OVERVIEW OF THE UNITED KINGDOM MARKET · In the United Kingdom, a large number of demographic clichés are true – II. The UK is rapidly developing into a post -industrial economy

OVERVIEW OF THEUNITED KINGDOM MARKET

November, 2000

CORIOLIS RESEARCH

The nature of British consumers is undergoing fundamental changes

– I. In the United Kingdom, a large number of demographic clichés are true

– II. The UK is rapidly developing into a post-industrial economy

– III. Meat and three vege are being replaced with Tandori chicken and mangoes

– IV. Food retailing, especially by supermarkets, is highly competitive forcing the various chains to differentiate themselves by targeting specific customers

I - 1

UK Market

Overview of the United Kingdom © Coriolis Research

There has been a fundamental shift in the characteristics of the UK consumer

FUNDAMENTAL CHANGES IN THE CONSUMER

1950s 2000

Nuclear family Singles, Smaller householdsYoung mothers Children later in lifeWomen at home keeping house Women in the work forceFood at home Restaurant/cafe culture

Meat and three vegetables VegetariansPie and a pint Healthy livingIndustrial nation London-based service economyRising middle class Rich getting richerMonoculture MulticulturalLocal Global

UK Market

I - 2Overview of the United Kingdom © Coriolis Research

I. In the United Kingdom, a large number of demographic clichés are true

– The United Kingdom is a highly urbanised country centered around multicultural London

– The United Kingdom has a low growth, rapidly aging population

– The structure of households is changing

UK Market


The United Kingdom is a highly urbanised country centered around multicultural London

– Almost 90% of the population live in urban areas

– Over 30% of the population lives in Greater London and the South East

– The cities are more multicultural than the rest of the country

UK Market


I - 5

UK Market


42.7 44.949.3 50.1 51.4 52.7

8.17.6

6.5 6.46.4

6.3

1950 1960 1970 1980 1990 2000

Almost 90% of the population live in urban areas

Source: FAO

URBANISATION (Population Millions; 1950-2000)

0.3%

PopulationCAGR(50-00)

Urban

Rural

50.8

59.157.856.555.8

52.5(0.5%)

0.4%

I - 6

UK Market


REGIONAL POPULATIONS(Millions, 1998)

Over 30% of the population lives in Greater London and the South East

London

Source: UN

6.9

5.2

3.0

5.3

3.5

2.3

10.37.6

5.0

2.7 5.3

Scotland

East

South EastSouth West

Wales

North WestYorkshire/Humber

East Midlands

West Midlands

NorthNorthern Ireland

1.7

I - 7

UK Market


The cities are more multicultural than the rest of the country

Source: UK Office of National Statistics (ONS)

UNITED KINGDOM INNER LONDON

White93.0%

Indian3.3%

Other2.1%Black

1.6%

White74.4%

Black13.5%

Indian7.0%

Other5.1%

ETHNIC GROUPS IN THE UK(1998)

The United Kingdom has a low growth, rapidly aging population

– The UK has had very low population growth in the last 40 years

– Young women have dramatically increased their participation in the labour force... leading to women having fewer children at an older age

– Declining birth rates have led to a rapidly aging population, 15.7% of the population is over 65 years

UK Market


I - 9

UK Market


The UK has had very low population growth in the last 40 years

Source: FAO

SELECTED COUNTRIES POPULATION GROWTH RATES (Annual growth rate; 1961-1999)

2.54%

2.15%

2.10%

1.21%

1.00%

0.76%

0.64%

0.39%

0.29%

Malaysia

Brazil

India

New Zealand

USA

Japan

France

Finland

UK

I - 10

UK Market


65.4%

51.3%

67.2%

66.8%

48.8%

27.2%

4.6%

70.5%

75.8%

77.1%

77.5%

53.3%

31.4%

3.6%

Women all

Women 25-34

Women 35-44

Women 45-54

Women 55-59

Women 60-64

Women 65 and over

Young women have dramatically increased their participation in the labour force...

WOMEN IN THE LABOUR FORCE(% of all women; 1976-2000)

Source: ONS

% change1976v00

24.5%

9.9%

10.7%

4.5%

4.2%

(1.0%)

5.1%

1999

1976

I - 11

UK Market


...leading to women having fewer children at an older age

LIVE BIRTHS BY AGE OF MOTHER(per 1000 women in age group; 1999)

Source: ONS

28

107

130

70

22

5

33

89

120

87

32

5

30

75

105

89

39

7

Under 20 20-24 25-29 30-34 35-39 40 +

1981

1991

1997

Total Births

362

366

345

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UK Market


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Under 16 16-24 25-34 35-44 45-54 55-64 65-74 75 and over

Declining birth rates have led to a rapidly aging population, 15.7% of the population is over 65 years

POPULATION BY AGE(Millions; 1961-1998)

Source: ONS

1961

199812.4 12.1

7.16.5 6.6

9.2

7.1

8.5

7.37.8

6.1 5.9

4.0

5.0

2.2

4.3

The structure of households is changing

– Nuclear families (couples with children) have fallen from 50% to less than 30%

– The size of the average household is falling

UK Market


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UK Market


51.5%44.0%

39.2%33.3% 29.7%

26.3%

27.0%25.5%

27.5%29.7%

16.2%22.0%

26.5% 29.4% 30.7%

6.1%

7.0%8.8%

9.8%9.9%

1961 1971 1981 1991 1999

Nuclear families (couples with children) have fallen from 50% to less than 30%

STRUCTURE OF UK HOUSEHOLDS(% of households)

Source: ONS

Single Household/Flatmates

Couple no Children

Lone Parent

Couple with Children

Absolute Changeof Households

61v99

14.5%

3.4%

3.8%

(21.8)%

16.3 Million 18.6 Million 20.2 Million 22.4 Million 24.0 Million 7.7 M

I - 15

UK Market


3.43.2

3.02.8

2.5 2.4

1951 1961 1971 1981 1991 1996

14.4916.19

18.32 19.4922.4 23.49

48.9351.38

54.39 54.81 56.21 57.14

1951 1961 1971 1981 1991 1996

The size of the average household is falling

POPULATION AND HOUSEHOLDS(Millions)

Source: ONS

CAGR1951-96

(0.7%)

Population

Households

CAGR1951-96

0.3%

1.1%

PEOPLE PER HOUSEHOLD

POPULATION CHARACTERISTICS OVER TIME(1951-1996)

II. The UK is rapidly developing into a post-industrial economy

– The economy is now based on services instead of manufacturing

– The UK has a healthy middle class

– However the class struggle remains

UK Market


The economy is now based on services instead of manufacturing

– The UK has seen a decline in manufacturing employment and an increase in services

– Services now account for more than two thirds of GDP - manufacturing and agriculture is less than 20%

– Just under half of the population is employed or looking for work

UK Market


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UK Market


5.0

4.4

2.5

6.8

1.5

1.4

0.9

0.4

0.7

5.9

5.5

4.5

4.0

1.5

1.2

1.2

0.3

0.2

Public Administration

Distribution, Hospitality

Finance

Manufacturing

Transport, Communication

Construction

Other Services

Agriculture

Energy

The UK has seen a decline in manufacturing employment and an increase in services

EMPLOYMENT BY INDUSTRY(Millions; 1978 vs. 2000)

Source: ONS

1978

2000

I - 19

UK Market


Services68.9%

Government11.3%

Manufacturing & Construction

18.7%

Agriculture1.1%

Services now account for more than two thirds of GDP - manufacturing and agriculture is less than 20%

GDP BY SECTOR(1997)

Source: CIA World Fact Book

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UK Market


Employed46.7%

Unemployed3.0%

Under 1621.3%

Over 6515.7%

Economically Inactive13.2%

Just under half of the population is employed or looking for work

EMPLOYMENT STATUS(Percent; 1998)

Source: ONS

TOTAL POPULATION = 59.1 Million

The UK has a healthy middle class

– Over 50% of households are defined as middle class

– Real incomes are rising

– Almost three quarters of households own their home

UK Market


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UK Market


A7.1%

B25.8%

C26.9%

D6.7%

E110.0%

E212.1%

Pensioners11.4%

Over 50% of households are defined as middle class

HOUSEHOLDS BY SOCIAL CLASS1

(Households by income-defined social class; 1998)

1. Gross weekly income by head of household, one or more earners A= £640+, B= £640-£330, C= £330-£160, D= under £160; Households without an earner E1= £160+, E2= Under £160; Pensioners Source: MAFF, National Food Survey

52.7%

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UK Market


£233£252 £258

£300£280 £288

£298

£325£343

£371

£307

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Real incomes are rising

REAL AVERAGE HOUSEHOLD DISPOSABLE INCOME(Pounds per week; 1988-1998)

Source: Family Expenditure Survey

CAGR88-98

4.8%

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UK Market


Own Outright28.3%

Own with Mortgage43.2%

Rented8.5%

Council20.0%

Almost three quarters of households own their home

OWNERSHIP OF DWELLING(Percent of households; 1998)

Source: ONS

TOTAL HOUSEHOLDS = 24 Million

71.5%

However the class struggle remains

– The rich are getting richer must faster than the poor are getting richer

– Regional differences remain; wealth and income is still concentrated around London and the south

UK Market


I - 26

UK Market


0

100

200

300

400

500

600

19711973

19751977

19791981

19831985

19871989

19911993

19951997

The rich are getting richer must faster than the poor are getting richer

DISTRIBUTION OF REAL HOUSEHOLD DISPOSABLE INCOME(Pounds per week per capita; 1971-1997)

90th Percentile

Source: Institute for Fiscal Studies, 1999

IncomeCAGR71-97

1.6%

1.3%

1.3%

2.0%

2.2%

75th Percentile

Median

25th Percentile

10th Percentile

I - 27

UK Market


London

East

South EastSouth West

Wales

North WestYorkshire/Humber

East MidlandsWest Midlands

North

Scotland

Regional differences remain; wealth and income is still concentrated around London and the south

UK INCOME DISTRIBUTION BY REGION(Household gross income; Pounds per week per capita; 1998)

Source: ONS, Coriolis Analysis

£350- 400

£401- 450

£451- 500

£501- 550

Northern Ireland

III. Meat and three vege are being replaced with Tandori chicken and mangoes

– The United Kingdom is seeing a significant change towards more healthy eating habits

– Consumer spending on food, while influenced by demographic factors, is flat

UK Market


The United Kingdom is seeing a significant change towards more healthy eating habits

– Unlike in most other countries, daily caloric intake is declining

– Consumers are trading away from high fat foods

• Total dairy consumption is down, while low fat milk is increasing at the expense of wholemilk

• Total spread consumption is decreasing, while low fat spreads are increasing at the expense of butter and margarine

• Total meat consumption is down, while poultry is increasing at the expense of red meat

– Consumers are embracing healthier foods and lifestyles

• Changes in eating habits reflect a healthier diet

• People are spending more on fruits, vegetables and cereals

• Ethnic food, produce and carbohydrates have grown at the expense of more traditional English fares

• Vegetarianism is on the rise, especially among women, 6.7% of whom are vegetarians

UK Market


Unlike in most other countries, daily caloric intake is declining

FOOD NUTRITION

Country 1970 1997 %∆∆ 1970 1997 %∆∆ 1970 1997 %∆∆

United States 2,965 3,699 25% 116 143 23% 95 112 18%

NZ 2,941 3,395 15% 117 137 17% 96 108 12%

UK 3,282 3,276 -0.2% 83.4 83 -0.5% 93 95 2%

Japan 2,704 2,932 8% 55 83 52% 81 96 18%

China 2,018 2,897 44% 23 71 214% 48 78 62%

Calories Fat Protein(Daily grams per capita) (Daily grams per capita) (Daily grams per capita)

Source: UN Human Development Indicators; Coriolis Analysis

UK Market


I - 31

UK Market


2662

2333

1844

1207

634

240

460

937

1373

204

104113

111

110

107

1975 1980 1985 1990 1999

Total dairy consumption is down, while low fat milk is increasing at the expense of wholemilk

PERSONAL WEEKLY CONSUMPTION OF DAIRY PRODUCTS(At Home; Milliliters/Grams; 1975-1999)

Source: MAFF, National Food Survey

CAGR Volume

75-99

(5.8%)

(0.1%)

(1.4%)

8.3%

CheeseLow Fat Milk/Cream

2973

2683

2415

2257 2111

Wholemilk

I - 32

UK Market


61 57 50 46 44 41 40 39 36 39 38 39

3329

2523 17 16 15 15 13

113108

9891

8979

70

4341 36

26 26

3138

46

4547

5152

7472 79

77 69

11 9 8

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Total spread consumption is decreasing, while low fat spreads are increasing at the expense of butter and margarine

PERSONAL WEEKLY CONSUMPTION OF SELECTED SPREADS(At Home; Grams; 1987-1998)

Low and Reduce Fat Spreads

Butter

Margarine

Lard

Source: ONS

CAGRgrams

1987-1998

7.5%

(12.5%)

(21.0%)

(4.0%)

238 232

219

205197

187177

171162 165

150142

(12.1%)

I - 33

UK Market


192 180 171149 152 141 133 131 121

101 110 109

7578 85

83 8671

66 54 5466 56 59

231229 220

226 216231 238

229 237 256 254 251

4445

4644 43

36 3537 37

42 36 36

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Total meat consumption is down, while poultry is increasing at the expense of red meat

PERSONAL WEEKLY CONSUMPTION OF SELECTED MEATS AT HOME1

(Grams; 1987-1998)

Fish

Beef and Veal

Mutton and Lamb

Poultry

1. Does not include pork and other meatsSource: ONS

CAGRgrams

1987-1998

0.8%

(2.2%)

(1.8%)

(8.2%)

(5.0%)

542 532 522502 497

479 472451 449

465 456 455

I - 34

UK Market


8%

7%

4%

3%

2%

1%

1%

5%

10%

9%

4%

6%

3%

1%

1%

7%

Eats less fatty/fried food

Eats more fruit and vegetables

Eats more pasta, rice, bread

Eats fewer sweets/cakes

Eats more fatty foods, fast foods

Stopped eating meat

Cut down on alcohol

Other changes

Changes in eating habits reflect a healthier diet

CHANGES IN DIET TO LAST YEAR(% of those surveyed; 1996v1997)

Source: ONS, Health Education Monitoring Survey

1996

1997

I - 35

UK Market


33.5%

21.1%

16.7%

14.0%

14.6%

31.4%

24.3%

18.1%

12.6%

13.6%

Meat and fish

Fruits and vegetables

Cereals

Dairy products

Other

People are spending more on fruits, vegetables and cereals

EXPENDITURE ON FOOD AT HOME BY MAIN FOOD GROUPS (Percent; Pounds; Share of stomach; 1988-1998)


Change1988-1998

(1.1%)

3.2%

(2.1%)

1.4%

(1.4%)

1988

1998

I - 36

UK Market


10.0%

7.8%

6.7%

4.3%

0.6%

0.2%

-5.2%

-5.4%

4.9%

Ethnic food, produce and carbohydrates have grown at the expense of more traditional English fares

GROWTH RATES OF SELECTED FOODS EATEN OUT(Grams per capita per week; CAGR; 1994-1998)


Ethnic Foods

Fish

Meat Products

Rice, Pasta, Noodles

Vegetables

Fruit

Icecream, deserts, cakes

Beverages

Alcoholic Drinks

Grams per personper week

1998

22

27

41

197

25

392 ml

110

435 ml

51

I - 37

UK Market


1.6%

2.0% 2.1%1.8%

2.9%3.2% 3.2%

4.1%

3.2%

2.6%

3.2%3.4%

4.1%

4.5%

5.4%

5.8%

6.5%6.7%

1984 1985 1986 1988 1990 1993 1995 1997 1999

Vegetarianism is on the rise, especially among women, 6.7% of whom are vegetarians

MALE AND FEMALE VEGETARIANS(Percent of population; 1984-1999)

Source: Vegetarian Society Website

Males

Females

CAGR1984-99

12.6%

9.1%

Consumer spending on food, while influenced by demographic factors, is flat

– Actual consumer spending on food is not showing significant growth

• Food as a percent of total household spending is decreasing

• The average person spends £23.67 per week on food

• Food away from home is growing faster than food at home

– Demographic factors impact on food expenditure

• Middle aged consumers spend the most on food, however younger consumers spend more on eating out

• The higher the income the more spent on food

• The richest 7% of UK households account for 25% of food spending

• People in the South of England spend the most on food

UK Market


I - 39

UK Market


Total Food15.7%

Other84.3%

Total Food19.6%

Other80.4%

Food as a percent of total household spending is decreasing

1: Constant prices; includes Food at Home and Food Away from HomeSource: ONS

1988 1998

FOOD AS A PERCENT OF TOTAL HOUSEHOLD EXPENDITURE1

(Percent; 1988-1998)

The average person spends £23.67 per week on food

AVERAGE PERSONAL WEEKLY UK FOOD EXPENDITURE(Pounds; 1998)

£23.67100%

Food Away From Home

Food at Home1

£6.7328%

£16.9472%

Total Spending on Food

1: Includes alcohol, does not include non-foods, HBC, pet food, petrol etcSource: ONS; MAFF, National Food Survey; FAS; Other; Coriolis Analysis

£14.79 “Food”

£1.33 Alcoholic drinks

£0.52 Softdrinks

£0.30 Confectionery

£5.21 “Food” £1.52 Alcoholic drinks

UK Market


I - 41

UK Market


£14.83 £15.63 £16.46 £16.71 £16.94

£5.74£5.83

£6.53 £6.61 £6.73

1994 1995 1996 1997 1998

Food away from home is growing faster than food at home

EXPENDITURE ON FOOD BY LOCATION1

(Pounds per week per person; 1994-1998)

1. Not adjusted for inflation (2.7% in 1998) Source: MAFF, National Food Survey

£20.57

£23.67 £23.32 £22.99

£21.46

Food Away from Home

Food at Home

ExpenditureCAGR1994-98

3.4%

4.1%

3.6%

71%

28%

I - 42

UK Market


£3.09 £3.58 £4.10£5.60 £5.82 £5.95 £5.10

£2.23£2.71

£3.22

£4.06£4.61 £4.55

£3.70£2.23

£2.48£2.56

£2.96£2.92 £2.92

£2.58£1.61£1.71

£1.99£2.25 £2.27

£2.15

£1.50

£1.55

£2.27

£2.70 £2.91

£2.53

£3.88

£8.71 £6.76

£6.69£5.08 £3.71

£1.48

£1.34

£1.37

Under 25 25-34 35-44 45-54 55-64 65-74 75+

Middle aged consumers spend the most on food, however younger consumers spend more on eating out

PERSONAL EXPENDITURE ON FOOD BY AGE BY MAIN FOOD GROUPS1

(Pounds; Share of stomach; 1998)

1: Food only, excludes alcoholSource: MAFF, National Food Survey

Other Food at Home

Dairy

Cereals

Fruits & Vegetables

Meat & Fish

£14.14

£20.59 £19.90

£23.57 £23.38 £22.31

£17.54

Food Away from Home

Average £20.82

I - 43

UK Market


17.75

9.788.50

6.67

4.12

5.90

2.812.01

28.55

21.09

17.39

15.44

12.73

22.43

13.40

16.69

A1 A2 B C D E1 E2 Pensioner

The higher the income the more spent on food

WEEKLY EXPENDITURE ON FOOD AND DRINK BY INCOME1,2

(Pounds per capita; 1998 )

Food at Home

Food Away from Home

1: Including Alcohol; 2. Gross weekly income by head of household, one or more earners A1= £910+, A2= £910-£640+, B= £640-£330, C= £330-£160, D= under £160; Households without an earner E1= £160+, E2= Under £160; PensionerSource: MAFF, National Food Survey

Households withouta wage earner

Households with oneor more wage earners

I - 44

UK Market


11.4% 9.4%

22.1%19.0%

6.7%

4.2%

26.9%

20.4%

25.8%

22.1%

7.1%

24.9%

Households Food Spending

The richest 7% of UK households account for 25% of food spending

INCOME GROUP:HOUSEHOLDS V. FOOD SPENDING1,2

(Percent; 1998 )

A

1: Including Alcohol; 2. Gross weekly income by head of household, one or more earners A= £640+, B= £640-£330, C= £330-£160, D= under £160, E= Households without an earner, OAP= PensionerSource: MAFF, National Food Survey

B

C

D

E

OAP

I - 45

UK Market


£4.34 £3.97 £3.98 £3.72 £3.20 £3.41 £3.13 £3.10 £3.23

£4.98£4.84 £4.51 £4.87

£4.76 £4.41 £4.36 £4.49 £4.07

£2.71£2.79 £2.90 £2.54

£2.93£2.55 £2.62 £2.44

£2.41

£1.83£1.99 £2.09

£1.81 £1.72£1.84 £1.72 £1.82 £1.89

£1.98 £2.21 £2.18£1.90 £1.92

£2.03£1.86 £1.78 £1.85

London South East South West East North East WestMidlands

Yorkshire &Humber

North West EastMidlands

People in the South of England spend the most on food

WEEKLY FOOD AT HOME EXPENDITURE BY MAIN FOOD GROUPS AND REGION1

(Pounds per capita; 1998)

Other

Dairy Products

Cereals

Meat & Fish

Fruits & Vegetables

£15.84 £15.80 £15.66

£14.84 £14.54 £14.24

£13.69 £13.62 £13.44

1: Excluding AlcoholSource: MAFF, National Food Survey

Average £14.79

IV. Food retailing, especially by supermarkets, is highly competitive forcing the various chains to differentiate themselves by targeting specific customers

– Food is a £77 Billion industry in the United Kingdom

• Restaurants and Cafes dominate the food away from home market

• Over a quarter of a million foodservice outlets exist in the UK with no truly dominant players

– Supermarkets dominate the £55 Billion retail food sector1

• Food at home sales are highly concentrated; five Major Multiples account for 49.9% of turnover

• The competitive UK supermarkets has produced a number of well respected chains

• Supermarket chains target different shoppers in different income groups and this positioning is reflected in their customer mix

• The AB chains have most of their stores in London and the wealthier South

UK Market

1: See Appendix A for Supermarket profilesI - 46Overview of the United Kingdom © Coriolis Research

Food is a £77 Billion industry in the United Kingdom

UK FOOD AND ALCOHOL EXPENDITURE BY CHANNEL1

(Pounds Billion; 1999E)

£77 Billion100%

Food Away From Home2

Food at Home

Major Multiples(5 Chains)

Other

£22 Billion28%

£55 Billion72%

£35 Billion45%

£20 Billion27%

Total Spending

1: Does not include non-foods, HBC, pet food, petrol etc 2: Includes non-personal food spending such as business meals, hotel dining, tourists, institutions (prisons, hospitals) and otherSource: ONS, MAFF, National Food Survey, IGD, Various Annual Reports, Coriolis Analysis

UK Market


I - 48

UK Market


Pubs21%

£4.6

Hotels24%

£5.3

Restaurants/Cafes28%

£6.2

Other5%

£1.1

Staff Catering

2%£0.4Travel/Leisure

11%

£2.4

Fastfood9%£2.0

1: Includes alcohol (£5 Billion or 22.6% of Food Away from Home expenditure) 2: Includes Health Care, Education, Services and WelfareSource: IGD

Restaurants and Cafes dominate the food away from home market

UK FOOD AND ALCOHOL AWAY FROM HOME MARKET SHARE1

(total retail sales; percent; Billions; 1999E)

TOTAL = £22.0 Billion

2

Over a quarter of a million foodservice outlets exist in the UK with no truly dominant players

UK FOOD AND ALCOHOL AWAY FROM HOME

Restaurant/Cafes £6.2 28% 45,787 Pizza Express, Cafe Rouge, Conran,

Fastfood £2.0 9% 2,067 Tricon, McDonalds, Burger King, Wimpy

Hotels £5.3 24% 60,991 Granada, Whitbread, Jarvis, Hilton, Stakis

Pubs £4.6 21% 55,945 Allied Domecq, Whitbread, Bass, S&N, Normra

Travel/Leisure £2.4 11% 49,655 P&O, Compass, First Leisure, Bass Leisure

Staff Catering £0.4 2% 21,041 Compass, Granada Food Service, Gardner

Other £1.1 5% 62,386 NHS, Compass, Granada Food Service, Gardner

Total £22.0 100% 297,872

Market No. ofSales Share Outlets

Segment (£B99) (% Sales) (1999) Main Players

Source: IGD

UK Market


I - 50

UK Market

Overview of the United Kingdom © Coriolis Research1: Total UK supermarket sales: Food (£55 Billion) and non-food (£42 Billion); 2. Includes Aldi, Lidl, and NettoSource: Various Annual Reports; Hoovers; Company websites; FAS; Coriolis Analysis

Food at home sales are highly concentrated; five Major Multiples account for 49.9% of turnover

UK FOOD AT HOME MARKET SHARE1

(Total Retail Sales; Food and non-food; 1999)

15.6%

11.8%

8.9%

7.4%

6.2%

14.0%Other

Minor Multiples12.1%

Major Multiples49.9%

TOTAL = £96.6 Billion

Convenience18.0%

Co-operatives6.0%

Morrisons 3.0%Marks and Spencer 2.9%Waitrose 1.9%Iceland 1.9%Discounters2 2.4%

The competitive UK supermarket sector has produced a number of well respected chains

UK SUPERMARKETS1

Tesco £16,958 £993 10% 15.6% 659 £495,000

Sainsbury £12,097 £714 5% 11.8% 405 £575,000

Asda £8,198 £413 8% 8.9% 240 £657,000

Safeway £8,100 £357 7% 7.4% 470 £331,000

Somerfield2 £5,898 £159 18% 6.2% 1400 £81,000

M&S3 £2,900 N/A 3% 2.9% 289 £193,000

Iceland £1,900 £78 9% 1.9% 763 £48,000

Waitrose £1,853 £64 8% 1.9% 122 £292,000

Morrisons £1,779 £114 9% 3.0% 110 £311,000

Co-op/CWS £1,750 £130 1% 3.0% 1100 £31,000

UK Operating Sales 1999 Market Number AverageSales Profit CAGR Share of Sales/Store

Group (£MM99) (£MM99) (95-99) (% Sales) Stores per Week

1. United Kingdom data only, does not include international operations; 2. Includes Kwik Save; 3. Food sales onlySource: Various Annual Reports; Hoovers; Company websites; FAS; Coriolis Analysis

UK Market


Supermarket chains target different shoppers in different income groups…

STORE POSITIONING BY SOCIAL CLASS

A

INDEPENDENTS

B

C

D

E

UK Market


I - 53

UK Market


11% 14% 10% 11% 11%16%

11%17% 16%

24% 26%9%

11%12% 11% 14%

17%17%

14% 15%

19%21%

15%15% 20% 22%

24%

24%29%

28% 29%

24%

27%

28%

31%31% 30%

29%

25% 27% 24%27%

22%18%37%

29% 27% 26% 22% 18% 16% 17%13% 11% 8%

Waitrose M&S Sainsbury Safeway Tesco Co-op Asda Somerfield Morrisons Iceland Kwik Save

…and this positioning is reflected in their customer mix

TOTAL SUPERMARKET TURNOVER BY SOCIAL CLASS(% of sales; by supermarket group; March 1998)

Source: Taylor Nelson AGB plc.

AB

C1

C2

D

E

I - 54

UK Market


74.8%

52.6%

40.6%

38.4%

34.3%

30.9%

24.5%

19.9%

18.9%

10.4%

12.5%

12.7%

16.5%

12.9%

26.0%

11.3%

13.4%

11.2%

14.8%

18.5%

15.6%

16.5%

18.0%

21.3%

14.2%

25.4%

17.0%

20.5%

16.4%

31.2%

28.5%

34.8%

21.8%

50.0%

41.3%

52.9%

79.5%

Waitrose

Sainsbury

Marks & Spencer

Tesco

Iceland

Somerfield

Safeway

Co-op

Asda

Wm Morrison

The AB chains have most of their stores in London and the wealthier South

RETAIL STORES BY CHAIN BY REGION(% of chains own outlets; 1997)

Source: Williams de Broe

115

Numberof Stores

1997

384

276

550

738

601

478

2300

206

78

London/South East MidlandsSouthwest/Wales

North/Scotland

I - 55

UK Market


SUPERMARKET CHAIN OUTLETS BY REGION (Number of chain supermarkets; 1997)

The location of supermarkets is directly related to population density

London& South East

Birmingham

Leeds

Sheffield

ManchesterLiverpool

Cardiff

Glasgow

435

Source: Williams de Broe

Newcastle

780

693

554

330

6691912

354

637

882

Appendix A: Supermarket Profiles

– Tesco

– Sainsbury

– Asda

– Safeway

– Somerfield

– Marks and Spencer

– Iceland

– Waitrose

– Morrisons

– Co-op

Appendix A

Overview of the United Kingdom © Coriolis Research - 1

Appendix A


TESCO PLC PROFILE1

Group Sales (£B): £20.4

UK Sales (£B): £18.3

UK Sales CAGR (96-00): 10.0%

Group Operating Profit (£B): £1.0

OP % of Sales 5.1%

UK Operating Profit (£B): £1.0

Tesco HouseDelamare RoadChestnutHerts EN8 9SLUK

Market Share: 15.6%

Location: Nationwide

Number of Stores: 659

Store Type: Superstore, Metro,

Express, Compact

Number employees: 131,031

Ownership: Publicly listed, UK

1. 2000 financial figures

Appendix A


SAINSBURY PLC PROFILE1



UK Sales CAGR (95-00): 5.2%


OP % of Sales 5.3%


Stamford HouseStamford StreetLondon SE1 9LLUK

Market Share: 11.8%



Store Type: Sainsbury, Savacentre

Sainsbury Local,




Parent Company: J Sainsbury plc

Appendix A


ASDA PROFILE1

Group Sales (£B): N/A


UK Sales CAGR (95-00): N/A

Group Operating Profit (£B): N/A

OP % of UK Sales 5.4%


ASDA House, Southbank, Great Wilson St.Leeds LS11 5AD, UK

Market Share: 8.9%



Store Type: Asda, Dales


Ownership: Publicly listed, USA


Parent Company: Wal-Mart

Appendix A






OP % of Sales 5.2%


6 Millington RoadHayes, Middlesex UB 3 4AYUK

Market Share: 7.4%



Store Type: Safeway




SAFEWAY PLC (UK) PROFILE1

Appendix A




UK Sales CAGR (95-00): 24.0%


OP % of Sales: 1.7%


Somerfield HouseWhitchurch LaneWhitchurchBristol BS 14 0TJUK

Market Share: 6.2%



Store Type: Somerfield, Gateway, KwikSave, Food Giant




SOMERFIELD PLC PROFILE1

Appendix A



UK Food Sales (£B): £2.8



OP % of Sales: 7.7%

UK Operating Profit (£B): N/A

Michael House

37-67 Baker Street

London W1A 1DN

UK

Market Share: 2.9%



Store Type: M&SNumber employees: 3720



MARKS AND SPENCERS PLC PROFILE1

Appendix A






OP % of Sales: 4.1%


Second Ave. Deeside Industrial Park Deeside,

Flintshire CH5 2NW,

UK

Market Share: 1.9%



Store Type: Iceland, Bhs

Store Iceland Extra




ICELAND GROUP PLC PROFILE1

Appendix A






OP % of Sales: 5.7%

UK Food Operating Profit (£B): £0.64

171 Victoria St

London SE 1E 5NN

UK

Market Share: 1.9%

Location: England


Store Type: Waitrose


Ownership: Employee owned


WAITROSE PROFILE1

Parent: John Lewis Partnership

Appendix A



UK Retail Sales (£B): £1.8



OP % of Sales: 4.0%

UK Retail Operating Profit (£B): £0.11

Hilmore House Thornton Rd.Bradford, West West Yorks BD8 9AXUK

Market Share: 3.0%

Location: England


Store Type: Morrisons




MORRISON SUPERMARKET PLC PROFILE1

Appendix A






OP % of Sales: 3.0%

UK Food Operating Profit (£B): £0.43

Freepost MR9473

Manchester

M4 8BA

UK

Market Share: 3.6%



Store Type: Welcome

Number employees: N/A

Ownership: Co-operative


CO-OPS PROFILE1

Co-operative Wholesale Society

Documents

OVERVIEW OF THE UNITED KINGDOM MARKET · In the United Kingdom, a large number of demographic clichés are true – II. The UK is rapidly developing into a post -industrial economy