMPACT OF ALDI Too late …now wearing more pain
Faster reaction, closed the price gap and won back share
Reacted well, but had to re-base earnings
Common Trend: margins are squeezed = lower growth
…convenience for consumers… scale benefits for the majors…
THE PERFECT STORM FOR A PRICE WAR ALDI resetting consumers perception of value
Coles maintaining focus on lower prices
All retailers increasing Retail Floor Space
Retailer:
LOSE
Supplier:
LOSE
Customer: WIN Metcash investing 3% in lowering prices
Woolworths investing $600m in service and lower prices
Insert PIC of Lidl
THE CHANGING CONSUMER
CONSUMER SHOPPING BEHAVIOUR
CONSUMERS ARE BALANCING BETWEEN ‘VALUE’ AND VALUES’
Source: IGD 2012
FOOD SAFETY
Food Safety – Sabotage
FOOD SABOTAGE
Ethical Issues
Mexico: ax led to a 6% drop in purchases UK: estimate 43% of people would buy fewer soft drinks if the price rose by 20%
WHAT’S THE LIKELY FUTURE STATE
1. PRIVATE LABEL GROWTH 100% Australia
90% France
80% 70%
Netherlands
Great Britain
Germany
Canada
60% TOP 5 RETAILERS’ 50% MARKET SHARE 40%
Switzerland
Belgium
Spain
USA 30% Thailand 20% 10%
2008
Japan
2020
2015
0% 0%
5%
10%
15%
20%
25%
30%
35%
PRIVATE LABEL SHARE
40%
45%
50%
TYPICAL 3-TIER PRIVATE LABEL STRATEGY
PREMIUM Private Labels
STANDARD Private Labels (National Brand Equivalent)
Price ECONOMY Private Labels (Value/Commodities)
Quality
2. DE-RANGING Less range, more choice
3. PRICE
MARGINS IN THE UK AND AUSTRALIA
BRAND LOYALTY
VALUE SENSITIVITY
4. PROMOTIONS (DISCOUNTING VERSES EDLP)
5. LOYALTY
WW: 9 million consumers 32% have Fly-Buys
COLES: 8 million consumers 50% have Everyday Rewards
THE LIKELIHOOD… Need to get PL range within 5% of ALDI’s prices on 900 core lines, to be PERCEIVED as competitive Global average margin = 3.9% New CEO; Woolworths at 7.9%, invest 2% ($800m) Coles at 4.7%, invest 2% ($600m) to match Woolworths and ALDI
…and Australia is ALDI’s most profitable market globally, so can invest further in price
THE FUTURE: MAJOR RETAILERS WILL GET SMARTER AND PUSH HARDER…
Brain Migration
Supplier Management
6. Global sourcing
1. Availability & Service-Level agreements 2. Consistent Quality 3. Consumer Insights 4. Direct Supply 5. Vertical integration
7. Better trained Rivalry amongst existing competitors
8. Specialist skillsets 9. Bring suppliers’ skillsets inhouse 10.Better strategic and operational planning
PRODUCERS: PLANNING FOR THE FUTURE 1. World-class account management (be the Buyer) 2. Global consumer insights 3. Supply and quality consistency 4. Risk Mitigation 5. Supply Chain Innovation
6. Technical expertise 7. Product premiumisation Rivalry amongst existing competitors
8. IP and exclusivity 9. Vendor consolidation 10. Strategic alliances
21 LINES: TARGET EVERY CONSUMER SEGMENT
SUMMARY IT’S GOING TO GET A LOT TOUGHER
PUT THE CONSUMER FIRST
BE DIFFERENT
The Changing Retail Landscape TRISTAN KITCHENER | +61 407 827 738
[email protected] | www.kitchenerpartners.com.au
