Retail Deep Dive 2014

Prepared by: Larry RyanMay 21st 2014J.5491

2

Any queries to Larry Ryan at B&A

Introduction● A ten year study of grocery shopping behaviour and particularly

focussing on the use and perspective of the discounters

● As a preamble, a review of up-to-date data on confidence, sentiment and recession impact, taken from a variety of sources, many of them qualitative.

● All data is owned by B&A and can be referenced if credited to us.

3

Behaviour & Attitudes Irelands leading independent research and insights agency

We run more qualitative projects than any other Irish agency

Recent gains:

TILDA

Eurobarometer

RTE exit poll

Delve Deeper

4

So, are we or aren’t we?

Want to believe in upturn ...

But diaspora wait and

see...

5

Changed horizons

Kids stay at home longer

Stay in college

See the world and stay away

Care of elderly parents

Postpone real retirement

6

Online anytime

Wifi threshold

‘Verify’ news

Memory prosthesis

Augmented reality

Personal portal

61% have a smartphone (86% of 16-24s)

40% have a tablet (up 15% in 6 months)

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Feb '13

Apr '13

Jul '13

Sept

'13

Dec '13

Feb-14

Apr-14

€0

€10

€20

€30

€40

€50

€60

€70

€80

€90

50.9454.6255.17

61.29

66.70

71.38

77.30

83.97

75.07

62.32

50.0546.6846.52

43.5747.0847.23

51.06

43.6642.9743.85

Q. About how much would you say you spend each week on things you buy for yourself including money spent on clothes, eating out, going for a drink, going to the cinema, gambling, sporting activities and so on?

Short Term

Dublin €50.23Outside Dublin €41.33 ABC1 €51.78C2DE €38.47

Up or down?Weekly Discretionary Income Base: All adults 18+

Fundamental recession impact

2009 2010 2011 2013 2014

34

43

49

4340

One or other in family has had salary or

hours reduced or

lost job (1,137,000)

U25

22%25-34

46%35-49

61%50-64

40%65+

10%

Quite a sharp erosion in fundamental impact, with a key reduction 25-34.

9

Looking forward by region Base: All adults 18+

Sep 12 Nov 12 Feb-13 Apr-13 Jul-13 Sep-13 Nov-13 Feb-14 Apr-14-70-65-60-55-50-45-40-35-30-25-20-15-10

-505

101520

-44

-61

-42

-32 -30

-4

-20

7

16

-52

-60

-38

-48

-39

-23

-36

-9

3

Dublin

Outside Dublin

Q.1 Thinking about the economy as a whole, do you think that the country is better off, worse off, or about the same as last year?

Balance +/-

2012 2013

The gap between Dublin and outside still

exists, however both registered a dramatic increase in confidence this

wave. Outside Dublin has finally

left negative territory.

2014

10

City buzzCity life

picking up

Pub lunches

Return of the Native

Unmortgaged spending

Restaurant Deals

11

Three speed Ireland?

Recovery is not equal…

Recoverers

Golden circle

Strugglers

What will we do this year?

Taking a holiday abroad

Home improvements/extension

Buying a new/newer car

Home entertainment equipment

Having a baby/starting a family

Buying a family home/taking out a mortgage

Buying an investment property

Buying a holiday home

53

24

23

17

9

6

3

1

Chart Title %

Perhaps a sign that people are anticipating

‘normal’ spending. However for many there is a sense of necessity in being ‘forced’ to make

these purchases.

Q. And which of the following are you planning to do over the next twelve months or so?

Base: All adults - 934

Source: B&A Sunday Times Dec 2013

13

Grocery Trends

Supermarket meat!

Aisle End Myopia

Deal Blinkers

Discount Chic

Mainstream Guilt?

Offer route planning

Restraint & release

14

1. Approach to Grocery Shopping

Who does the grocery shopping?All adults 16yrs+

Personally do all/ most grocery

shopping

Neither

Jointly do all/most

58

16

22

17

19

67

Men (480)

%

Women (531)

%

Personally

Jointly

Neither

49

37

9

20

44 43

2002

2013

2013

Incidence of couples taking joint responsibility for grocery

shopping has doubled in a decade

Women still most likely do all or most of the shopping on their

own

% %

Series1

63%

42% 43%

19%

67%

So, how much of the shopping are women really doing?All adults 16+: 1,011

Any Grocery Shopping Responsibility

All Adults

Do All or Most of the Grocery Shopping

Of the 2.25 million grocery shoppers in Ireland, over 1.5 million are women.

Of the 1.5 million who do all or most of the grocery shopping, over 1.2 million

are women – 80%

42%

84%

All Adults

7 5 5 5 73 4

9 8 5 6 5

96 7 5

8

5 6

6 65 5 5

2024 21 27

2732 31

25 2727

3529

64 65 6762

59 60 60 60 58 6054

61One main trip weekly (+ top

ups)

Spread 2+ days week

Daily

It varies

Normal approach to grocery shoppingAll Shoppers: 662

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013% % % % % % % % % % % %

It now looks as if 2012 was the anomaly. The trend shows just how

resilient the main shop is.

Approach to main grocery shop x storeAll grocery shoppers: 662

6166 66

47

7968

2724 27

38

17

23

6 3 28

34

5 6 6 6 2 5

All grocery shoppers Tesco Dunnes Aldi Lidl

% % % % % %

One Main

Spread 2+

DailyIt varies

Aldi main shoppers much more traditional or perhaps more disciplined in their approach.

Main Shoppers

2. Store Usage

Tesco

Dunnes

SuperValu

Any Symbol GroupOther

Main grocery store usedAll Shoppers: 662

27 2520

2923

19

17

18

19

4

4

4

612

18

8 9 12

3 4 56 4 2

% % %

2010 2012 2013

We see major progress in adoption of Aldi and Lidl as main stores: a

more peripheral profile before but reached a tipping point around 2010.

3. Grocery Spend

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201370

80

90

100

110

120

130

140

150

160

€119€123

€127€132 €133

€136 €136€133

€122€119

€113

€120

Chart Title

Long term trend: weekly grocery spend All Shoppers: 662

Shift - +3% +3% +4% +1% +2% = -2% -8% -2% -5% +6%

A surprising 6% growth in spend relative to 2012

Weekly grocery spend x main storeAll Shoppers: 662

2002-2006 2007 2008 2009 2010 2011 2012 2013100

110

120

130

140

150

160

149152

155

130126

101

112 114

134

141

153

143

130

134

113

125127

138

144

134

119

129

114

122126

134

127

138

124

115

121

125

109

125

118

116

111114

113

118

127

136 136

133

122119

113

120

Superquinn Dunnes SuperValu Tesco Aldi/Lidl All Shoppers

DunnesTesco

SuperValu

All Shoppers

Aldi/Lidl

Superquinn

The spread in weeklySpend has contractedfrom almost €40 to Just over €10 in ten years

Average spend per head in household X main storeAll Shoppers: 662

Aldi/Lidl

Tesco

Symbol Groups

Dunnes

SuperValu €122

€125

€93

€125

€118

€47.47

€42.66

€37.20

€35.92

€35.12

Very little difference between Discounters and Tesco, on a per head basis, but SuperValu shoppers seem less constrained overall.

Ave. H.Hold

Size

3.4

3.5

2.5

2.9

2.5

Spend per Household

Spend per Household

Weekly grocery spend vs weekly disposable incomeAll Shoppers: 662

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201440

50

60

70

80

90

100

110

120

130

140

150

160

€119€123 €127

€132

€133€136 €136

€133

€122

€119

€113

€120

€54.62€55.17

€61.29€66.70

€71.38€77.30

€83.97

€75.07

€62.32

€50.05

€46.68€45.90 €42.97

Weekly grocery spend

Weekly disposable income

If grocery spend goes up otherspending must fall

2 in 5 shoppers appreciate that they are starting to spend more

Much higher

A little higher

About the sameA little lower

Much lowerDon’t know

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012

1% 2% 1% 1% 8%3% 5%

10%5% 2% 2%1% 2% 2%

1%

5%

1%5%

38%

30%

10% 11%17% 12%

22%17%

21%27% 20%

37%

46%

43% 45%

21%

37%

34%40%

43%34% 41%

10%13%

26%29%

60%

47%39% 40%

28%33% 32%

3% 6%

17%13%

2013

Clear growth

Grocery spending now versus last year..

This perception is apparent across all storesAll grocery shoppers: 662

13 917 17 14 14

29 38 21 25 26 24

4547

4849

30

50

116

128

21

82 1 2 0

631 0 0 1 2 0

All grocery shoppers Tesco Dunnes SuperValu Aldi Lidl

% % % % % %

Much higher

A little higher

Same

A little lower

Much lowerDon’t know

Main Shoppers

4. Discounter Store Usage

Awareness is now universalAll heard of Aldi or Lidl: 658

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201350%

60%

70%

80%

90%

100%

85%

90%

94%96% 97% 98% 98% 99% 99% 98% 99% 99%

87%

96%98% 99% 99% 100% 99% 100%100% 99% 99% 100%

Have heard of

Local availability is strongBase: All heard of Aldi or Lidl: 658

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201330%

40%

50%

60%

70%

80%

90%

100%

31%

41%45%

53% 53%

58%

71%75%

78% 77%

89%86%

42%

72%

77% 76% 75%

83% 82%

89%92% 91%

95%92%

Available locally

Incidence of visiting is at roughly 5 in 6Base: All heard of Aldi or Lidl: 658

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201320%

30%

40%

50%

60%

70%

80%

90%

100%

27%30%

37%

47%50%

55%

64%69%

73%

76%82% 82%

45%

59%

66% 67%

73%77%

82%

89% 87% 86% 84% 86%

Ever Visited

A threefold increase in Aldi shopping in 10 yearsBase: All heard of Aldi or Lidl: 658

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201320%

30%

40%

50%

60%

70%

80%

90%

100%

23%26%

30%

37% 37%

44%

50% 58%61%

63% 69%73%

38%

55%59% 59%

64%68%

72%77% 77% 78%

70%

79%

There is still a gap between visiting and shopping; people still go to these store stores

for a “look”.

Ever shop

Use monthly+72%

Ever shopped at73%

Ever visited82%

Available locally86%

Aware of99%

Main Grocery Shop18%

Aldi brand status checkAll Shoppers: 662

Conver-sion

25%

98%

89%

95%

87%

Conversion rate is very strong.

Lidl

18%

86%

92%

94%

92%

Use monthly+68%

Ever shopped at79%

Ever visited86%

Available locally92%

Aware of100%

Main Grocery Shop12%

Lidl brand status checkAll Shoppers: 662

Conver-sion

18%

86%

92%

94%

92%

Conversion rate for Lidl is slightly less impressive

Aldi

25%

98%

89%

95%

87%

Frequency of shopping in Aldi/LidlAll shop at each store

Weekly+

Fortnightly

Monthly

Less often/varied

49% 51%56%

40%44%

37% 35%28%

35%41% 42%

32%39% 36% 34% 32%

18% 17%11%

14%11%

14% 15%

15%

21%

20% 20%

17%12%

15% 19%18%

16%12% 15%

13% 15%

14%12%

13%

21% 14% 14%

16%16%

12%15%

14%

17%23% 21%

33% 30%36% 39%

44%

23% 25% 25%

35% 33%38%

31%36%

Very strongacquisition More measured

2005 2006 2007 2008 2009 2010 2012 2013 2005 2006 2007 2008 2009 2010 2012 2013

Future usage plans: momentum remains strongAll current users of each store

5%

18%11% 13%

5%12%

18%13% 9% 8% 5% 2%

15%9% 11% 12%

7% 7% 10% 9% 8% 6%

9%

5%

3%2%

2%

2%

8%

1%2%

1% 5%4%

4%

3% 2% 1%

2%7% 1% 2% 2% 10%

9%

4%

7% 6%

9%5%

4%

5%3%

3% 3% 7%

5%

5% 4% 6%6%

5%6% 4% 4%

6%

46%46%

59% 59% 59%57%

59%67%

60%

57%67%

49%

52%

55%62%

66%

58%

65% 67% 65%61%

64%

18%19%

18% 14% 13%

19%

14% 12%15%

19%12%

18%

18% 23%14%

10%

19%

14% 13% 13%18%

12%

7%3% 3% 5% 3% 6% 4% 3% 4%

8% 8%11%

6% 5% 7% 4%8%

3% 4% 3% 4% 3%

Will buy…

A lot more there

A little more there

The same

A lot/little less

Will not use

Don’t know

2003 2004 2005 2006 20072008 2009 2010 20112012 2013 2003 2004 2005 2006 20072008 2009 2010 20112012 2013

Top 10 items bought

Fresh fruit & veg

Biscuits

Cheese

Household cleaners

Toilet tissue/rolls

Butter/butter spreads

Toiletries

Cereals/Por-ridge/Muesli

Fresh meat

Frozen foods

63

54

49

49

40

39

39

36

34

34

Fresh fruit & veg

Biscuits

Household cleaners

Cheese

Toilet tissue/rolls

Butter/butter spreads

Toiletries

Household products

Detergents/washing powder

Bacon/Rashers

50

40

39

38

34

28

28

26

24

23

%%

Q. Thinking about the last time you shopped in ……… (SHOP) can you list all of the items you bought on that occasion. Anything else?

Base: All shoppers of each store

Lidl has

fewer stapleItems than Aldi

Items bought last visit: key household staple categories

2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

3936

41 47

52 5451

57

63

10 1012

19

1817 18

27

34

19

11

1916

1415 16

12

24

15

9

13

710

8

15

15

1310 9 9 9

11 13 15

22

25

1414

13 15

20

1717

19

34

69

6 5

107 7

11

15

Fresh fruit & Veg Fresh MeatConfectionary Pet Food Sauces Pasta & NoodlesRice/Cous Cous

2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

4543 43 51 49

58

45

51

50

12

11 9

18 17 18

12

20

23

1517 17

1416

14 14

10

1615

11

12 13

9

10

4

10

5

11

12 11 1315 14

12

1716

12

15 1514

1816

1310

18

6

12

9 8

12

8

3

7

7

Fresh fruit & Veg Fresh MeatConfectionary Pet Food Sauces Pasta & NoodlesRice/Cous Cous

Significant growth since 2011.Not experiencing the same broad

momentum as Aldi

2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

80

90

100

17 15 15

1319 18

45 43 43

51 49

58

4551 50

12 11 9

1817

18

12

2023

Bread Fresh fruit & Veg Fresh Meat

Items bought last visit: bread in context

2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

80

90

100

1517

16 13

2127

3936

4147

52 5451

5763

10

10 12

19 18 17 18

27

34

Bread Fresh fruit & Veg Fresh Meat

Significant increases in bread purchasing

since 2011.

Progress in bread more modest at Lidl

despite roll out of in-store bakeries.

Items bought last visit: BWS in context

2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

3936

4147

52 54 51

57

63

10 1012

19 18 17 18

27

34

86 5 5

95

84 6

12 12

9 8

119

11 12 13

28

16 1511

1612 14

15

21

Fresh fruit & Veg Fresh Meat Spirits

Beer Wine

2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

4543 43 51 49

58

45

51 50

12 119

18 17 18

12

2023

6 7 4 59

4 4 2 2

15 1411 12 11

11 10 9

11

2721

16

11

16 16

1613

18

Fresh fruit & Veg Fresh Meat Spirits

Beer Wine

Wine was an exploratory product initially, but fell back to roughly 15% where it

remained until 2012 before its next leap.

Fruit and veg remains the standout category but with notable growth for

meat too.

5. Discounter Imagery

Range of choiceAll current users of each

2 210

510

2 410

4 7 3 3 1 15 3 5 2 2

72 5 4 5

42

23

10

1 0

1

11

0 0 2 12

2 11 1

12

2 1 1

15

8

67

9

10 6

9

9 6

4 614

9

9 1013

10 99

87

57

43

36

47

42

44

4242

43

4237

2729

46

46

4744

4549

44

4547 42

3435

3

39

3037

30

36 37

3037

39

47 38

27 3730

3531 32

3629 33 35

4338

6 126 6 6 9 10 8 8 10

1824

10 7 6 6 5 6 8 9 8 914 14

Excellent

Very good

Fairly good

Fairly poor

Very poorDon’t know

Significant improvement

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

More modest improvement

Quality of productsAll current users of each

2 29

511

2 410

5 6 4 3 1 1 5 3 5 2 16

2 5 4 52 1

02

7

2 0

00 1 1 0 1 1

1 11

1 10

01 1 0

17

5

4 6

5

5 53

3 31 1

145

7 78

5 75

53 2 3

39

30

36 33

33

34 31

38

26 2321

20

46

37

3836

39

41 3638

32 2926 21

32

44

34 4039

39 41

32

46 47

47

41

26

4336 41

3539

39 32

42 4547

46

918 16 13 11

18 18 17 20 2026

34

11 14 13 12 11 1116 18 19 17 20 23

Very high

Fairly high

About average

Fairly poor

Very poor

Don’t know

Rate of improvement picked up in past few years.Same trend: Significant improvement for Aldi, more modest increase for

Lidl.

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

Value for moneyAll current users of each

2 29

511

3 410

4 6 4 3 1 15 3 6 2 2

62 5 4 5

6 2

12

0

3 1

1

13

1 1 5 21 2

12 2

12

1 2 1

13

5

911

1215 17

17

1110

9 713

109 13

14 18 18 1412

14 12 10

41

40

3848 41

3845 35

44 3739

33

47

3942

44 40 38 4138 47 39 44

40

39

5142

34 3542

33 37 3845 47

56

36

4842

38 40 39 37 4036

40 3844

Very good value

Fairly good value

About average

Fairly/very poor

Don’t know

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

Again, Aldi very strong. Lidl more modest.

Prices relative to other supermarkets All current users of each

2 29 5

112 4

94 6 5 3 1 1

6 2 6 2 16 3 6 4 5

46

56 40

3027

3421

26

23

31 36 37 4250 36

33 2827 26

26

21

3026

30

48

38

42

50 4542

53

4655 39

3742

48

43

48

49 52

48 5548

5637 43

46

6 1 913

1417 18

16 1218 16

12

85 8

12 1118

14 1716

19 1913

1 3 1 1 3 5 4 2 6 7 7 6 2 1 1 2 3 4 4 2 5 9 7 6

Much/a little higher

About the same

A little lower

Much lower

Don’t know

Both stores retaining a positive price posting.

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013% % % % % % % % % % %

Changing approaches to grocery shopping in the recessionAll grocery shoppers: 508

Shopped in cheaper grocery stores

Switched from buying branded items to own brands

Traded down to cheaper brands

Bought cheaper items (mince instead of steak)

None of these

67

52

39

34

12

%

88% of grocery shoppers have made at least one of these 4 changes; using a cheaper store is the most prevalent change.

Source: B&A/Checkout (2014)

Recession habits we won’t abandonAll made any change: 448

Shopped in cheaper grocery stores

Switched from buying branded items to own brands

Traded down to cheaper brands

Bought cheaper items (mince instead of steak)

None of these

72

49

33

28

3

%

72% of all shoppers feel they will continue to shop in cheaper stores even as things improve. Only 3% feel they will not hang on to any of

the recession tactics adopted.

Source: B&A/Checkout (2014)

It’s hard to change back

Once habits change they seem to stay changed.

67 63 6051 49 48 48 46

38 38 36 36 35 31

122

3135 40

47 4739

51 49 59 59 60 6360 64

73

68

1 3 0 2 312

2 5 3 3 4 1 6 515

30

House-hold

products

Biscuits

House-hold

cleaners

Chips (frozen

)

Frozen

foods

Ethnic dry

meats

Cereals/

Porridge/

Muesli

Cheese

Butter/ butter spread

s

Sliced cooke

d meat

Bacon/ Rasher

s

Frozen fish

Fresh fruit &

veg

Fresh meat

Baby Foods

Baby Formul

a

% % % % % % % % % % % % % % % %

Trading Down (Buying a cheaper product

than in the past)

Same

Trading Up (Buying more expensive

product than in the past)

Source: B&A/Checkout (2014)

49

Some key take outs

2. We are spending 6% more on groceries than last year

But the disposable income trend remains negative, which means it is still possible that we will see a decrease in 2014.

3. In a very static market with little differentiation, a profound shift has occurred over 10 years

The store that demonstrated a point of difference, had absolute clarity of positioning and underlying commitment to quality has won through

1. Shopping is more egalitarian and communal perhaps than before

But women are still evidently in charge

4. Aldi & Lidl had good timing and entered a conservative market that was about to be hit by financial turmoil

From being an alien and unsavoury concept they have become first-visit choices for many and a source of fresh food (rather than just detergent and loo roll)

50

5. Acceptance of Aldi is very high, with 1 in 3 buying meat there on their last visit.

The Northern Europeans withstood a quality & trust challenge and championed Irish origins very forcefully.

6. We are in an era where satisficing may have replaced optimizing

Shoppers are prepared to make trade-offs in many situations and can be quite content with “good enough” if they are saving money

7. ‘Overnight success’ was hard fought

Aldi used every possible tactic: press inserts, TV ads, product copying, predatory pricing, product demonstration, advertorial, celebrity chefs, massive store expansion

Some key take outs

51