The Future Of The Convenience Market

• September 2014

The Future Of The Convenience Channel

Amanda Jones, Conviviality Retail, Chief Operating Officer

June 2015

My journey to convenience retailing.....

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Conviviality...Our business

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The UK’s largest off-licence and convenience chain with over 600 stores

We have 400 Franchisees

Our stores are at the heart of communities serving mainly C2,D,E shoppers

We are a discounter........ we price over 12% lower than thebig 4 supermarkets

We are well placed to capture share from the growing Convenience market

Our aim is to be the best value off licence led convenience store in the eyes of our customers, employees and Franchisees

We specialise with our unique point of difference in the Convenience Market

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Destination value led off licence with tobacco, impulsecrisps snacks and confectionary

Destination off licence led Convenience store servinglocal community needs

Wine and Sprits Specialist providing excellent rangeand service for customers wanting range beyond the supermarket offering

Destination volume based mission,full range and choice. Pricing targeted towards better value case deals and offers

The UK Grocery Market is undergoing unprecedented change

As UK enters deflation,

Asda boss Andy Clarke

calls 2015 supermarkets‘

"most challenging year yet"

Grocery price falls hurting UK supermarkets

Lower prices have taken £532m

out of supermarket tills, Kantar Worldpanel

says

Aldi, Lidl and Waitrose are only food retailers

growing sales Latest industry sales figures

underline pressure on "big four" supermarkets

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Convenience, Online and Discount to grow fastest

Price is increasingly important in determining where to shop, but Location remains the primary reason for store choice.

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Customers are in fact slow to change their shopping habits, with better prices and moving home being the main drivers for change

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The changing face of convenience stores...

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FROM THIS… TO THIS…

FROM THIS… TO THIS…

Major Supermarkets have changed the Convenience channel for the better

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Consumers changing needs favour the convenience channel

10Source: Kantar Retail 2014, ONS 2014, Eurostat 2014

Retailers are developing new formats that cross traditional channel boundaries

• ‘blurring’ of channels is occurring as retailers think differently about convenience

• The newest development is a hybrid format that bridges the divide between discount & convenience

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Symbols account for 42% of the channel - and growing at +5%

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Note: YoY growth figures given as actual growth not % share

Source: IGD & WRBM 2014

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Symbols have grown consistently ahead of the channel for 10years

• Symbol groups represent the largest share – more than

double that of Convenience Multiples

• They are developing their offers to meet specific shopper

missions, particularly around fresh and quality

• Shopper satisfaction ratings have improved year after

year after year

• Retailers benefit from a branded shop fascia

• IT and logistics support

• Marketing and promotions

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• A Symbol retailer includes independents that are affiliated to a symbol, fascia or franchise

group and typically, purchase a proportion of the goods from their respective symbol group

Who is the Convenience shopper today?

14Source: ACS, HIM 2014

Local is increasingly important

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A demand for better pricing will continue

• Shoppers are less tolerant of premium pricing in convenience - up to 11% premium on

supermarket prices is acceptable

• Convenience stores need to show VFM - promotions are becoming an expectation

• Bargain Booze pricing is on average 12% cheaper than the multiples

16Source: HIM, IGD 2014

Fresh food and good store standards are an expectation

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Shoppers rate Symbol retailers higher than Independents or Multiples

18Source: ACS, HIM 2014

We are Learning from the Best in Class from Around the World

Best in class from around the world can be grouped into three distinct convenience models

Fresh & Meal Solutions:

• Pioneered in Western Europe

• Fresh is a hero category

• Offers inspiration and solutions

Food To Go:

• Driven by forecourt operators

• Targeted at food-for-now

• Limited focus on wider shopper needs

Impulse:

• Highly populated Asian markets

• About the here and now

• Offer changes by time of day

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Hong Kong, 7-eleven Hot Food To Go & Services

A hot food counter offers local

delicacies which are available as

part of meal solutions which

change throughout the day. Due

to the nature of the store, and the

focus on impulse purchases, a

strong food-to-go offer is essential

to compete with specialist

foodservice operators such as

Starbucks

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The store offers additional

services to shoppers which

includes; free wi-fi, transport card

top-up, mobile phone top-up, mobile

charging, pre-paid Alipay (third party

payment solution), ITunes cards and

bill payments. All these services

are immediate – offering

customers solutions to problems

in real time

The Convenience market is expected to reach £49bn by 2019

• Over the next 5 years, sales through Superstores and Hypermarkets will decline by £3bn

• …Convenience will take almost a quarter of the market by 2019 – worth £49bn (+30%) as shoppers

increasingly prefer to shop locally

• Symbol retailers are well positioned to deliver against the growing trends

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By 2019,

Convenience will

account for 24p in

every £1 spent on

food & grocery

CAGR

5.5%

Source: IGD & ACS 2014

37.4

49.0

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e 2019e

Sale

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bn

)

There are 5 key areas to compete in our market...

Great store standards

Range and services that customers want

Emphasis on community

Deliver consistently good value

Excellent Customer Service

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How will Convenience retailing develop?

Combining Functional & Emotional:

Use of Digital and Social Media

Click & Collect, Apps, Services

Discount ranges

Longer opening hours

Meet the Food Service missions

Become the community hub for goods and

services

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“Creativity is one of the last remaining

legal ways of gaining an unfair advantage

over the competition.”

Ed McCabe