89 - Eurofresh Distribution

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DiStributioN/DiStribucióN
United Kingdom,
world benchmark
for food retailing
Major firms diversify their range and keep ahead of
consumer trends to meet their customers’ needs
After experiencing higher growth than
other European countries in recent
years, the British economy slowed to
1.9% growth in 2005. The forecasts
expect a recovery, with growth rising
to 2.8%. The UK retail sector showed
annual growth of 1.9% in 2005 and
2.8% in 2006. The inflation rate was
2% in 2005 and household debt was
117% of gross disposable income at
the end of that year.
The British consumer
The birth rate is falling and IGD estimates
that by 2014 the over-65s
will outnumber those under 16. The
ageing population will have consequences
for food consumption in the
United Kingdom because the future
pensioners of 2020 are today’s regular
consumers of ready-prepared
dishes, which is also a consequence
of households having fewer members.
Also, consumers have less
time for shopping and are choosing
convenience stores, avoiding the
traffic jams at the volume retailers.
Food retailing
Specialised studies estimated food
retailing turnover at GBP 90 billion
(thousand million), over 130 billion
euros, in 1998. The same source estimated
that it had risen to GBP 100
billion (147 billion Euros) in 2003.
On 10 March 2006 The Times newspaper
calculated GBP 95 billion. The
British multiples sell a wide range of
ethnic products and a large quantity
of dishes prepared with products imported
from different countries. They
have created a new positive image
by deciding to strengthen local products
and by the efforts they make to
ensure food safety.
According to data from AC NIELSEN,
28% of the products sold in the
United Kingdom in April 2005 were
retailer brands, which had grown by
1% year on year. They made up 24%
of sales by cooperatives, 73% at the
discounters and 40% in large multiples
such as Tesco or Sainsbury’s.
Retailers have developed various
levels of private label depending on
the quality. High quality private labels
(Tesco Finest, Sainsbury’s Taste
the Difference, with sales worth over
GBP 1 billion in April 2006) and those
in the lower range (Sainsbury’s Basics,
Asda Essentials...) each have
their own specifications and their
own packaging. At the same time,
the major multiples have expanded
their service to consumers: long
opening hours, goods returned if not
satisfied, disabled access, etc. Also,
to cut down the number of suppliers
and the associated costs, the British
supermarkets have opted to work
with external operators known as Category
Managers. Their work covers
choosing the suppliers and product
ranges and defining the marketing
strategies (promotion, positioning,
packaging).
Most of the sector is British-owned,
despite the prominence of a North
American group, Wal Mart, since its
takeover of Asda in 1999 and the entry
of German groups on the discounter
circuit. Internationally, only the Tesco
group has expanded abroad, but its
core business remains in the United
Kingdom.
Sector segmentation
Food retailing operators fall into the
following groups: Firstly the ‘Big 4’
(the 4 major supermarket groups that
aspire to the leadership): between
them, Tesco, Asda, Sainsbury’s and
Morrisons have 75% of the grocery
market as well as each having a market
share in excess of 10% and extensive
nation-wide coverage. Then
there are the groups that aim to
differentiate themselves, Waitrose
and Marks and Spencer, which have
around 7% of the grocery market.
They aim to capture a growing clientèle
that looks for quality products
or a large service component (e.g.
prepared salads) or differentiated
products (e.g. biscuits manufactured
at the point of sale). A further group
are the separate smaller multiple
brands, which account for 11% of the
ApRIl
MAY
2 0 0 7
grocery market: Somerfield (4.2 %),
the Co-ops (5 %) and Iceland (2%).
Among the chains of independents
and small franchises (4% of the
market) the leading groups are Spar
and Kwik Save; for discounters (3%
market share) the main names are
Lidl, Aldi and Netto. Lastly, it must
be remembered that the up-market
department stores have a line in
food, with excellent grocery sections.
Outlets such as Boots the Chemist,
newspaper shops and tobacconists
also offer all kinds of snacks, sandwiches
and refreshments.
Supermarkets
According to the market studies
company Verdict, between 1995 and
2005 superstores (over 25,000 sq
ft) increased their market share by
6.2% to 41.8%, with sales worth an
estimated 56.3 billion (thousand million).
Hypermarkets (over 40,000 sq
ft sales space) are scarcer in the United
Kingdom than on the Continent.
The main ones are Tesco and Asda.
75% of total food product sales in the
United Kingdom are made by the big
4: Tesco alone controlled 31.1% of the
market in the first half of 2006. Tesco
was the great winner in 2005 as well,
with over half of the market growth in
the past 5 years (the grocery market
has risen to GBP 125 billion). Since
2000, Tesco has gained 6 times
more market share than the next 4
combined (Sainsbury’s, Morrisons,
Asda and Somerfield). According to
Verdict, Tesco’s returns on its total
retail sales are GBP 1 for every GBP 8
of expenditure, in other words, twice
as much as any other retailer.
According to the British press, these
EUROFRESH
DISTRIBUTION
multiples will have 91% of the market
in 2010, thanks to their ability to keep
a step ahead of the changing lifestyle
of the British consumer.
Trends
As the sector is increasingly competitive
and subject to buy-outs and
mergers, the major groups are developing
their business into other
segments, both as regards products,
by giving priority to local supplies
(distinguished by the little red tractor
logo), and by diversifying into nonfood
products. These are considered
a great development opportunity, as
it is easier to obtain permission for
this type of shop and the products
increase customer loyalty. Non-food
product sales in supermarkets in
2005 reached GBP 6.8 billion (10
thousand million euros), up 13% on
2004.
Between 2006 and 2010, Keynote
calculates that online sales will grow
by 20% annually to GBP 3.1 billion
(4.5 hundred thousand euros) and
account for around 3.2% of the total
UK food retailing market. The convenience
store market in the United Kingdom
is estimated at GBP 25 billion
(a little over 36 hundred thousand
euros). This includes all the operators
in the sector and all categories
of products sold, both food and nonfood.
The expansion of the supermarket
chains is now taking place in
this area, owing to the difficulties in
obtaining permission to open large
out-of-town stores. The forecasts for
convenience food retailing are rosy:
sales will rise to GBP 30-40 billion
(44.1-58.8 thousand million euros)
by 2011.
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