IRI's Weekly FMCG News Update - w/c 13th June 2016

Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 17th June

Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2

• Queen’s birthday and Euros boost sales at Waitrose• Iceland beats off competition from Aldi at ‘Frozen Food Industry Oscars’• Poundland FY 2015/16: challenging year as discounter prepares for growth • Waitrose opens new Truro branch alongside Great Cornish Food Store• Tesco sells Dobbie Garden Centres for £217m• Convenience store numbers reach 'saturation' after surging 21% in five years• Warmer weather boosts retail expenditure in May • Holland & Barrett enjoys strong growth both home and abroad• Revlon to acquire Elizabeth Arden• Brexit threat has already hit UK ad spend, says IPG Magna forecast

Weekly News Summary –6th June 2016


Queen’s Birthday And Euros Boost Sales At WaitroseSales at Waitrose rose 5.1% to £132.39m in the week to 11 June, boosted by build up to the start of the Euro Football Championships and celebrations for the Queen’s 90th Birthday.

The chain said it saw a 10.8 % uplift in Fresh Produce and growth of 20% in beers and ciders. Warmer weather also drove ice cream sales up 10.5%, whilst football fans stocked up on easy dinner choices with Pizza sales increasing 10%.The group added that its recently launched premium range, Waitrose 1, continued to perform well.

Meanwhile, at sister chain John Lewis, sales were up only 1.5% following a stronger increase in the previous week due to the fall of half term. Electricals and home technology had strong week with sales up 11.4% on last year. Home sales were steady, up 1.1%, whilst fashion sales slid 5.4%.

Source: NamNews 15th June 2016


Iceland Beats Off Competition From Aldi At ‘Frozen Food Industry Oscars’Iceland Foods has hailed its success at last week’s British Frozen Food Federation (BFFF) Annual Awards – viewed as the frozen food industry’s top accolade.

The retailer took home 13 of the 18 awards handed out, including the star prize of Retail Product of the Year for its Slimming World Chicken Tikka Masala. The judging panel cited Iceland’s “drive for innovation and authenticity.”

Iceland beat off competition from rival Aldi to take home awards in all categories, including Gold Awards in the Best New Poultry, Best Meat and Best Pizza, Savouries & Savoury Bread categories.

Nigel Broadhurst, joint managing director of Iceland said: “We’re all absolutely delighted, but the most important thing is that these accolades reflect the energy and efforts we’ve put in to creating real reasons for consumers to try frozen foods and visit Iceland.

“We’ve long advocated the benefits of frozen food – both in terms of nutrition and cost – and with our most recent Power of Frozen campaign it feels like shoppers are finally beginning to sit up and take notice. We’ve also recruited a new head of Product Development, Neil Nugent, to ensure our shoppers have a greater choice of frozen products than ever before.”Commenting on the awards, Brian Young, BFFF chief executive said: “This year’s awards are a real triumph for Iceland and its collaboration with Slimming World. The quality of products submitted for judging has been outstanding and once again, demonstrates the on-going innovation and creativity of frozen food producers. Consumers continue to recognise that frozen food is nutritious and tasty as well as providing value for money, minimal waste and convenience.”

Source: NamNews 15th June 2016


Poundland FY 2015/16: challenging year as discounter prepares for growth Poundland's results for the year ending 27 March 2016 reflect both a challenging market and disruptive trading from its recent 99p Stores acquisition, however the discounter is confident that this has prepared the ground for future growth.

FY 2015/16 in numbersTotal sales for the year came in positive at £1,326m, up 18.7% on the year before, due to the 53% increase in stores across the estate. Like-for-like sales however show signs of a difficult trading period at -3.9% as the discounter carried out its conversion programme and the market remained challenging. Comparable profit to the previous year excluding 99p Stores came in at -9.4% to £53.8m, however Poundland remains confident that this will be offset in the long-term with incremental EBITDA of £25m from the acquisition.

Update on stores and trialsIn the last year, Poundland has increased its estate significantly, ending the year with 906 stores and consequently a much stronger presence in London and the South of England. The focus of organic growth has been on retail park locations where the discounter achieves a higher average transaction value, which currently stands at £4.76 for the business, marginally above the year before. Six multi-price stores under the 'Poundland & more' banner have been opened, while online continues to trade well, making a small yet profitable contribution to the business.

Outlook for 2017In 2017, Poundland will slow down its rate of organic store openings, focusing instead on improving the existing estate store conditions and its Spain trail, investing £25m in total over the year. This year will also see Poundland open its latest regional distribution centre in Wigan; a key investment that will unlock efficencies with a new warehouse management system. With regards to performance, it will take Poundland some time to reap the benefits of its investments, therefore trading conditions are not likely to improve until H2 when performance is expected to pick up.

Kevin O'Byrne: new CEO's three prioritiesFollowing a farewell from the current chief executive Jim McCarthy as he embarks on his retirement, Poundland's new CEO Kevin O'Byrne talked about his three key priorities: offer, efficencies and returns. O'Byrne sees these as areas where there are obvious opportunities and it is important for suppliers to understand the implications of these, particularly when it comes to O'Byrne's vision for the offer. This includes a reduction in SKUs, more general merchandise to create increasing points of difference and private label FMCG ranges. O'Byrne will officially take over the reigns on 1st July and here is what he has said about his upcoming role:“It is very clear to me that Poundland’s brand, position and focused model are real strengths and resonate strongly with our millions of customers. I’m looking forward to taking up the CEO role in two weeks’ time and the committed, talented and passionate people I’ve encountered throughout the business give me further confidence that Poundland has a bright future at the heart of the discount sector.”

Source: IGD 16th June 2016


Waitrose opens new Truro branch alongside Great Cornish Food Store

Waitrose has opened it most southerly store in the UK at Truro in Cornwall. The store was officially opened yesterday together with the neighbouring Great Cornish Food Store by Sarah Newton MP and the Mayor of Truro, Cllr Rob Nolan.

They were joined by Mayoress, Cllr Moyra Nolan, Waitrose branch manager, Chris Reynard, and Great Cornish Food Store manager, Angie Coombs.

MP for Truro and Falmouth, Sarah Newton, said: "I am delighted to be opening the most southerly Waitrose in the UK. I very much support the values of Waitrose and the John Lewis Partnership. I am delighted that they are working closely with the Great Cornish Food Store that provides a great opportunity for us to buy locally grown, harvested and produced food and drink.“

The new 21,000 square foot Waitrose is the supermarket’s second store in Cornwall since it opened a shop in Saltash 16 years ago. More than 1,400 people applied for the 114 Waitrose jobs which have been created as a result of the new store.

The branch will offer meat, fish and deli counters, a bakery, an extensive wine department and the John Lewis ‘click and collect’ service.

Chris Reynard, branch manager for the Waitrose store, said: “We are proud to be opening in Truro alongside the Great Cornish Food Store and to be creating a fantastic destination for people who love good food. This is the realisation of a long standing ambition and to see how it’s all come together is extremely exciting.”The 5,000 square foot Great Cornish Food Store, which shares an entrance with Waitrose, will open for up to 12 hours a day and will focus on local food and drink.

Angie Coombs, manager of the Great Cornish Food Store, said: "As a team we are incredibly excited and immensely proud of the Great Cornish Food Store. We have been overwhelmed by the support of the local food and drink industry and we hope our customers will be surprised and delighted by what we have on offer."

Source: Retail Bulletin 17th June 2016


Tesco sells Dobbie Garden Centres for £217m

Tesco has sold its Dobbies Garden Centres business to an investor group led by Midlothian Capital Partners and Hattington Capital.

The supermarket will receive £217 million for the company.

Dave Lewis, Tesco chief executive, said: "It was a difficult decision to sell the business, but we believe this agreement will give Dobbies a bright future, while allowing our UK retail business to focus on its core strengths."

Tesco bought Dobbies Garden Centres in 2007 for £150 million and since then it has grown to become the UK's second largest specialist garden centre retailer, operating 35 garden centres across Scotland, England and Northern Ireland.

The supermarket said it will continue to offer customers a selection of home and garden products through its own stores and online.Source: Retail Bulletin 17th June 2016


Convenience store numbers reach 'saturation' after surging 21% in five yearsThe growth of convenience stores may have reached “saturation” point in the UK after the number of smaller shops surged 21% in just five years.

There were 16,426 c-stores operating across Britain at the end of 2015, up from 13,617 shops at the end of 2010.The fastest growth in the sector came from the “big four” supermarkets, as Sainsbury’s and Tesco aggressively rolled out their smaller formats, putting symbol groups including Spar, Mace, Londis and Budgens under increasing pressure.

But according to analysis from Local Data Company (LDC), the boom in the fast-growing convenience market may have peaked after 228 towns and cities across the UK reported a fall in the number of c-stores last year, with a total of 300 stores closing.LDC said that convenience stores were actually the slowest growing division of the grocery market over the past five years, when considering their compound annual growth rate.

The number of convenience stores increased 3.2% across the last five years, less than half of the growth rate of discount stores, which stood at 7.2%.

The number of supermarkets grew at 4.9% during the same five-year period, LDC said, although the larger stores were the only formats to post a fall in their growth rate between 2013 and 2015, slipping from 5.3% to 1.6%.

At the end of 2015, the UK had 2,304 supermarkets and 4,337 discount stores in addition to the 16,426 convenience stores.Local Data Company director Matthew Hopkinson said: “The key point of note in this research is the relentless expansion of all food formats across Great Britain for the last five years.

Hopkinson said that “profoundly” changing consumer habits had affected the shape of bricks and mortar retailing over the past five years and added that the launch of Amazon Fresh could have similar impact on the online grocery market.

“Last week’s announcement of the launch of Amazon’s new grocery service will be an interesting one to watch, as it has the potential to compete with not just the supermarkets, but the discounters and the convenience stores,” Hopkinson said.“The role and relevance of food shopping for consumers is changing profoundly. We have seen the physical impact but unlike other sectors we have yet to see the online impact.

“Perhaps Amazon will be the catalyst to change this and if it does then we will see some retailers under significant pressures over the next five years.”Source: Retail Week 17th June 2016

http://www.retail-week.com/companies/sainsburys

http://www.retail-week.com/companies/tesco

http://www.retail-week.com/companies/spar

http://www.retail-week.com/companies/amazon


Warmer weather boosts retail expenditure in May Retail sales bounced back in May as warmer weather encouraged consumers to spend more both online and on the high street. The Office for National Statistics noted that the quantity of retail sales rose by 0.9% from April and is up 6% on the same time last year.

An online sales growth of 17% year-on-year was recorded in May, the highest increase since June 2015 according to the IMRG Campgemini eRetail Sales Index. Within the ecommerce division, the Index also reported its highest month-on-month growth rate between April and May, the greatest increase for more than ten years. Average basket value rose from £78 in 2015 to £81 in 2016.In separate figures, the ONS added that the value of online sales gew by 21.5% year-on-year and 6.4% on April.

IMRG further reported that online garden sector sales soared by 55% year-on-year following a 27% year-on-year fall in May 2015. This was in part a result of hotter temperatures, which also aided clothing sales which rose by 24% on last year - the highest annual growth in nearly three years.

Results suggest that the warmer weather brushed aside EU uncertainties and encouraged greater spending.Spending via smartphones outperformed tablet sales with a growth of 79% and 5% respectively.

“It was great to see the Index recording a solid performance for online retail in May 2016, up by eight per cent on an indifferent April 2016 performance and up 17% on the year. The country experienced record temperatures in May and this was reflected in the performance of the fashion and garden sectors, which both recorded significant growth" said Bhavesh Unadkat, Management Consultant in Retail Customer Engagement Design, Capgemini .

“Uncertainty around the EU referendum doesn’t appear to have had any impact on the UK e-retail sector, with the latest results from the IMRG Capgemini Index revealing strong growth in online sales during May. It seems the fine weather last month helped boost online clothing sales, with annual growth reaching the highest rate observed in three years, while the garden sector saw a much-needed return to growth after 14 consecutive months of decline, with sales surging 55% compared with May last year" added Tina Spooner, Chief Information Officer at IMRG .

“Year-to-date, online sales have grown 14.5%, well ahead of our 11% growth forecast for 2016, while sales via mobile devices continue to grow at twice the overall market rate.”

Nonetheless, EU uncertainties still remain and could cause retail spending to decline."Should the UK vote to leave the EU in next Thursday's referendum, the strong suspicion is that consumer spending would be severely pressurised for some time as a consequence of increased uncertainty, likely higher unemployment and squeezed purchased power" IHS Global Insight said.Source: Retail Gazette 17th June 2016


Holland & Barrett enjoys strong growth both home and abroadHealth and Beauty retailer Holland & Barrett celebrated a "strong financial performance" in the year to 30 September 2015 as total like-for-likes and its retail estate saw strong growth.

Total like-for-likes rose by 7%, driven by its UK stores which recorded a like-for-like increase of 10.4%. Internationally, including its outlets in The Netherlands and Belgium and franchised stores in China, sales grew by 11.7%.

Online sales soared by 27.5%, largely due to a 127% rise in mobile sales.

In its financial year, Holland and Barrett focused on extending its already 1,071 store international portfolio, increasing its store number in Ireland from 47 to 50 sites and opening a 70,000 sq ft warehouse in Dublin to enhance its distribution capacity in the country and in Sweden.

The health retailer also opened a head office in Amsterdam to assist its warehouse operations in the country.Chief Financial Officer Christian Keen noted that the retailer’s “strong financial performance” was due to “ a combination of continued investment in store openings and refurbishments and realising the value of our omnichannel growth strategy.”

“At the end of March this year we completed our 28th consecutive quarter of like-for-like growth,” said Keen.“We have set ourselves a challenging target to become a £1bn business by 2020, drawing on plans for further international growth and our ability to leverage our position as part of the NBTY Group.”Source: Retail Gazette 17th June 2016


Revlon To Acquire Elizabeth ArdenRevlon has announced a deal to acquire Elizabeth Arden, in a move aimed at boosting its presence in the global premium skincare and fragrance markets.

Revlon offered $14-per-share for Elizabeth Arden, valuing the deal at $420m. The deal additionally includes around $450m in debt. The group will fund using new financing from BofA Merrill Lynch and Citigroup.

The deal will create a combined entity with revenues of around $3bn. Revlon said it expects cost synergies of around $140m in three to five years following the completion of the deal, adding that the acquisition will “leverage Revlon’s scale across major vendors and manufacturing partners, improving distribution and procurement”.

The deal comes just months after Chairman (and controlling shareholder) Ron Perelman said Revlon would consider strategic alternatives to compete better with larger rivals such as L’Oreal. The acquisition comes as a surprise, as Revlon was expected by analysts to divest brands or put itself up for sale in order to focus on core operations.

Elizabeth Arden has seen its sales and share price fall in recent years, but CEO Scott Beattie said the scale of the combined company will help attract new licenses in perfumes and drive growth in sales of some fragrance brands.Source: NamNews 17th June 2016


Brexit threat has already hit UK adspend, says IPG Magna forecastThe prospect of Britain leaving the EU may have already led to a slowdown in adspend this year, according to Magna, the media trading division of Interpublic's Mediabrands unit.

Amid a slowdown in UK adspend in the second quarter of 2016, Magna’s 5.4% prediction is less optimistic than the 7% forecast made by Group M at the end of last year and 6.2% by Carat in March.

This year’s second quarter suffer from an early Easter (which happened in Q1), while demand and pricing also seemed to slow down. This is despite the Euro 2016 football tournament starting in June.

The possibility of Britain leaving the EU may have already contributed to a slowdown in adspend this year, the report added.It said: "The softness of 2Q16 may partly be caused by advertisers concerns ahead of the 23 June referendum, when British voters may opt to leave the European Union. Some brands may prefer to avoid running campaigns because of the media noise created by football and the referendum in that period. Some local and international marketers may also be nervous about the potential consequences of Brexit in terms of political, economic and monetary uncertainty.

"Whatever the long term consequences, most agree that a Brexit would likely trigger a short-term economic slowdown (e.g. financial services, house prices, British exports). A Brexit could indeed harm British exports in terms of TV programs, financial services and marketing services. Currently the Remain vs Brexit camps are close in the polls and our forecasts are based on the scenario that the UK remains part of the European Union."

Magna expects adspend to increase to £17bn this year and is the largest advertising market in Europe after outgrowing Germany last year, the report said.

Globally, Magna has forecast ad revenues will also grow by 5.4% in 2016, to $480bn, and by 3.1% in 2017. That compares with +4.8% in its previous forecast.The biggest contributors to the higher 2016 growth forecast are the US (revised from 5.7% to 6.2% this year) and China (from 5.5% to 8.4% this year).

Magna estimated that, taking out one-off events like the Olympic Games, Euro 2016, and the US presidential election, the global advertising marketing will still grow by 4% this year.

Source: Campaign Live 17th June 2016

http://www.campaignlive.co.uk/article/carat-upgrades-uk-adspend-growth-forecast-6/1389464

Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 17th June