IRI'S Weekly FMCG News Update - w/c 22nd august 2016

Macroview
Weekly News update
Your window on the latest trends
in Packaged Groceries
Stephen Hall
Friday 26th August

Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2
• Morrisons appoints new ‘Bake Officer’ following success of Great British Bake Off
• Premier reaches 3,300 store milestone
• Tourist spending up in UK following Brexit
• GB grocery retail gets a (modest) summer boost
• Asda offloads photo business as it sharpens focus on core supermarkets
• Waitrose sales hot up as warm weather sends shoppers outdoors
• John Lewis ramps up its beauty sector with £9 million investment
• Consumer magazine sales in decline
• Tesco hits back in grocery fulfilment war with same-day click and collect
• Homebase sales up as Wesfarmers tackles 'poor and confusing offer'
• Consumer confidence grows fastest since 2013 as Brexit jitters ease
• Henkel study reveals insights about UK shoppers
• Latest CBI survey shows retail sales beat expectations this month
Weekly News Summary – 22nd August 2016

Morrisons Appoints New ‘Bake Officer’ Following Success Of
Great British Bake Off
Morrisons has announced the creation of an unusual post, which will focus mainly on trends developing from the latest
edition of hit TV series The Great British Bake Off.
The grocer has named Anastasia Duncanson as a dedicated ‘Bake Officer’ – the first such in the UK – making her
responsible for monitoring buying trends prompted by show, and ensuring that Morrisons stocks the most popular
ingredients in store.
Duncanson, who is in charge of the Home Baking range in 492 Morrisons stores, predicted that Brits will look to enhance
their own cake decoration and presentation skills while the show is on air. She added: “Being chosen to watch TV and
react to baking trends is an absolute dream job so I am delighted to be appointed to the dedicated role of Bake Officer. I
will be keeping a close eye on trends and managing demand to ensure we satisfy the baking needs of our eleven million
customers.”
Her pre-show predictions for trends in the ‘piping line’ include – metallic frosting, edible glitter and cake lace effect; hand
painted icing artistry, with a rise in ‘edible paint’ brushes; 2D and 3D edible toppers; and marble, rainbow and ongoing
experimentation with the popular ombré baking trend.
The rise in home baking in the UK over the past five years is widely attributed to the ‘Bake Off effect’ and each episode
provokes a run on certain home baking items.
Source: NamNews 22nd August 2016

Premier Reaches 3,300 Store Milestone
Symbol group Premier has announced that it now has more than 3,300 Premier-branded stores in the UK, helped by the
recruitment of 330 new members during the last financial year.
The rapid expansion follows the relaunch of Premier in February 2016, which aimed to help retailers ‘sell more and make
more’ with new sales opportunities through food to go, kids zone, bigger packs, non-foods and ‘feed the family.’ Premier
also revamped the fascia and imagery to a contemporary look, to reflect what is demanded from a modern convenience
store.
Martin Swadling, Director of Premier, noted: “It is Premier’s job to help retailers make more profits as they are facing a
whole raft of new legislation that all impacts their bottom line profits and I’m pleased with the progress we have made.
We have taken the learnings from our trial store in Sheffield and rolled them out across the estate with over 100 now
currently reflecting this.”
Source: NamNews 23rd August 2016

Tourist Spending Up In UK Following Brexit
The sharp drop in the value of the pound following the Brexit referendum has convinced more tourists to shop more in the
UK, helping drive sales.
According to new data from tax-free shopping firm Global Blue, tax-free shopping sales were up 7% year-on-year in
July. Sales of watches and jewellery in particular did well during July (up 16.6%), while apparel sales were also higher.
The increased spending during the month was driven by tourists from Japan, Indonesia and the US – with Japanese
tourists spending 96% more on a year-on-year basis, Indonesian tourists upping their spend by 88%, and US tourists
splurging more by 22%. Chinese tourists continued to account for the biggest share of overall spending (32%), but their
spending rose just 6% in the month.
Global Blue added that tourists from the Middle East did not spend too much more, but attributed this to the timing of
Ramzan this year. However, Qatar maintained its position as the country with the highest average spend per transaction
(at £1,642).

GB grocery retail gets a (modest) summer boost
Kantar Worldpanel data, covering the 12 weeks to 14 August, indicates that growth in the GB grocery retail market
strengthened again in this period. Boosted by some long-awaited better summer weather, the market was up by a
relatively buoyant +0.3%; though this is still very low by historical standards. The pricing environment remains solidly
deflationary, with Kantar measuring inflation at -1.3% for the period. This means that grocery sector inflation has now
been negative for over two years.
Leading four retailers still negative
Despite the benefits of the summer weather Tesco, Sainsbury's, Morrisons and Asda all saw their sales fall once again
over this latest three-month period. Amongst them Tesco and Sainsbury's at least saw some improvement over the July
data, with both successfully narrowing their underperformance versus the market. Tesco on -0.4% was the 'strongest'
performer amongst them, but Asda is still undoubtedly the weakest with sales remaining down by well over 5%, and
showing no sign of improvement at present.
Discounters strong, but slowing
Aldi and Lidl retain their positions as by far the fasting growing players in GB grocery retail, on +10.4% and +12.2%,
respectively, though their outperformance of the market has narrowed markedly in recent months. Between the July and
August data Aldi's market outperformance fell from 10.9 percentage points to 10.1, while Lidl's fell from 12.4 to 11.9.
Improving performance for Co-op and Iceland
Both Co-op and Iceland saw their growth rates rise ahead of the general level of market improvement. With sales up
+2.8% Co-op is continuing to benefit from its increased focus on a dedicated convenience strategy, and is also well-
placed to tap into the greater impulse opportunity brought by the burst of hotter weather. Meanwhile Iceland's
performance improved sharply to +4.3%, driven by a strong programme of summer pricing activity, including its ongoing
7 Day Deals and loyalty promotions, and increasing customer numbers: up by 129,000 over the 12 weeks.

Asda offloads photo business as it sharpens focus on core
supermarkets
Asda has sold its loss-making photo business in a £5.35m deal as the grocer increases its focus on its core supermarket operations.
Photo-Me will pay Asda £3.35m for the business and an estimated £2m for inventory
The Walmart-owned supermarket chain, which posted a 7.5% slump in like-for-like sales during its second quarter, has offloaded
Photo Division to Photo-Me International – a company that operates booths often found in locations such as train stations.
Under the deal, Photo-Me will operate the 191 photo centres and 172 self-service kiosks located in Asda’s supermarkets as part of a
10-year concession agreement.
Photo Division employees will automatically transfer to Photo-Me under the terms of the acquisition.
As well as those in-store locations, Photo-Me will also operate Asda’s online photo processing proposition for a minimum of two-and-
a-half years.
Photo-Me will pay £3.35m for the business and will pay an estimated £2m on top of that to acquire the inventory at each photo
centre and central stock.
Asda will also receive “periodic commission payments” from Photo-Me, based on the turnover of the business, costs of utilities and
business rates.
Photo-Me chief executive Serge Crasnianski said: “This is an interesting opportunity to significantly expand our UK business in a
strong set of locations and increase our market share in the digital photo printing market, which we believe has growth potential in
the digital age.
“Photo-Me is the leader in its field with a wide range of attractive and innovative products which we plan to introduce into the Asda
stores as soon as possible, and we believe will improve the level of trading and overall performance over the next two years and
beyond.”
Last year, Asda’s photo business made a loss of £3.4m on sales of £19.3m.
Source: Retail Week 23rd August 2016

Waitrose sales hot up as warm weather sends shoppers outdoors
Waitrose said last week’s warm weather and the Rio Olympics inspired people to head outdoors, resulting in a 4.7% sales
uplift.
Waitrose sales for the week to August 20 came in at £125.1m, up 4.7% year-on-year.
As a result of the week’s sunny weather, the grocer said sales of its outdoor living range and sun creams rose 24% and
37% respectively.
Food-to-go sales also grew 10.5%, with hot takeaway options soaring 20% and single-serve drinks rising 21%.
Fresh produce was up 9.6%, as customers were particularly drawn to British seasonal fruit such as cherries, which were
up 36%.
Promotions for wines and spirits also helped drive alcohol sales up 11.5%.
However, while warm weather proved fruitful for Waitrose at the start of the week, department store retailer John Lewis
benefited from cooler weather at the end of the week, which prompted customers to return to shops.
The department store’s total sales edged up 1.3% compared with the same week last year, totalling £72.9m for the week.
The retailer said audio and connected home products remain popular, posting a 15.7% year-on-year uplift. Beauty also
had a strong week, with sales up 5.1%.
Fashion sales were up 1.2% and home sales rose a marginal 0.7%.
However, John Lewis reported a “massive spike in popularity” of its outdoor living products, up 64.4%, presumably in
anticipation of the sunny bank holiday weekend forecast for this week. Bed sales also rocketed 30.8% compared with the
same week last year.
Overall John Lewis Partnership sales for the week to August 20 grew 3.4% to £198m.
Source: Retail Week 23rd August 2016

John Lewis ramps up its beauty sector with £9 million investment
Department store chain John Lewis has announced it would invest £9 million in its beauty halls in key stores, in light of
how its beauty departments now out-sell fashion.
Perfumes, face creams and makeup have continued to perform well and drive footfall for John Lewis, rising a third in the
last five years.
The new investment will see new brands like MAC, Marc Jacobs and Tom Ford Beauty become a staple in its beauty halls.
It will increase the size of its beauty departments in key stores across the country including Cambridge, Bluewater, and
Bristol by a massive 50 per cent.
There are also plans to modernise four other department store beauty halls, including its Sloane Square store.
This follows recent efforts to expand these sections in Birmingham with the opening of its own &Beauty spa and Oxford
St’s Clarins Beauty bar.
“Beauty is one of the best performing categories at John Lewis and a significant footfall driver, so this investment is a
reflection of our ambition in this space,” buying director for fashion and beauty Ed Connolly said.
Rising demand in the beauty sector has also been picked up on by Debenhams, Sainsbury’s and Marks & Spencer, who
have all expanded their beauty ranges in response to demand.
Fashion has had a difficult year due to unpredictable weather patterns and has now been overtaken by the beauty.
Source: Retail Gazette 23rd August 2016

Consumer magazine sales in decline
Children’s comics and mainstream women’s home interest magazines represented the bright points in the consumer
magazines market in the first half of 2016, according to the latest Audit Bureau of Circulation data for the January to June
period.
Total newsstand sales of consumer magazines fell by 8.6% in the six-month period, compared with a 5.3% decline last
year.
The children’s sector sold 12.5 million copies in the first half of the year, accounting for £40.5m in sales and up by 6.7%
on the previous year. Their performance was helped by the launch of several new titles, in particular Immediate Media’s
Lego Nexo Knights, Andy’s Amazing Adventures, Go Jetters and Clangers.
The mainstream women’s home interest sector grew sales by 0.2%, with Ideal Home (up 6.2% year on year) leading the
way as the best-selling title. Livingetc and Beautiful Homes were the fastest-growing titles, up 9.7% and 7% respectively.
TV Choice (down 3.4%) remains the best-selling consumer title, selling more than 1.23 million copies, ahead of What’s on
TV, which was down by 6.9%. Slimming World (up 12.7%) is in third place after doubling circulation over the last nine
years.
Source: Talking Retail 23rd August 2016

Tesco hits back in grocery fulfilment war with same-day click and
collect
Tesco has fired a salvo at grocery rivals Sainsbury’s and Amazon by launching a same-day click and collect service across the
UK.
The supermarket giant, which has launched a TV advert to showcase the move, will offer the service at almost 300 of its stores
as it ramps up its fulfilment proposition.
It comes just months after Amazon brought its Fresh grocery proposition to the UK, offering Prime customers same-day
delivery on its range of 130,000 fresh, frozen and ambient goods on orders placed before 1pm.
Tesco’s big four rival Sainsbury’s, which is pursuing a strategy to be there for its customers “whenever and wherever they
want”, is piloting same-day deliveries from 30 stores as the two leading players in UK grocery fight back against the etail titan’s
assault on the lucrative food market.
Tesco, which posted encouraging figures in the latest Kantar Worldpanel grocery data, will allow shoppers to collect any orders
placed before 1pm from their local store at 4pm.
Shoppers will be charged £2 for a two-hour collection slot from Monday to Thursday and £3 for slots on Friday or Saturday.
Customers can choose either a 4pm to 6pm collection window or 6pm to 8pm on all six days.
Same day click and collect will not be available to shoppers on Sundays.
The move to roll the new fulfilment offer out to almost 300 stores means that 90% of Tesco’s click-and-collect grocer locations
will offer a same-day service.
A spokesman for the grocer said: “We know time is valuable to our customers and they expect more convenience and choice
than ever before in how, when and where they do their grocery shopping.
“Our same day grocery click-and-collect service is available at nearly 300 stores across the UK and means our customers can
get their shopping at a time and location that is convenient for them.”
Source: Retail Week 24th August 2016

Homebase sales up as Wesfarmers tackles 'poor and confusing
offer'
Wesfarmers has reported a rise in store transactions at Homebase as the Australian giant ploughed £60m into the UK DIY
chain’s “poor and confusing offer”.
Hombase like-for-like store transactions jumped 7.5% in the first four months of Wesfarmers owning the business, the
Australian retailer revealed in a full-year update. The increase was driven by new merchandising, pricing and marketing
strategies, it said.
Overall Wesfarmers said trading had been “steady” at Homebase.
Wesfarmers, which acquired Homebase for £340m in February from Home Retail Group, is planning to convert the stores to its
successful DIY fascia Bunnings.
Four to six pilot Bunnings stores are planned for the UK by the end of next June, it said. The first is expected to open in
October.
Bunnings boss John Gillam said investment in the wider roll-out of Bunnings would depend on the success of the pilots. “Proof
of concept is a critical step,” he said.
Gillam also revealed that £60m has been invested to address Homebase’s “poor and confusing offer”. He added: “The offer is
now very firmly focused on the home improvement and garden market.”
In April it emerged that Wesfarmers was cutting nearly 20% of Homebase’s head office staff. The Australian giant also culled
Homebase’s senior team, bringing in Bunnings veteran Peter Davis to run the business.
Former Asda boss Archie Norman, who has been an adviser to Wesfarmers since 2007, has also been appointed to a three-man
advisory board to guide Bunnings in the UK.
As a group, Bunnings reported EBITDA rose 11.5% to AUS$1.21bn (£700m) in the 12 months to June 30. However,
Wesfarmers posted an 83% slide in net profits to AUS$407m (£234.9m) owing to write-downs at its coal business and retailer
Target.

Consumer confidence grows fastest since 2013 as Brexit jitters
ease
Consumer confidence has risen at the fastest month-on-month rate since February 2013, but it has not yet recovered to pre-Brexit
levels.
Sentiment jumped 3.2 points in August, according to the latest figures from YouGov and the Centre for Economics and Business
Research (CEBR).
But while consumer confidence rebounded strongly in August – from 106.6 points in July to 109.8 in August – it has not yet fully
returned to the level it was at prior to June’s EU referendum.
The index, based on the views of 6,000 adults, has only recovered around half the ground it lost in the wake of the referendum.
YouGov and CEBR said consumer confidence slumped 4.7 points in July to its lowest monthly level in three years.
CEBR director Scott Corfe said: “This month’s improvement in consumer confidence follows positive news from other areas of the
economy and slightly punctures the arguments of those who predicted immediate economic Armageddon following a Brexit vote.
“It is clear that the panic that gripped the public in the immediate aftermath of the referendum has subsided as institutions like the
Bank of England take decisive action and the result becomes a part of life”
Stephen Harmston, YouGov
”With consumer confidence rising and year-on-year retail sales up, it is evident that the public have yet to feel many – if any –
effects from the vote to leave the EU.
”Both inflation and unemployment are low, for now, which is undoubtedly supporting consumer optimism.”
YouGov head of reports Stephen Harmston agreed that “for all the talk of doom and gloom” most consumers have yet to feel much
tangible impact of the vote.
He said: ”It is clear that the panic that gripped the public in the immediate aftermath of the referendum has subsided as institutions
like the Bank of England take decisive action and the result becomes a part of life.”
He added, however, that “everything could change” once details of the deal to leave the EU emerge and ”the process of extracting
ourselves from the Union become a reality”.
Likewise, Corfe said 2017 could be the year that consumers stumble, ”as the weakness of sterling pushes up the cost of imports”.

Henkel Study Reveals Insights About UK Shoppers
Henkel has unveiled new research of 2,100 shoppers in the UK as part of a global long-term study of 52,000 shoppers. The study by
the FMCG company offers an in-depth understanding of the UK shoppers and their purchasing journey, based on their attitudes.
The study analysed which customer typologies frequent which major retailers across the UK. Interestingly, there is little variation
between retailers. “With this study we can identify untapped current and future opportunities for retailers, highlighting the attitudes
which drive their shoppers’ behaviours”, said Manuela Unger, Marketing Director, Laundry and Home Care UK & Ireland, at Henkel.
“In particular, the study has identified the Convenience Shopper as the largest and youngest UK shopper typology, with growth
potential. This shopper cluster is unique to the UK and is looking for quick and easy purchases. They are keen to see innovative
products, alongside a wide variety of choice, such as organic or ecological options, with supporting information. Promotions and
special offers should be as easy as possible.”
Manuela added: “There is clearly huge potential in the Convenience Shopper, especially online. This typology uses online shopping
more than any other shopper, highlighting a clear desire for quick, easy and efficient purchasing. Our study shows that the
Convenience shoppers use online services to a much higher extent, and make up to 40% of all online shoppers. They also attach
importance to convenient and safe payment, easy navigation, and flexibility in delivery & pick up. Product categories and a broad
assortment are likewise of paramount importance.
“Retailers can also leverage the Convenience Shopper potential offline, by meeting the shopper needs in store with clear shelf layout,
simple and customised offers and brands. Quick distribution build up and visibility of New Product Development (NPD), as well as
quick self-check-outs are likewise crucial.”
“It is really interesting to see this new type of shopper evolving, and understanding what drives and motivates them is invaluable in
helping retailers to strengthen their competitive position in the retail environment. Henkel is able to support retailers in this
challenge by offering a customised approach that helps retailers to better target specific shopper types, and to differentiate in such a
competitive market.”
Source: NamNews 26th August 2016

Latest CBI Survey Shows Retail Sales Beat Expectations This
Month
Boosted by the warm weather and tourist spending, retail sales volumes grew in the year to August following last month’s
fall, according to the latest CBI quarterly Distributive Trades Survey.
The survey of 131 firms, of which 58 were retailers, showed that the volume of sales grew modestly over the year,
beating expectations for a further fall this month. However, sales volumes look set to be broadly flat over the next month.
The volume of orders placed upon suppliers fell for a fifth consecutive month although retailers expect them to grow
somewhat in the year to September.
While grocers’ sales were broadly flat in the year to August, clothing reported a strong month for sales volumes. Growth
in internet sales volumes picked up over the same period, outstripping expectations, with broadly similar growth expected
next month.
Investment intentions for the year ahead turned positive following the most negative results since 2013 in the previous
quarter. Year-on-year employment was again flat in the year to August, although retailers expect a small cut in headcount
in September. While retailers anticipate a further small improvement in their business situation, sentiment is improving at
a slower rate than over the past year. Average selling prices fell on a year ago, after rising over the first half of this year.
Anna Leach, CBI Head of Economic Analysis and Surveys, commented: “The summer weather has brought shoppers out
onto the high street with retailers reporting that sales growth has risen, outdoing expectations, although firms do expect
sales growth to ease next month.
“While the fall in Sterling has boosted visitor numbers to the UK, it is likely to push up the price of imported goods over
time which will mean households will be more likely to rein back spending on non-essentials.”
Source: NamNews 26th August 2016

Big Four quarterly LFLs over time
Source: Retailers
%
Note: Trading periods vary in their length and dates.
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2016
Q1
2016
Q2
2016
Q3
2016
Q4
Asda
Morrisons
Sainsbury's
Tesco

IRI'S Weekly FMCG News Update - w/c 22nd august 2016

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