Table of Contents
Overview
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- What you need to know
- Products covered in this Report
Executive Summary
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- The market
- Confidence: bouncing back following Brexit
- Record deflation in the food categories but price rises imminent
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- Figure 1: Food and drink inflation, 2011-16
- Consumer spending on food takes a dive
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- Figure 2: Annual % change in the value, volume and prices in the food category, 2011-15
- Supermarkets’ sales falling but positive growth on the horizon
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- Figure 3: Supermarkets market size (inc. VAT), 2011-21
- Increased choice has chipped away at sector share
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- Figure 4: Estimated breakdown of sector sales, by channel, 2011-16
- Leading players
- The big four continue to lose market share
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- Figure 5: Leading grocery retailers: Share of sector sales, 2015
- Continued growth in online could hurt supermarkets
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- Figure 6: Leading online grocery retailers’ estimated market shares (excluding VAT), 2015
- Morrisons and Waitrose lead on fresh food allocation
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- Figure 7: UK leading food retailers: food and drink categories as a percentage of total space allocated to food and drink, October 2016
- Improved levels of trust at Tesco, Sainsbury’s and Morrisons
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- Figure 8: Attitudes towards and usage of selected brands, October and January 2016
- The consumer
- Most shop multiple times per week
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- Figure 9: Frequency of grocery shopping, September 2016
- Most still spend the most in supermarkets
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- Figure 7: Formats where the most money is spent in a typical month, September 2016
- Tesco the dominant player
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- Figure 8: Primary and secondary usage by grocery, retailer used, September 2016
- Why they shop in supermarkets…
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- Figure 9: Why they spend the most in supermarkets, September 2016
- …and why they don’t
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- Figure 10: Why they do not spend the most in supermarkets, September 2016
- Availability a core concern for supermarket shoppers
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- Figure 11: Areas that supermarkets shoppers would like to see improved, any rank, September 2016
- Shoppers in favour of the move to EDLP
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- Figure 12: Attitudes towards pricing and promotions, September 2016
- Own-brand the differentiator
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- Figure 13: Attitudes towards range reduction and own-brand, September 2016
- Brexit is likely to place greater scrutiny on sourcing
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- Figure 14: Attitudes towards sourcing and the effect of Brexit, September 2016
- What we think
Issues and Insights
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- Will Brexit cause a greater focus on sourcing?
- The facts
- The implications
- Own-brand: more important than ever?
- The facts
- The implications
- Non-foods: an increasingly competitive battleground
- The facts
- The implications
The Market – What You Need to Know
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- Confidence rising steadily
- Deflation persists but price rises on the horizon
- Consumer spending on food and drink falls in 2015
- Supermarkets sector continues to see sales decline
- Supermarkets have lost sector share consistently since 2011
Market Drivers
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- Consumer confidence rises steadily
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- Figure 15: Consumer confidence: Current financial situation vs sentiment for the coming year, January 2014-September 2016
- Inflation remains low
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- Figure 16: Food and drink inflation, 2011-16
- Growth in the number of convenience stores
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- Figure 17: Store numbers of the leading convenience operators, by operation, 2011-15
- Growth in other channels
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- Figure 18: Market size for online grocery retailing and discounter grocers, 2011-16
- Consumers prepared for increasing cost of living
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- Figure 19: Consumer views on the impact of Brexit, July 2016
- Private renting increases
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- Figure 20: UK household tenure status, 2011-15
Consumer Spending on Food and Drink
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- Figure 21: Consumer spending on core food and drink categories, 2011-16
- Spending on food
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- Figure 22: Annual % change in the value, volume and prices in the food category, 2011-15
- How food spending breaks down
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- Figure 23: Composition of consumer spending on food, categories as a % of total spending, 2012-15
- Spending on non-alcoholic drinks
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- Figure 24: Annual % change in the value, volume and prices in the non-alcoholic beverages category, 2011-15
- Spending on alcoholic drinks
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- Figure 25: Annual % change in the value, volume and prices in the alcoholic beverages category, 2011-15
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- Figure 26: Composition of consumer spending on alcoholic drinks, categories as a % of total spending, 2012-15
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Sector Size and Forecast
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- Sector sales slowed by deflation
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- Figure 27: All food retail sales (inc. VAT), 2011-21
- Figure 28: All food retail sales, 2011-21
- Supermarkets’ sales fall once more in 2015
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- Figure 29: Supermarkets’ market size and forecast (inc. VAT), 2011-21
- Figure 30: Supermarkets: market size and forecast (inc. VAT), 2011-21
- Supermarket share predicted to continue to fall
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- Figure 31: Percentage of grocer sector sales accounted for by supermarkets, 2011-21
- The impact of the EU referendum vote on the grocery sector
- The grocery sector has been resilient in previous slowdowns
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- Figure 32: Alternative market scenarios for the post-Brexit grocery sector, at current prices, 2016-21
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- Figure 33: Detailed post-Brexit scenarios for the grocery sector, at current prices, 2016-21
- The grocery sector is more insulated from economic slowdown than other sectors
- The effect on supermarkets
- Same again?
- Forecast methodology
- Changes in methodology
Channels of Distribution
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- Despite falling share, supermarkets remain the dominant force
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- Figure 34: Estimated channels of distribution for grocery retail sales, 2015
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- Figure 35: Estimated breakdown of sector sales, by channel, 2011-16
The Consumer – What You Need to Know
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- The majority shop multiple times per week
- Many still spend the most in supermarkets
- Tesco is the dominant player
- Historical strengths remain but increased choice is hurting supermarkets
- Availability a core concern for supermarket shoppers
- Shoppers in favour of the move to EDLP
- Brexit is likely to place greater scrutiny on sourcing
How They Shop
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- Who does the shopping
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- Figure 36: Who is responsible for grocery shopping, September 2016
- Most combine a main shop with a top-up
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- Figure 37: Grocery shopping behaviours, September 2016
- Older consumers more likely to shop purely on a top-up basis
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- Figure 38: Grocery shopping behaviours, by age, September 2016
- Frequency of shop
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- Figure 39: Frequency of grocery shopping, September 2016
- Changing definition of what constitutes a main shop
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- Figure 40: Frequency of shop, by shopping behaviour, September 2016
- Age affects shopping frequency…
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- Figure 41: Frequency of shop, by age, September 2016
- …as does the area lived in
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- Figure 42: Frequency of shop, by area lived in, September 2016
Where They Shop
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- Despite falling market share the majority spend the most in supermarkets
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- Figure 43: Formats where the most money is spent in a typical month, September 2016
- Younger consumers more likely to look elsewhere
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- Figure 44: Formats where the most money is spent in a typical month, by age, September 2016
- Discounters have made up the most ground in the North
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- Figure 45: Format where the most money is spent, by region, September 2016
- Top-ups taking away market share
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- Figure 46: Formats where the most money is spent in a typical month, by frequency of shop, September 2016
Which Retailers Do They Use?
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- Tesco out in front
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- Figure 47: Total grocery retailer usage, September 2016
- Tesco also grabs the most primary shops
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- Figure 48: Primary and secondary usage, by grocery retailer used, September 2016
- Main shop trend: Asda losing shoppers fast
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- Figure 49: Retailer spent most money with, trend data, 2013-16
- Secondary shop trend: small changes
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- Figure 50: Secondary usage, by grocery retailer used, 2015 and 2016
- Discounters taking more secondary shops from Asda and Morrisons
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- Figure 51: Where leading players’ primary shoppers also shop, September 2016
- Shopper profiles: primary shoppers
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- Figure 52: Retailers used for primary shops, by average age and socio-economic group, September 2016
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- Figure 53: Retailers’ primary shoppers, by region lived in, September 2016
- Shopper profiles: secondary shoppers
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- Figure 54: Retailers used for secondary shops, by average age and socio-economic group, September 2016
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- Figure 55: Retailers used for secondary shops, by region lived in, September 2016
- Figure 56: Retailers used for secondary shops, by region lived in, September 2016
- Repertoire of secondary shops
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- Figure 57: Number of retailers used for secondary shops, September 2016
Why They Do (and Do Not) Spend the Most in Supermarkets
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- Historical strengths ring true for supermarkets
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- Figure 58: Why they spend the most in supermarkets, September 2016
- Key reasons by age
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- Figure 59: Leading reasons why they spend the most in supermarkets, by age, September 2016
- Reasons by retailer
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- Figure 60: Reasons for spending the most in a supermarket in a typical month, by retailer where the most is spent in a typical month, September 2016
- Increased choices are driving some away
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- Figure 61: Why they do not spend the most in supermarkets, September 2016
- Those living in urban areas more likely to have an alternative
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- Figure 62: Why they do not spend the most in supermarkets, by area lived in, September 2016
What They Would Change About Where They Shop
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- Availability a concern
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- Figure 63: Areas that grocery shoppers would like to see improved, any rank, September 2016
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- Figure 64: Areas that grocery shoppers would like to see improved, by rank, September 2016
- Retailer-specific concerns
- Tesco: Quality concerns
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- Figure 65: Overall ranking of factors supermarket shoppers would like to see improved, by total and by Tesco shoppers, September 2016
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- Figure 66: What Tesco shoppers would improve, any rank, September 2016
- Sainsbury’s: Range a positive, but more information is needed
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- Figure 67: Overall ranking of factors supermarket shoppers would like to see improved, by total and by Sainsbury’s shoppers, September 2016
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- Figure 68: What Sainsbury’s shoppers would improve, any rank, September 2016
- Asda: A good deal of change needed
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- Figure 69: Overall ranking of factors supermarket shoppers would like to see improved, by total and by Asda shoppers, September 2016
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- Figure 70: What Asda shoppers would improve, any rank, September 2016
- Morrisons: Range of non-foods singled out
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- Figure 71: Overall ranking of factors supermarket shoppers would like to see improved, by total and by Morrisons shoppers, September 2016
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- Figure 72: What Morrisons shoppers would improve, any rank, September 2016
- Aldi: Quality of goods a real strength
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- Figure 73: Overall ranking of factors supermarket shoppers would like to see improved, by total and by Aldi shoppers, September 2016
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- Figure 74: What Aldi shoppers would improve, any rank, September 2016
Attitudes towards Pricing and Promotions
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- Consumers in favour of the move to EDLP
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- Figure 75: Attitudes towards pricing and promotions, September 2016
- Sainsbury’s shoppers less convinced by EDLP
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- Figure 76: Agreement with statements around pricing and promotions, by retailer where the most money is spent, September 2016
- Younger consumers far less price-aware
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- Figure 77: Agreement with the statement ‘I rarely pay attention to prices when in a grocery stores’, by gender and age, September 2016
- In an EDLP world own-brand will be increasingly important
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- Figure 78: Attitudes towards range reduction and own-brand, September 2016
- Tesco shoppers see own-brand as a bigger differentiator
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- Figure 79: Agreement with the statement ‘The main difference between supermarket retailers is their own-brands’, by retailer where the most money is spent, September 2016
Attitudes towards Brexit, Sourcing and Ethical Products
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- Over a third expecting price rises post-Brexit
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- Figure 80: Attitudes towards the effect of Brexit on pricing, September 2016
- Sourcing is likely to be thrown into the spotlight in a post-Brexit market
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- Figure 81: Attitudes towards sourcing and the effect of Brexit, September 2016
- Aldi shoppers want more locally sourced products
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- Figure 82: Attitudes towards sourcing and the effect of Brexit, by retailer where the most is spent, September 2016
- Younger consumers particularly aware of potential price rises
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- Figure 83: Agreement with the statement “Leaving the European Union will mean we pay more for groceries in the UK”, by age, September 2016
- Ethical products perceived at coming at a (unfair) cost
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- Figure 84: Attitudes towards ethical products, September 2016
- Younger consumers have concerns over the ethics of the discounters
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- Figure 85: Agreement with the statement “The discounters, Aldi and Lidl, are less ethical (eg free-range, fair trade etc) than other supermarkets”, by age, September 2016
Leading Retailers – What You Need to Know
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- The big four continue to lose market share, but losses are slowing
- Online: increasingly a channel in its own right
- Retail product mix: room to grow non-foods
- Advertising spend falls in 2015
- Improved levels of trust at Tesco, Sainsbury’s and Morrisons
Innovation and Launch Activity
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- Making supermarkets a destination again
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- Figure 86: Habitat shop-in-shop, Sainsbury’s Nine Elms, October 2016
- Groceries delivered straight to the fridge
- Pop-up wine bars
- Cycle delivery
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- Figure 87: Sainsbury’s Chop Chop, October 2016
- Inclusive shopping
- Tackling food waste
- Fresh as can be
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- Figure 88: INFARM high-tech kitchen garden in Metro store, Berlin, February 2016
- Free fruit for kids
- Driverless trolleys
Leading Grocery Retailers – Key Metrics
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- 2015: Another challenging year
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- Figure 89: Leading grocery retailers: Net sales, 2011-15
- Store numbers and sales per outlet
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- Figure 90: Leading grocery retailers: Store numbers, 2011-15
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- Figure 91: Leading grocery retailers: Annual sales per outlet, 2011-15
- Sales area and densities
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- Figure 92: Leading grocery retailers: Total sales area, 2011-15
- Figure 93: Leading grocery retailers: Annual sales per sq m, 2011-15
- Operating profits and margins
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- Figure 94: Leading grocery retailers: Operating profits, 2011-15
- Figure 95: Leading grocery retailers: Operating margins, 2011-15
Market Shares
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- Figure 96: Leading grocery retailers: Share of sector sales, 2015
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- Figure 97: Leading grocery retailers: Share of sector sales, 2011-16
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- Figure 98: Market shares: the big four grocery multiples vs the discounters, 2011-16
- A note on our market share
- Space allocation and retail product mix
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Online
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- Around half do some online grocery shopping…
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- Figure 99: Usage of online grocery shopping, December 2015
- …but online only accounts for 5.3% of sector sales
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- Figure 100: Online grocery sales as a % of all grocery retailers’ sector sales, 2011-16
- Delivery passes: a double-edged sword?
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- Figure 101: Ownership and interest in delivery passes, December 2015
- Online market shares
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- Figure 102: Leading online grocery retailers’ estimated market shares (excluding VAT), 2015
- What about Amazon?
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- Figure 103: Attitudes towards shopping online for groceries from Amazon, December 2015
Space Allocation Summary
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- Summary data and classifications
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- Figure 104: Food, non-food standard classifications, 2016
- Convenience comparison overview
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- Figure 105: UK leading food retailers’ hypermarket store format: Convenience comparison overview split, October 2016
- Figure 106: UK leading food retailers’ superstore format: Convenience comparison overview split, October 2016
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- Figure 107: UK leading food retailers’ smaller supermarkets and discounters: Convenience comparison overview split, October 2016
- Detailed convenience comparison split
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- Figure 108: UK leading food retailers’ hypermarket store format: Convenience comparison detailed split, October 2016
- Figure 109: UK leading food retailers’ superstore format: Convenience comparison detailed split, October 2016
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- Figure 110: UK leading food retailers’ smaller supermarkets and discounters: Convenience comparison detailed split, October 2016
- Food and drink split
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- Figure 111: UK leading food retailers: food and drink categories as a percentage of total space allocated to food and drink, October 2016
- Detailed space allocation
Retail Product Mix
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- Figure 112: Leading food retailers: Estimated sales mix, 2015
- Figure 113: Leading food retailers: Category sales as % of total sales, 2015
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- Figure 114: Sales density, by broad category (ex VAT), 2015
- Figure 115: Major food retailers: Estimated market share of key categories, 2015
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Brand Research
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- What you need to know
- Brand map
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- Figure 116: Attitudes towards and usage of selected brands, October and January 2016
- Key brand metrics
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- Figure 117: Key metrics for selected brands, October and January 2016
- Brand attitudes: Lidl and Aldi lead on value
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- Figure 118: Attitudes, by brand, October and January 2016
- Brand personality: Co-op struggles, but shows signs of improvement
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- Figure 119: Brand personality – macro image, October and January 2016
- Discounters are seen as basic, but trendsetting
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- Figure 120: Brand personality – micro image, October and January 2016
- Brand analysis
- A good year for Tesco
- A Morrisons renaissance
- Asda’s reputation for value continues to dissipate
- Lidl and Aldi increasingly seen to offer more than just value
- Exclusivity of Waitrose and M&S Food helps them stand out
- Co-op behind but moving in the right direction
- Iceland improves its image
- Ocado, small but highly recommended
Advertising and Marketing Activity
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- Total advertising spend falls in 2015
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- Figure 121: Recorded above-the-line, online display and direct mail total advertising expenditure by UK supermarket and online grocers, 2012-15
- Asda and Lidl lead advertising spend
- Changing advertising strategies
- Co-op increases adspend to focus on convenience
- Competition leads to disputes
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- Figure 122: Recorded above-the-line, online display and direct mail total advertising expenditure by leading UK grocery retailers, 2012-15
- TV increases its dominance
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- Figure 123: Percentage media type split of recorded above-the-line, online display and direct mail total advertising expenditure by UK supermarkets and online grocers, 2012-15
- Lidl and Iceland boost spending on TV advertising
- Ocado prefers press advertising
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- Figure 124: Percentage of recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading grocery retailers, by media type, 2015
- Nielsen Ad Intel coverage
Aldi
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- What we think
- Simpler is better
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- Figure 125: Aldi joint advertising campaign, 2016
- Slowing growth in the UK
- Entering the Italian market
- Experimenting with online
- Company background
- Company performance
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- Figure 126: Aldi: Estimated group sales performance, 2011-15
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- Figure 127: Aldi: Number of outlets, 2011-15
- Retail offering
Asda Group
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- What we think
- Gross margins
- Cost cutting
- Falling market share
- Where next?
- Company background
- Company performance
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- Figure 128: Asda Group Ltd: Group financial performance, 2011-15
- Figure 129: Asda Group Ltd: Outlet data, 2011-15
- Retail offering
The Co-operative Food
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- What we think
- New luxe brand to inspire and encourage customers to re-appraise The Co-op Food own-brand
- Tailoring food ranges to local communities
- Adapting its stores to make the top-up grocery shopping experience easier and quicker
- Price cuts eating into profits
- Award winning food-to-go product range
- Tapping into health issues upper most in consumers' minds
- Tackling food waste
- Company background
- Company performance
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- Figure 130: The Co-operative Food: Group financial performance, 2011/12-2015/16
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- Figure 131: The Co-operative Food: Outlet data, 2011/12-2015/16
- Retail offering
Iceland Foods
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- What we think
- Three areas of future focus
- New concept store provides pointers to future direction of Iceland brand
- Power of Frozen campaign seeks to change perceptions
- The Food Warehouse brand taps into retail park popularity
- Online business shows potential
- Background
- Company performance
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- Figure 132: Iceland Foods Ltd: Group financial performance, 2011/12-2015/16
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- Figure 133: Iceland Foods Ltd: Outlet data, 2011/12-2015/16
- Retail offering
Marks & Spencer (UK food)
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- What we think
- Convenience food for treats and special occasions
- Finding the right balance with availability
- Innovation key to keeping offer fresh
- Refocusing on the UK
- Background
- Company performance
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- Figure 134: Marks & Spencer (UK food): Group financial performance, 2011/12-2015/16
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- Figure 135: Marks & Spencer (UK food): Food outlets, by format, 2011/12-2015/16
- Figure 136: Marks & Spencer (UK food): Outlet data, 2011/12-2015/16
- Retail offering
Ocado
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- What we think
- Scaling up
- UK grocery home delivery competition intensifies
- Still no news on international partner
- Pressure builds for more distribution centres
- Background
- Company performance
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- Figure 137: Ocado group plc: Group financial performance, 2010/11-2014/15
- Retail offering
J. Sainsbury
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- What we think
- Argos
- Distraction
- Modest optimism
- Background
- Company performance
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- Figure 138: Sainsbury’s: Quarterly sales performance, Q1 2016-Q2 2017
- Pharmacy
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- Figure 139: J. Sainsbury: Group financial performance, 2011/12-2015/16
- Figure 140: J. Sainsbury: Outlet data, 2011/12-2015/16
- Retail offering
Schwarz Group (Lidl)
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- What we think
- Chasing Aldi in key markets
- Changing strategy in France
- Plans to break America
- Tentative moves online
- The Lidl shopper
- Company background
- Company performance
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- Figure 141: Schwarz Group: Group sales performance, 2011/12-2015/16
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- Figure 142: Schwarz Group: Outlet data, 2011/12-2015/16
- Retail offering
Spar International
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- What we think
- Top-up grocery shopping opportunities
- More reasons to visit Spar
- Supporting consumers’ healthy food and lifestyle choices
- New grocery delivery services
- Own-brand drive
- Digital Leadership Store
- Company background
- Company performance
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- Figure 143: Spar International: Retail sales, by country, 2011-15
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- Figure 144: Spar International: Outlets, 2011-15
- Figure 145: Spar International: Retail sales area, 2011-15
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- Figure 146: Spar International: Sales per sq m, by country, 2011-15
- Retail offering
Tesco
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- What we think
- Success
- Credit where it is due
- Making the most of its assets
- Retailing against the hard discounters
- The problems of maturity
- Outside the UK
- Background
- Company performance
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- Figure 147: Tesco: Like-for-like sales performance (excluding fuel), H1 2015/16-H1 2016/17
- Figure 148: Tesco, sales and share of food retailers sales, by country, 2014/15 and 2015/16
- UK
- RoI
- Central Europe
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- Figure 149: Tesco: European businesses, 2016
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- Figure 150: Central Europe: store portfolios, October 2016
- Online
- Fuel
- Tesco Bank
- Tesco Mobile
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- Figure 151: Tesco Plc: Group financial performance, 2011/12-2015/16
- Figure 152: Tesco Plc: Outlet data, 2011/12-2015/16
- Retail offering
Waitrose
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- What we think
- Store investment focus shifts
- Re-affirming its core values
- Waitrose 1 helps consolidates premium ranges
- Experiential shopping
- Online
- Background
- Company performance
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- Figure 153: Waitrose: Group financial performance, 2011/12-2015/16
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- Figure 154: Waitrose: Outlet data, 2011/12-2015/16
- Retail offering
Wm Morrison Group
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- What we think
- Cutting prices…
- …to better compete with discounters…
- …and address shoppers’ pricing concerns post-Brexit
- More reasons to visit Morrisons stores
- Tailoring product offering to suit local tastes
- A more rewarding loyalty card scheme
- Flagging up the in-store skills of its trained butchers, bakers and fishmongers
- Morrisons.com expanding home delivery coverage
- Company background
- Company performance
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- Figure 155: Wm Morrison Group: Group financial performance, 2011/12-2015/16
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- Figure 156: Wm Morrison Group: Outlet data, 2011/12-2015/16
- Retail offering
Appendix – Data Sources, Abbreviations and Supporting Information
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- Data sources
- Financial definitions
- VAT
- Abbreviations
- Consumer research methodology
- Detailed space allocation
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- Figure 157: UK leading food retailers hypermarket store format: detailed space allocation, October 2016
- Figure 158: UK leading food retailers superstore format: detailed space allocation, October 2016
- Figure 159: UK leading food retailers smaller supermarkets and discounters: detailed space allocation, October 2016
Appendix – Sector Size and Forecast
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- Forecast Methodology
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