Keeping pace with the rapidly changing European retail market
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Transcript of Keeping pace with the rapidly changing European retail market
Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Management Ventures, Inc.Management Ventures, Inc.
Keeping pace with the rapidly changing European retail market
•Presented by Ethan S. Sinick•MVI
•November 2008
2 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
European retail growth is slowingEuropean retail growth is slowing
• Current MVI forecasts, excluding the effect of currency changes, indicate that the European* retail** market will see growth decline from 5.9% in 2008 to 4.1% in 2009
• Excluding Russia, MVI projects the European retail market to slow from 4.7% growth in 2008 to 2.8% growth in 2009
• MVI expects the first half of 2009 to see market contraction with some recovery in the second half on the back of weak comparative numbers
*Geographic Europe including all of Russia** Excluding automobilesSource: MVI analysis
3 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Discounters will grow to 17% of MVI Discounters will grow to 17% of MVI measured grocery salesmeasured grocery sales
7.2% 7.4%6.6%
4.9%4.8% 4.6%
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4 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Quick service restaurants are performing Quick service restaurants are performing well by offering an accessible premiumwell by offering an accessible premium
• McDonald’s year to date life for like sales are up 10.7% across Europe
• Dominos in the UK and Eire has seen like-for-like sales for through September 2008 up 10.5%
• YUM brands has recorded year-to-date growth of 12% in Europe
5 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Tesco is trying to change the perception Tesco is trying to change the perception of its brand by attacking the discountersof its brand by attacking the discounters
New Strap Line
Expanded price matching to discounters
Private label instead of own label to match discounters
Source: MVI photos
6 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Healthy brands are improving their value Healthy brands are improving their value to try and regain momentumto try and regain momentum
« L'innovation Danone continuera d'animer le marché. Nous réfléchissons aussi à la façon de couvrir le spectre entier du pouvoir d'achat, sur tous nos pays, y compris les plus matures comme la France ou l'Allemagne. »
« The innovation of Danon continues to change the arket. We also consider the need to cover the entire spectrum of purchasing power in all countries incrlind the very mature markets like France and Germany »
Franck Riboud, PDG Danone28.07.2008
Danone ECO Pack launched July 2008
GBP 2.88 with nearly constant
promotion in Tesco for the
past few months
“Oranges are cheaper than mangoes, passionfruits and blueberries…We’re going to make the average price cheaper over the next year or two on our core smoothies so we can get them into peoples’ weekly shopping trolley.”
Innocent Drinks Co-Founder Richard Reed28.10.2008
GBP 1.89 with nearly constant
promotion in Tesco for the
past few months
Sources for quotes: Le Figaro and the Financial Times
7 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
The current environment gives retailers a chance The current environment gives retailers a chance to attack 75% to 80% of their coststo attack 75% to 80% of their costs
Source: MVI research
8 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
However, the market is changingHowever, the market is changing
• We are moving from record levels of inflation to potentially record levels of deflation
• Deflation in the retail market will come from two areas:1. Fundamental changes in commodity and
transportation costs2. Pricing actions designed to attract shoppers back
into retail outlets
9 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
The deflationary cycle will be as sharp as The deflationary cycle will be as sharp as the recent inflationary spikesthe recent inflationary spikes
• The rise in prices was driven by a steady growth in demand from emerging markets which was largely reflected in prices through the end of 2006
• Speculative investments in 2007 and 2008 took prices well above the rates of normal demand growth
• We now have the double impact of a collapse in speculation and a slowdown in demand• The markets should correct over the next 12
months
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Deflation will allow retailers to begin Deflation will allow retailers to begin profitable price reductionsprofitable price reductions
AMAROY® Premium Röstkaffee Extra
2,69
500-g-Packung 2,49
Fein Zucker
–,92
1-kg-Packung -,85
Würfelzucker
1,15
1-kg-Packung 1,09
Irische Butter
–,99
250-g-Stück -,95
MILFINA® Deutsche Markenbutter
–,79
250-g-Stück -,73
MILFINA® H-Schlagsahne
–,39
200-g-Packung -,33
11 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
ConclusionsConclusions
• The economic crisis is changing shape• Retailer and manufacturer strategies will follow
• Consumer opinion changes more slowly than the fundamentals• We are still dealing with inflation although
fundamentals have already begun to change
• Build a strategy that breaks 2009 into quarters as the consumer begins to see the changing nature of the economic crisis
12 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
ConclusionsConclusions
• There are some obvious growth strategies for retailers in the meantime• Aggressively correct your value proposition if it is out
of line with the marketplace• If you have a good price position, emphasize quality
of life• Focus on building sales through traffic and frequency
at the expense of weight of purchase until the consumer again feels purchasing power returning to their pockets
• Reduce costs and reduce the range to free up cash flows as credit lines tighten
13 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
ConclusionsConclusions
• There are some obvious growth strategies for manufacturers in the meantime• Follow the discounter channel growth• Shift distribution into retailers who have a strong price
image with consumers irrespective of their channel (discount supermarkets)
• Adapt your trade marketing programmes to promotions that reduce the emphasis on basket building and look more for increasing frequency and capturing more shoppers
• Find profitable ways to close the price gap with own label
Thank You!Thank You!
. . . A Partner in Your Success. . . A Partner in Your Success
Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Ethan SinickManaging Director, EMEAMVI
EMEA Headquarters6 More London PlaceTooley StreetLondon SE1 2QY