IRI Topline Report. Is economic uncertainty affecting FMCG sales? Q2/H1 2015

Transcription

1 IRI Topline Report Is economic uncertainty affecting FMCG sales? Q2/H Data trends show 1 st half 2013 vs. 1 st half 2014 followed by the respective Q3, Q4 and 1st half Tim Eales Director of Strategic Insight

2 Key findings Overall economy is back to growth in Europe, with gross domestic product (GDP) at +1.6% versus a year ago. Most countries have performed well lead by Spain (+3.2%), followed by the United Kingdom (+2.9%). Despite a slight decrease of the unemployment rate it remains high in Europe (11.1%) with big differences between Spain and Greece with 22.5% and 25.0% and Germany (4.7%) and the United Kingdom (5.5%). This favourable context brought some relief to the FMCG sector which is back to growth at the European level: + 0.9% in H in value versus flat in 2014 and + 0.8% in volume versus -0.6%. This growth has been driven by Italy, Spain and in some extend by the United Kingdom (UK) and the Netherlands, where the consumer confidence index was back to positive. Meanwhile in Greece volume has dropped even more compared to last year. France and Germany s growth trends remain the same with a bigger growth in volume sales for Germany. Greece, where the total of the IRI Shopping Basket cost was the highest, has been overtaken by Italy where prices increased whilst decreasing for the Greek shopper, sustained by a very active promotion activity, especially on national brands, aimed at reducing the volume sales decline. The price wars in France and in the UK impacted mainly national brands which lowered the price of the IRI Shopping Basket in those countries. FMCG is back to growth overall but big discrepancies between countries Prices in food categories are back to growth in all countries except the UK. UK food volume did not improve, however, whereas food volume sales are growing for most countries.; Greece and the Netherlands being the exception. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2

3 Key findings After several challenging quarters, non-food categories have started to recover. Volume sales in most countries are back to growth; the UK and the Netherlands are the exception due to prices continuing to increase. Driven mainly by the food sector, the growth of trade promotions has mostly stopped except in Greece which is now at the third highest position; the UK remains the country with the highest promotion pressure (52.2%) followed by Italy (30.4%). Promotion is mainly impacting national brands enabling shoppers to track the best price for value. Private label continues to lose its attractiveness versus the high promotion pressure on national brands. In Italy, for example, the only private labels tiers growing were bio/organic categories (+9.2% value sales) and premium lines (+12.7% value sales). In France, Italy, the UK and to some extend Italy, the price gap between highly promoted national brands and private label products is shrinking. In France, the shopper has taken advantage of price reductions to upgrade their shopping basket, trading up to higher quality products. Whilst in the UK, the growth of the hard discounters is forcing the supermarkets to retaliate with lower prices. Lower prices have had limited impact on the overall basket, as the biggest price cuts are largely restricted to the most popular products at the moment. Private label and national brands: price gap is lower A pause in the trade promotion activity Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 3

4 GDP 2014 % change versus 2013 EURO AREA (18 COUNTRIES) GDP +0.9% IN 2014 Growth rates of real GDP volume 5 Germany France Netherlands Italy Spain UK Greece Provisional estimate for Spain and the Netherlands. For Greece, estimate is based on the average for four quarters. The euro area (EA18) includes Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. Source : Eurostat Q Updated 9th March 2015 Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 4

5 GDP Q % change versus Q EURO AREA (18 COUNTRIES) GDP 1.6% IN Q Growth rates of GDP, in volume (based on non seasonally adjusted data) 5 Germany France Netherlands Italy Spain UK Greece Provisional estimate only for : Greece, Spain & Netherlands The euro area (EA18) includes Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. Source : Eurostat Q Updated 9 th October 2015 Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 5

6 GDP Q % change versus Q EURO AREA (18 COUNTRIES) GDP WAS UP IN Q VERSUS Q1 2015, BY +0.4% Growth rates of GDP, in volume (based on seasonally adjusted data) Germany France Netherlands Italy Spain UK Greece Provisional estimate only for : Greece, Spain, Netherlands The euro area (EA18) includes Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. Source : Eurostat Q Updated 9 th October 2015 Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 6

7 Unemployment levels in Europe % UNEMPLOYMENT RATE IN JUNE 2015 COMPARED WITH JUNE 2014 Germany France Netherlands Italy Spain UK Greece JUNE % 10.2% 7.4% 12.4% 24.5% 6.1% 26.6% Euro area (18 countries) unemployment down from 11.6% in June 2014 to 11.1% in June Source : Eurostat August 2015 : Table name - Harmonised unemployment rate by sex Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 7

8 FMCG full year 2013: % change versus previous year Germany France Netherlands Italy Spain UK Greece VALUE TREND Full Year Average +0.5% VOLUME TREND -3.6 Full Year Average -1.0% Unit trend for Greece -3.0 Price inflation is pushing up value sales in most countries. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 8

9 FMCG full year 2014, % change versus previous year Germany France Netherlands Italy Spain UK Greece VALUE TREND Average 0.0% VOLUME TREND Unit trend for Greece 2014 Average -0.6% The year of 2014 was a poor one for FMCG in most countries. Most countries have had lower rates of inflation versus Value sales were not boosted by price increase as much as they were in Germany recorded the fastest value growth whereas in 2013 it was the UK. Volume growth has become hard to achieve. The Netherlands has had the highest level of inflation in Both the Netherlands and the UK were well down in volume. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 9

10 FMCG H1 2015, % change versus previous year Germany France Netherlands Italy Spain UK Greece VALUE TREND VOLUME TREND H Average +0.9% Unit trend for Greece H Average +0.8% The first quarter of the year was a good one for most countries but this was predominantly due to Easter coming early relative to Value change has suffered due to inflation being very low or falling in all countries except the Netherlands. Price increase is having much less effect across the countries than it was Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 10

11 Total IRI Shopping Basket average price IRI FOOD SHOPPING BASKET VALUE IN Q VERSUS Q IN WESTERN COUNTRIES, AVERAGE WEIGHTED PRICE IN EUROS Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 11

12 Total IRI Shopping Basket, national brands versus private labels price IRI FOOD SHOPPING BASKET, TOTAL NATIONAL BRANDS VERSUS PRIVATE LABELS IN Q IN WESTERN COUNTRIES, AVERAGE WEIGHTED PRICE IN EUROS Private label Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 12

13 Total IRI Shopping Basket, national brands versus private labels, relative price index IRI FOOD SHOPPING BASKET, TOTAL NATIONAL BRANDS VERSUS PRIVATE LABELS RELATIVE PRICE INDEX, IN Q IN WESTERN COUNTRIES Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 13

14 H1 food and non-food volume grew, with food prices up a little. Non-food prices returned to flat after falling at the end of FOOD SALES IN FRANCE, % CHANGE, YEAR-ON-YEAR (Packaged food, confectionery, drinks, exc. alcohol) VALUE VOLUME PRICE H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H NON-FOOD SALES IN FRANCE, % CHANGE, YEAR-ON-YEAR (Pet food, health, toiletry, household) H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H Source: IRI, hypermarkets, supermarkets, hard discounters and drive Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 14

15 Grocery inflation continues to be negative in France but shoppers upgrade their grocery basket FMCG INFLATION, BASKET PRICE AND MIX EFFECT 2.5 % 2.5 % 1.6 % 1.6 % 1.6 % 1.6 % 1.7 % 1.4 % % 1.4 % 1.1 % 1.1 % % 1.6 % 1.2 % 0.9 % % 1.3 % 1.4 % 1.4 % 1.4 % 1.2 % 0.7 % 1.0 % 1.0 % 0.7 % 0.4 % 0.3 % 0.3 % 0.3 % 0.4 % 0.4 % 0.2 % 0.1 % % 0.0 % % 2.1 % 0.7 % 0.4 % 1.9 % 1.8 % 1.8 % 1.8 % 1.6 % 1.6 % 1.5 % 1.3 % -0.6 % % -0.8 % % 1.5 % 2.0 % 1.7 % 0.5 % 0.4 % 0.2 % 0.1 % 0.2 % 0.2 % 0.0 % -0.1 % Mix effect (valorisation) Basket price evolution Inflation 0.2 % 1.6 % 0.6 % 0.6 % 1.9 % -0.0 % 1.1 % 0.6 % -1.2 % -1.3 % -1.4 % % -1.6 % -1.7 % % % % -1.5 % -1.4 % -1.6 % -1.9 % Source: IRI, hypermarkets and supermarkets Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 15

16 Overview France VAT on food 5.5% and 19.6% In its last economic situation report (June 2015), INSEE upgraded its March 2015 forecasts which were already positive. For 2015 INSEE has forecasted a growth domestic product (GDP) growth of 1.2% (compared to only +0.2% for 2014). This year consumer spending should increase by 1.6% (+0.6% for 2014) with improved purchasing power (+1.9% compare to +1.1% for 2014). This positive situation should allow the unemployment rate to stabilise at 10.1% in continental France. Based upon INSEE grading, consumer sentiment keeps going up. The index was 93 for the first half year compared with only 86 for All opinion indicators are looking good, households evaluation of their private situation as well as the overall economic situation. During the second quarter, the price war has not slowed down but neither has it increased in intensity (See IRI Point of View FMCG Price War ) Annual grocery deflation is steady at around -1.5% Over the last few months, hard discounters have improved their performance, mainly due to the positive dynamic of the leader, Lidl, and despite Dia s context which stores will gradually change name after Carrefour takeover. Click & Collect continues to grow but with at a slower pace versus previous years: +20%. Promotion activity is quite steady. This activity is mainly enhanced by major companies, national brands, at the expense of the private labels. Overall assortment continues to increase annually, although a slow down is noticed in Q2 compare to Q The second quarter confirms the main trends observed in previous quarters, namely: FMCG moderate sales growth is aligned with the population growth. A slight price increase despite the strong deflationary situation and finally the continuing high level of premiumisation which affects most categories. Another decline for private labels in hypermarkets and supermarkets. This decline is getting faster month after month. Private Labels lost 1.2% of market share during this quarter, with value sales falling by -4.0% while national brands achieved +1.8%. Although changes are small and sometimes reduced by meteorological changes, a gradual recovery is noticed on non-food (+1.1% for the first half year versus +1.2% for 2014). This performance is mainly due to beauty care products. Nevertheless, this market is more and more dependent upon promotional activities (Beauty-ope) and deflation. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 16

17 H1 food sales increased strongly with prices slightly positive. The value decline in non-food volume continued, with ongoing price deflation. FOOD SALES IN ITALY, % CHANGE, YEAR-ON-YEAR (Packaged food, confectionery, drinks, inc. alcohol) VALUE VOLUME PRICE H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H NON-FOOD SALES IN ITALY, % CHANGE, YEAR-ON-YEAR (Pet food, health, toiletry, household) H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H Source: IRI, all outlets Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 17

18 During Q2 2015, the FMCG market in Italy shows low level inflation. 3.0 FMCG INFLATION IN ITALY June 2015 apr-15 February 2015 December 2014 Oct 2014 August 2014 June 2014 apr-14 February 2014 December 2013 October 2013 August 2013 June 2013 apr-13 February 2013 December 2012 October 2012 Mix effect basket Inflation FMCG Inflation Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 18

19 Overview Italy VAT on food 4.0% and 10.0% During the first quarter of 2015 the Italian GDP started to grow, registering an increase of 0.3 point versus the last quarter of This was the highest positive trend since 2011 (Source: Istat). In the second quarter of 2015 the seasonally and calendar adjusted, chained volume measure of GDP increased by 0.2% with respect to the first quarter of 2015 and by 0.5 % in comparison with the second quarter of 2014 (Preliminary estimate of GDP - Source: Istat) In June 2015 with regard to the consumer survey, the confidence climate index increased from to The increase is explained by all components: economic, personal, current and future, which rose respectively from to 139.4, from 98.5 to 100.0, from to and from to With regard to business surveys, the composite business confidence climate index (IESI, Istat Economic Sentiment Indicator) increased from in May to (Source: Istat) In June 2015, the Italian consumer price index for the whole nation (NIC) rose by 0.2% on both monthly and annual basis up from 0.1% in May In June unemployment climbed to 12.5% (source: Eurostat). During the first semester of 2015 fast moving consumer goods (FMCG) consumption registered an increase in both value (+2.1%) and volume (+1.8%) after two years of difficulties. The best performing categories are food and beverage. Only the home care market is still struggling (-0.1% in volume and -0.3% in value) (Source: Infoscan Census- Total Italy Hypermarkets, supermarkets, superettes and drugstores). The positive trends registered by the FMCG market are not sustained by an increasing promotional pressure. This is an important fact in the Italian market. During the last three months promotional pressure has decreased, standing at 28.6% in June Private labels are losing space on the shelf in In the total market, private labels market share slipped (down 0.3 point in June). The only private labels tiers growing were bio/organic categories (+9.2% value sales) and premium lines (+12.7% value sales). Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 19

20 Food prices were slightly up in H1. Volume and value sales improved for both food and non-food. Non-food prices continued to fall. FOOD SALES IN SPAIN, % CHANGE, YEAR-ON-YEAR (Packaged food, confectionery, drinks, exc. alcohol) VALUE VOLUME PRICE H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H NON-FOOD SALES IN SPAIN, % CHANGE, YEAR-ON-YEAR (Pet food, health, toiletry, household) H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H Source: IRI, hypermarkets and supermarkets Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 20

21 The second quarter in Spain shows a return to low level price inflation and the rate of increase in consumption slowing down a little. VALUE SALES EVOLUTION (FMCG ) VERSUS PREVIOUS YEAR: PRICE AND CONSUMPTION YTD 2015 jan-15 feb-15 mar-15 apr-15 may-15 jun-15 Price Evolution Consumption Evolution Source: InfoScanCensus TM, hypermarkets and supermarkets Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 21

22 Overview Spain VAT on food 10.0% and 21.0% The macroeconomic environment shows Spain going through a period of increasing GDP (+3.1% in Q2 2015), while the unemployment rate reduced in July to 22.0% with CPI remaining flat. FMCG value sales in this first half of the year continued to grow at around +2%. Consumption continues to grow (around +2%) also, as prices don t show any change. Proximity channels continues to increase sales, such as large and medium supermarkets, that are growing in the first six months of the year 4.4% and 1.0% respectively. Hypermarket and small supermarkets are decreasing sales around 1% each. In 2015 year to date, private label value share has been declined by 0.5 point versus the same period last year, to 42.0% of market share, with a slight price reduction of -0.4% which has sustained consumption. Share loss by private label is affecting all channel types, except for large supermarkets, where it is increasing. National brands, despite increasing prices by around 1% have shown volume sales increasing by +1.7%. Promotion pressure is reducing to 20.0% from January to June was a very highly promoted year for FMCG products, with a high share of sales done through promotions. National brands are investing the most in promotions, around 75% of promotions sales are done by them. High temperatures in June caused some categories such as ice cream to increase 13.0% value sales this month. Also there has been strong growth for still water, suntan products or tiger nut milk drink, that increased around 9 and 10%. Spanish shoppers like to go to stores to make their FMCG shopping, according to Spanish IRI Shopper Barometer: 62.0% say that they enjoy looking for, touching and directly selecting, the products that they are going to consume; 21.0% like it but it s time consuming when 17.0% don t like to go shopping for FMCG products and for 5.0% of them, because of time it requires. Smart shoppers find more occasions to look for premium moments and products, trying to find the best balance between what they want and what they need. Emotional sales are again part of the game, and brands are taking benefit of it. It is estimated that in Spain the population will tend to decrease, for both migrants returning back to their origin countries, and also decrease of births and ageing population. This trend will affect FMCG in the future, and also need to focus on senior population, with specific needs and habits. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 22

23 Both food and non-food unit sales continued to decline in H1 as price reductions ended. Non-food sales showed a steeper decline than food. FOOD SALES IN GREECE, % CHANGE, YEAR-ON-YEAR (Packaged food, confectionery, drinks, exc. alcohol) VALUE UNITS PRICE Price per unit H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H NON-FOOD SALES IN GREECE, % CHANGE, YEAR-ON-YEAR (Pet food, health, toiletry, household) H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H Source: IRI, hypermarkets and supermarkets Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 23

24 Overview Greece VAT on food 13.0% until July 2015 From July 2015 and on VAT varies according to the category VAT on food (13% 13% and 23%) Prices in Greece were deflationary Jan./Jun versus Jan./Jun (-2.3%). Unemployment in Q was 25.0% and remained at this level for June GDP for Q showed some improvement, +09% versus Q Manufacturers are using more customised activities to promote their goods. Seven retailers account for about 89% of supermarket s turnover. Consolidation of Greek supermarket is accelerated. Small retailers cannot follow due to lack of cash and promotional support. Lidl is gaining market share, continuing their intense advertising campaigns. The poor economic context is still negatively impacting grocery sales. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 24

25 Food volume declined again in H1 2015, with prices still rising, whilst non-food prices continued to fall, bringing value sales down in FOOD SALES IN THE NETHERLANDS, % CHANGE, YEAR-ON-YEAR (Packaged food, confectionery, drinks, exc. alcohol) VALUE VOLUME PRICE H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H NON-FOOD SALES IN THE NETHERLANDS, % CHANGE, YEAR-ON-YEAR (Pet food, health, toiletry, household) H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H Source: IRI, supermarkets (exc. discounters) -7.5 Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 25

26 Overview The Netherlands VAT on food 6.0% The positive trend in the growth of the economy in the Netherlands continued in Q2. The economy has grown 0.2% in Q2 compared with Q1, and 1.6% compared to Q Also, household consumption rose by 1.8% compared to Q Inflation in the Netherlands for Q was 0.8%, which is low compared with the year 2014 (1.0%). The unemployment rate in Q was 6.9%. Youth unemployment was 11.0% and the unemployment rate among 25 to 44-year-olds and over-45s were 5.7% and 6.6%, respectively. All numbers are significantly lower than both Q as well as Q For almost two years, the mood among consumers has been very pessimistic. In Q2 2014, the consumer confidence index was -2. For Q the index slipped to -4. The spiral continued in Q4 2014, causing a big drop in the consumer confidence index, to -10. The average index for full year 2014 was -6. For Q the index rose again to -2. However, the negative trend has been broken; the consumer confidence index is positive again for Q2 2015: 5 Total supermarket value growth is the same as for Q2 2014: 0.4% growth for Q Trade promotion sales remained steady, at 20.9% for food in Q and 25.6% for non-food. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 26

27 In H1, food prices were largely flat, and volume and value sales were marginally positive. Non-food volume grew as prices fell. FOOD SALES IN GERMANY, % CHANGE, YEAR-ON-YEAR (Packaged food, confectionery, drinks, exc. alcohol) VALUE VOLUME PRICE H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H NON-FOOD SALES IN GERMANY, % CHANGE, YEAR-ON-YEAR (Pet food, health, toiletry, household) H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H Source: IRI, all outlets Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 27

28 Overview Germany VAT on food 7.0% and 19.0% The German economy is currently experiencing a strong upturn. GDP is expected to grow by 2.1% versus This upturn is driven by unexpected expansive impulse purchases, especially by the falling oil price as well as the sharp depreciation of the euro. FMCG value sales in year to date Q increased by 1.3% compared to Q2 2014, bringing FMCG market value to 65.1 billion in year to date Q The positive development is led by the categories paper including diapers including female hygiene (+4.1%) and confectionery including salty snacks (+3.9%), but also major categories like food increase (+2.9%). The small growth in volume is accompanied by an increase in the pricing level as well. Aldi, Lidl and Norma, formerly known as hard discounters in Germany, are the only retailers next to beverage cash & carry markets to show a steady decline of value sales versus the prior time period. Supermarkets, with a clear focus on key accounts Rewe, Edeka and Markant remain strong across all size classes, especially small and medium-sized stores. Soft discounters that offer a broad variety of branded products and manage to have a good assortment of brands and private labels show value growth of 2.5% and can benefit from shoppers that seem to be turning away from Aldi, Lidl and Norma more and more. Drugstores show significant growth with gains of 8.7% in value sales, profiting from broad assortments and very loyal customers. Value share on private labels among FMCG is slightly decreasing compared to tear to date Q especially with dairy products losing - 9.4% due to a noticeable drop in prices of -5.1 % on average. Private label goods now account for slightly under 35% of FMCG value sales. Paper including diapers and feminine hygiene show the highest share of private Label value sales (57.9% and still increasing) whereas the lowest share can be found with body care including baby care (14.1%). Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 28

29 Food prices have deflated in H by almost -2%, keeping value sales lower than last year as volume was flat. Non-food volume continued to decline. FOOD SALES IN THE UK, % CHANGE, YEAR-ON-YEAR (Packaged food, confectionery, drinks, exc. alcohol) VALUE VOLUME PRICE H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H NON-FOOD SALES IN THE UK, % CHANGE, YEAR-ON-YEAR (Pet food, health, toiletry, household) H Q3 Q4 Q Q2 Q3 Q4 H Q3 Q4 H Q3 Q4 H Source: IRI, all outlets, excludes Northern Ireland Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 29

30 Prices continue to fall to as supermarkets aim to address differentials with discounters. Topline inflation (CPI) has been flat for five months. 11,000 % CHANGE VERSUS LAST YEAR SHOPPING BASKET, ALL ITEMS IN THE UK 10, ,000 9,500 9,000 8,500 8,000 7, The average basket price has continued to decline as the price war develops. The CPI has mostly been falling as well. The growth of the discounters is forcing the supermarkets to retaliate with lower prices. So far, to June 2015, the reduction has been 1.8% since prices started to fall in April TOTAL PRICE Monthly CPI Jun, 15 May, 15 Apr, 15 Mar, 15 Feb, 15 Jan, 15 Jan, 15 Dec, 14 Nov, 14 Oct, 14 Sep, 14 Aug, 14 Jul, 14 Jun, 14 May, 14 Apr, 14 Mar, 14 Mar, 14 Feb, 14 Jan, 14 Dec, 13 Nov, 13 Oct, 13 Sep, 13 Aug, 13 Jul, 13 Jun, 13 May, 13 Apr, 13 Mar, 13 Mar, 13 Feb, 13 Jan, 13 Dec, 12 Nov, 12 Oct, 12 Sep, 12 Aug, 12 Jul, 12 Jun, 12 May, 12 Apr, 12 Mar, 12 Mar, 12 Feb, 12 Jan, 12 Dec, 11 Nov, 11 Oct, 11 Sep, 11 Aug, 11 Jul, 11 Jul, 11 Jun, 11 May, 11 Apr, 11 Mar, 11 Feb, 11 Jan, Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 30

31 Overview The United Kingdom VAT on food 0.0% and 20.0% Inflation (CPI) has been essentially flat from February 2015 to June Grocery prices have been falling, as the traditional trade react to the growth of the discounter sector. Prices are down by 1.5% to 2.0% in the last few months, with food prices falling faster than non-food. Unemployment has been declining and so good news for the UK economy, down to 5.5% in January and drifting to 5.6% by May. Nearly 2 million people aged 16 and over were seeking and available for work. GDP was up again (+0.7%) in Q versus Q This is a good sign and continues the trend of GDP growth seen now for the past nine quarters. Private labels value share continues to slide slowly. Brands are keeping up the pressure with promotions, so the anticipated move to own label due to the consumer recession has not happened in packaged groceries within the traditional trade. Grocery prices are a key focus once again in the retail trade, as the major retailers battle against the growth of the discount sector. Morrison s, Asda and Tesco have all announced big investments in lower prices. Sainsbury s has Brand Match and now Morrison s has Match & More, which includes price matching versus Aldi and Lidl. So far, the impact of these lower prices on the overall basket has been fairly minimal, as the biggest price cuts are mostly restricted to the most popular products at the moment. Much more significant cuts are beginning to be seen however. Food volume sales were flat year-on-year for H1 2015, with growth coming from the soft drinks sector. Despite assumed increases in population, UK consumers are buying fewer groceries, shopping more often and wasting less. Value sales were still down for the fifth quarter in a row, which is putting pressure on the major supermarkets to maintain profit levels. As a result, store opening programs are being re-evaluated, some existing store are closing and there are prospects of job losses at head office and store level. The non-food sector has also been shrinking in volume, almost continuously for the last 4years, however some growth is evident for for value due to rising prices and the price wars not hitting non-food as hard as food. The health sector has grown in H due to high levels of flu-like sickness amongst many people, resulting in a higher level of deaths than normal amongst the older age demographic. Shoppers have been trading down their purchases to save as much as the price cuts have been offering. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 31

32 IRI Topline Report Trade Promotion to Q

33 Deal levels vary enormously across Europe All Products % SALES ACROSS ALL PRODUCTS WITH TRADE PROMOTION, VOLUME, IN SEVEN EUROPEAN COUNTRIES 60 Germany Driven mostly by the food sector, the total level of trade promotions is quite similar across the countries apart from Italy at 30% and the UK above 50%. The growing trend has mostly stopped apart from in Greece. UK Netherlands 30 Italy 20 France 10 Spain 0 Greece Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 33

34 Deal levels vary enormously at the European country level across food categories, but most have been quite stable for the past year apart from the lower level in UK. 60 % FOOD SALES WITH TRADE PROMOTION, VOLUME, IN SEVEN EUROPEAN COUNTRIES Germany The last two quarters has seen trade promotion levels for food stabilise in most countries with a reduction in the UK and continued increase in Greece. Around 20% seems to be a popular level, with Greece approaching that and Italy some 10 points higher. UK Netherlands 30 Italy 20 France Spain 10 Greece 0 Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 34

35 Non-food categories also show variable deal levels across Europe and a considerable increase in Greece over the past year. % NON-FOOD SALES WITH TRADE PROMOTION, VOLUME, IN SEVEN EUROPEAN COUNTRIES 70 Germany Trade promotion levels on non-food are more erratic than on food, often rising in Q2 for summer and Q4 for Christmas. Greece has been increasing quickly, having reached 3 rd highest in the latest quarter. UK Netherlands 30 Italy 20 France 10 Spain 0 Greece Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 35

36 Looking forward RESOURCES WHY ONLY WITH IRI? IRI Global Executive Market Reviews (IRI GEMs) give fast moving consumer goods manufacturers and retailers access to POS-based information outside of their home country. This solution is ideal for exploring new market opportunities, to understand the players and products in countries where you don t yet have a presence. This is also valuable for understanding new or adjacent categories in foreign markets. IRI GEMs are based on the retail census data IRI collects from grocery, drug and other available FMCG retailers across countries. Information is available from the United States, the UK, France, Germany, Spain, Italy, the Netherlands, Greece, Puerto Rico, Australia, New Zealand and Japan. IRI Price & Promo models provide a global analytical solution for all revenue management needs. They enable both retailers and manufacturers to get fast and in-depth category insights on key price and promotional levers, to understand their respective impacts on the portfolio, allowing full return on investment analyses, identifying growth opportunities, and enhancing overall bottom line. Faster: IRI s unique Liquid Modeling technology, leverages WhiteBox in-memory database-farm to ensure integrated workflows with high responsiveness and unprecedented speed across the what, so what and now what. More Accurate: Proprietary IRI algorithms and advanced prescriptive analytic methodologies identify opportunities, quantify the revenue potential and recommend specific actions. Proven: A never before used integrated and expanded causal dataset, built on the basis of three decades of unique IRI expertise. Trusted: Working with 95% of CPG, retail and health & beauty companies in the Fortune 100. Certified: The biggest and fastest growing marketing analytics centre in the world, located in Europe and ISO certified. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 36

37 Final notes Source: IRI InfoScan, syndicated retail tracking service. Methodology: Quarterly review, year-on-year data for fast moving consumer goods. Country coverage: France, Germany, Greece, Italy, The Netherlands, Spain and the United Kingdom. IRI Food Shopping Basket includes the following products: Ambient Mayonnaise, Ambient Wet Soup, Beer, Butter, Margarine & Spread, Canned Tuna Fish, Cereals, Colas, Dry Cat Food, Energy Drinks, Frozen Pizza, Ambient Fruit Juice, Ambient Milk, Rice, Wet Dog Food, Yogurts. To gain deeper insights, predictive analysis and recommendations on specific products, categories, segments, channels or retailers contact your IRI Consultant or About IRI. IRI is a leader in delivering powerful market and shopper information, predictive analysis and the foresight that leads to action. We go beyond the data to ignite extraordinary growth for our clients in the CPG, retail and over-the-counter healthcare industries by pinpointing what matters and illuminating how it can impact their businesses across sales and marketing. Move your business forward at IRIworldwide.eu International Headquarters: 1 Arlington Square, Bracknell, Berkshire RG12 1WA, UK, Copyright 2015 Information Resources, Inc. (IRI). All rights reserved. IRI, the IRI logo and the names of IRI products and services referenced herein are either trademarks or registered trademarks of IRI. All other trademarks are the property of their respective owners. Copyright 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 37