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Macroview Weekly News update Your window on the latest trends in Packaged Groceries Stephen Hall Friday 29 th July
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Page 1: Your Weekly News Update!

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

Stephen Hall

Friday 29th July

Page 2: Your Weekly News Update!

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

• Remaining BHS stores set to close within weeks• Consumers show resilience in the aftermath of the EU Referendum• Tesco links up with Holland & Barrett to pilot new health & wellbeing ‘store in

store’ format• No immediate impact from Brexit vote on grocery sector; Tesco’s market share

declines slowing• Heatwave boosts sales at Waitrose but trading at John Lewis wilts• Profits up at McColl’s but underlying sales continue to slide• GSK announces major investment plan• Asda income tracker shows another rise in disposable income for UK families• Amazon introduces Dash device for customers of new grocery delivery service• Superdrug enjoys sales growth in budget skincare range• LloydsPharmacy gets CMA green light to acquire Sainsbury's unit • Consumer confidence drops to lowest level since 1990• Number of new product launches falls by 13% as supermarkets cut ranges• Tesco launches free fruit for kids initiative

Weekly News Summary – 25th July 2016

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Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 3

Remaining BHS Stores Set To Close Within WeeksThe remaining BHS stores are reportedly set to close over the next four weeks, putting 5,000 staff out of work.

According to Sky News, administrators Duff & Phelps will announce today the last 114 BHS outlets still trading will start closing over the coming weeks with brand disappearing from the high street by 20 August.  The report said 50 BHS stores have already closed, with the loss of more than 1,300 jobs.

After failing to find a buyer for the whole business, administrator Duff & Phelps recently sold BHS’ 70 overseas stores and online business to Qatari retail group Al Mana. It had continued to seek buyers for the UK stores, although hopes of saving a large chunk of the stores have all but faded with sites now likely to be sold off on a piecemeal basis.

The news comes amid today’s publication of a damning report by MPs on the retailer’s failure. It accuses Sir Philip Green, the billionaire former owner of BHS, of choosing to rush through the offloading of a business that was losing money and encumbered with a massive pension fund deficit, to a buyer who he was aware was “manifestly unsuitable”.

Source: NamNews 25th July 2016

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Consumers Show Resilience In The Aftermath Of The EU ReferendumConsumer confidence remained unchanged in the days that immediately followed the EU Referendum, according to the Q2 2016 Consumer Tracker from Deloitte.

The survey of 3,000 consumers, which was carried out between the 24th and 27th June, found that its headline measure of consumer confidence remained flat from the previous quarter, at -8. However, despite overall confidence remaining stable, consumers did appear to be concerned about job security in the future.

According to the Tracker, consumer confidence in job security fell by three points in Q2 from the previous quarter, and by six points compared to the same period last year. For those aged 18-34, confidence in job security fell by seven points, and is now at its lowest level since Q1 2012.

The Tracker also found that consumer spending in Q2 2016 remained largely stable. As has been the case in recent quarters, consumers appear to be shifting their spending towards non-essential, discretionary items and away from everyday essentials. Net spending on both big and small ticket discretionary items rose compared to the previous quarter.In addition, leisure spending continues to grow at a faster rate than retail spending, as consumers prioritise spending on experiences, such as eating out and entertainment.

Ben Perkins, head of consumer research at Deloitte, commented: “Consumer spending has shored up well in the last three months, with spending having risen in almost every category year-on-year.

“It appears this healthy level of spending looks set to continue over the next three months. UK consumers plan to spend more on leisure activities, such as holidays and going out, as well as groceries and big ticket items such as furniture and appliances. They expect to spend less on clothing and footwear.

“It remains to be seen what impact political and economic uncertainty will have on the consumer market. However, a silver lining lies in the fact that consumer-focused economic fundamentals remain favourable, with inflation, unemployment and the cost of borrowing still all low.”

Source: NamNews 26th July 2016

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Tesco Links Up With Holland & Barrett To Pilot New Health & Wellbeing ‘Store In Store’ FormatTesco and Holland & Barrett have announced today a new partnership to introduce a health and wellbeing ‘store in store’ format in a number of Tesco stores across the UK.

The new partnership follows Tesco’s introduction of several Arcadia sites in its larger stores last year as part of moves to drive football at its out-of-town sites.

The first Holland and Barrett store opened in the Dudley Tesco Extra yesterday, with a number of further concessions set to be introduced over the summer.

Holland & Barrett’s sales areas will include a range of brands from the specialist health and wellness retailer, including Bootea, snail gel and its best-selling coconut-based products. The new format will be integrated within Tesco’s store sales floors, enabling its customers to shop across some 3,000 product lines from Holland & Barrett’s health, food, beauty and sports ranges. Customers will also be able to access Holland & Barrett’s natural beauty section showcasing the brand’s ethical and natural beauty products, its natural Tea Bar and its Pick n Mix station for healthy snacking.

Holland & Barrett at Tesco DudleyMatt Davies, Tesco UK and ROI CEO said: “We’re always looking at new ways our stores can best serve the needs of our customers, so we’re excited to be embarking on this partnership with such a recognised and trusted brand as Holland and Barrett. The new concessions will provide an exciting new offer for our customers that will complement our Tesco stores.”

Holland & Barrett CEO Peter Aldis added: “This pilot is a fantastic opportunity to demonstrate the value of a partnership between two trusted and complementary brands in retail and we are excited to be exploring with Tesco how their customers respond to this innovative in-store concept.

“We know that Tesco’s customers are diverse, like ours, but one thing that they have in common is that they want access to a wide range of health and wellbeing products without having to take too much time out of their busy routines to source them. We hope that this pilot will help them to achieve this as we continue our mission to bring health and wellbeing to high streets across the UK.”

Source: NamNews 26th July 2016

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No Immediate Impact From Brexit Vote On Grocery Sector; Tesco’s Market Share Declines SlowingLatest grocery share data from Kantar Worldpanel suggests last month’s Brexit vote has yet to have any real impact on prices or volume sales in the grocery market.

Figures for the 12 weeks ending 17 July 2016 show continued slow growth for the supermarket sector, with sales up 0.1% compared to last year. Sales at the Big 4 grocers remained weak, whilst smaller chains and the discounters made gains.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, commented: “The EU referendum result has had no immediate impact on the prices retailers are charging or the sales volumes consumers are buying over the past 12 weeks. The nation’s average shopping basket is 1.4% cheaper than a year ago, exactly the same level of deflation as reported last month, and it remains to be seen if the Brexit vote will bring about any price rises this year.

Among the individual retailers, sales at Tesco fell by 0.7%. Kantar Worldpanel said the retailer’s market share declines are now slowing, down by 0.2% percentage points to 28.3% of the market. This was Tesco’s slowest rate of share loss since March 2014 and has been helped by an improved performance from its larger stores.

At Sainsbury’s sales fell by 1.1%, taking market share down by 0.2 percentage points to 16.3%. McKevitt commented: “Sainsbury’s has followed through on its promise to remove multi-buy offers from its shelves in favour of everyday low prices and simple price cuts and less than 1% of its sales now require shoppers to pick up more than one item to feel the benefit of the promotion.”

Meanwhile, newly installed Asda Chief Executive Sean Clarke saw sales at the grocer fall by 5.6%, with share declining to 15.5%. McKevitt said: “Asda is alone among the big four retailers in increasing the proportion of sales made on promotion compared with last year. However, its absolute level of sales sold on a deal remains behind its large competitors, where promotions account for 45.2% of sales.”

Morrisons sales fell by 1.8%, although this was its best results since January this year. The figures still reflect its wave of store disposals in 2015 and their impact on Morrisons’ performance is expected to lessen in the next few months. While Morrisons’ overall market share fell by 0.2 percentage points to 10.7%, its premium own-label lines showed strong growth of 3.8% – the best premium private label performance among the big four.

The discounters continued their rapid growth, helped by a 5% increase in the number of shoppers visiting either Lidl or Aldi during the period. Lidl reached a new market share high of 4.5% thanks to a sales increase of 12.5% while Aldi, up 11%, increased its market share to a record 6.2%.

Source: NamNews 26th July 2016

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Heatwave Boosts Sales At Waitrose But Trading At John Lewis WiltsWaitrose saw its sales climb 7.2% in the week to 23 July, as its customers stocked up on products to help them cool off in the heat.

Amid rising temperatures, the chain sold a record amount of ice cream with sales jumping 74%. Frozen fruits were also up 39% and frozen desserts increased by 35%.

Meanwhile, shoppers quenched their thirst by picking up beers, wines and spirits with sales climbing 16.9%. Sales of Pimm’s grew by 63%, rosé by 54% and sparkling wine by 93%. Sales of freshly squeezed juice were up 61%, iced coffee increased by 50%, and ice was up a cool 140%.

Its outdoor living category also had a record week with sales up 65%. Sales of charcoal rose 120%, outdoor toys by 300% and sales of BBQ meat rose 45%.

However, the heatwave had a negative impact on sister chain John Lewis as shoppers focused on making the most of the good weather. The chain’s sales fell by 4.3% during the week with the fashion and home categories suffering the most – sales down 7% and 11.2% respectively. However, sales in electricals department rose 6.4%, boosted by demand for home cooling products such as fans and air conditioning units.

Source: NamNews 27th July 2016

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Profits Up At McColl’s But Underlying Sales Continue To SlideMcColl’s Retail has posted higher first half profits, although underlying sales continued to fall amid the competitive trading conditions.

During the 26 weeks to 29 May, the group’s pre-tax profit was up 8.1% to £8.2m, whilst operating profit before exceptional items was unchanged at £9.6m.

Overall like-for-like (LFL) sales were down 2.2% with contrasting performance across the business. LFL sales in recently acquired and converted stores were up 1.0%, whilst sales in its premium convenience and food and wine stores fell 1.5%.  Meanwhile, LFL sales in newsagents and standard convenience stores were down 3.7% as a result of “continued pressure on traditional categories”.

The group added that investment in its food-to-go offer continued to deliver strong sales with LFL performance ahead by 11.4%. It now has five Subway outlets operating within its store estate with plans for a further six to be opened by the year end.

24 new convenience stores were acquired during the period with a further 19 newsagents converted to food and wine stores.  At the period end, the group operated 933 convenience stores and 433 newsagents with it on target to achieve 1,000 convenience stores by the end of 2016.

Earlier this month, McColl’s agreed a £117m deal to acquire of 298 c-stores from the Co-op Group. The stores will begin transitioning over at the beginning of next year.

Jonathan Miller, chief executive, said: “I am pleased to report marked strategic progress and a robust financial performance in what has been another challenging period for the sector.”

He added: We are committed to enhancing our convenience proposition through growing market share, developing our product ranges and delivering great customer service.  I am especially pleased that we have been successful in the transformational acquisition of 298 Co-operative stores.  This is a pivotal moment for the business and allows us to accelerate our growth ambitions and considerably increase our neighbourhood presence.”

Source: NamNews 27th July 2016

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GSK Announces Major Investment PlanDespite the recent Brexit vote, GSK has signalled its commitment to the UK by announcing a £275m investment plan at three of its manufacturing sites.

The move will boost production and support delivery of its latest respiratory and large molecule biological medicines, the vast majority of which will be overseas export.

Amid concerns that the vote to leave the EU could lead to major multinational companies curtailing their investment in the UK, GSK said it still views the country as an attractive location for investment in advanced manufacturing due to a number of factors including the skilled workforce, technological and scientific capabilities & infrastructure and a competitive corporate tax system.

Andrew Witty, CEO, GSK said: “Today’s announcement reflects further investment to support our pharmaceutical pipeline and meet growing demand for our innovative portfolio of newly launched products. It is testament to our skilled UK workforce and the country’s leading position in life sciences that we are making these investments in advanced manufacturing here. From their manufacture in the UK, many of these medicines will be sent to patients around the world.”

The investment announced today is split across three UK sites: Barnard Castle in County Durham, Montrose in Angus, and Ware in Hertfordshire.GlaxoSmithKline currently employs 16,000 people in the UK, 6,000 of which are employed at its nine manufacturing sites.

Source: NamNews 27th July 2016

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Asda Income Tracker Shows Another Rise In Disposable Income For UK FamiliesFamilies across the UK saw another rise in spending power in June, with average discretionary income once again reaching £201 a week, according to Asda’s latest monthly Income Tracker.

The figures reveal that families enjoyed an extra £12 a week (6.2%) on average in June, compared to the same period last year. The increase marks the 20th consecutive month of double-digit growth in spending power, with total average discretionary income remaining at a record level since the Income Tracker began in 2008.

The data suggested that people’s income was being boosted by low unemployment, the falling cost of food and drink, and lower mortgage payments.

However, while discretionary income rose overall, the rate of growth in spending power slowed slightly, falling below 7% for the first time in two months. Part of this can be attributed to a rise in consumer price inflation, which reached its highest rate since late 2014 (0.5%).

Transport costs also provided upward pressure on overall levels on inflation, following an increase in the cost of airfares for flights within Europe, as well as a rise in the price of petrol.

Sam Alderson, Economist, Cebr, said: “Whilst the latest data shows a slight slowing in spending power growth, we continue to see a picture of broad increases in discretionary incomes across the country.

“In the uncertain economic environment the UK now faces, the gains in spending power seen in recent years cannot be understated. Whilst consumers have understandably lost some confidence in recent weeks, improved finances should provide some support in navigating the uncertain outlook.”

An Asda spokesperson added: “While a rise in consumer price inflation and transport costs influenced the overall growth in consumer spending power, families across the UK continued to enjoy some buoyancy in their bank balances last month thanks to a continued fall in essential items and steady levels of wage growth.

Source: NamNews 28th July 2016

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Amazon Introduces Dash Device For Customers Of New Grocery Delivery ServiceFollowing on from the launch its AmazonFresh grocery delivery service in London last month, Amazon has announced the introduction of its innovative Dash device, which it launched in the US last year.

The six-inch long device allows customers to scan a product barcode or say the name of a product to add items automatically to their Amazon online shopping basket. These items are then ready for purchase the next time the customer visits the Amazon.co.uk website or mobile app. Dash will be available for AmazonFresh customers, initially at no additional charge with their second AmazonFresh order, from now until 28 August 2016.

Amazon DashThe company claims the device makes online shopping significantly quicker and easier for customers by allowing them to build their shopping list without having to browse its website. The device also learns as it is used, recognising millions of products including groceries, household, health and beauty products, enabling customers to keep track of their weekly grocery order.

“We’re all used to trying to remember the contents of the fridge and kitchen cupboard and scribbling down reminders on pieces of paper,” said Ajay Kavan, Vice President of AmazonFresh. “With Dash, at any given time, customers can keep track of products when they come to mind and scan to reorder groceries and household essentials as soon as they run out. At Amazon, we’re always looking to innovate based on feedback and Dash has been designed to continually learn as customers use it.”

AmazonFresh is now available in 128 London postcodes, allowing members of its Prime scheme to order a full weekly grocery shop from a range of over 130,000 products, which include major brands, Morrisons’ own label lines and offerings from local food producers.

Source: NamNews 28th July 2016

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Superdrug enjoys sales growth in budget skincare rangeSuperdrug has reported seeing a dramatic year-on-year increase in sales of budget skincare products.

The health and beauty retailer said its customers are choosing lower price products in place of premium skincare items which is due in part to the rise in popularity of Korean skincare trends.

Sales of Superdrug’s own brand Simply Pure Hydrating Serum have surged by 700% year-on-year while the Simply Pure range has seen a 30% increase. Bioré’s new charcoal and baking soda cleansers have boosted sales for the brand with total sales up 137%.

While skincare staple Palmer’s Cocoa Butter Lotion has grown its sales by 21.5%, sales of Superdrug’s Own Brand Vitamin E Micellar Water have risen by 40%, which Superdrug said shows that consumers are opting for every day skincare as well as innovative and new skincare products.

Simon Comins, Superdrug buying director said: “When it comes to beauty sometimes the simple option is the best, and the most cost effective. But if customers are looking for innovation then they are lucky that the high street is moving fast to offer budget alternatives to designer brands.”

Source: Retail Bulletin 29th July 2016

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LloydsPharmacy gets CMA green light to acquire Sainsbury's unit • CMA gives ’conditional’ green light to deal • LloydsPharmacy must sell stores in 12 areas of England and Wales to allay competition concerns• Celesio-owned business aiming to acquire 277 Sainsbury’s pharmacies

LloydsPharmacy’s deal to buy Sainsbury’s pharmacy unit has had the go-ahead from competition authorities, but it must still sell some stores.

The Competition and Markets Authority said it has given a ‘conditional’ green light to the deal, but LloydsPharmacy must sell pharmacies in 12 areas to satisfy competition concerns.

The CMA had said in April that the Celesio-owned business would have to sell pharmacies in 13 areas of England and Wales, as it seeks to acquire Sainsbury’s 277 pharmacies.

The body said today the areas had been identified where the two firms pharmacies are “such close competitors that the merger may be expected to lead to a substantial lessening of competition”.

Celesio will not be allowed to close the stores it has to sell, the CMA said.

Simon Polito, chair of the CMA’s inquiry, said: “In those areas where a Sainsbury’s pharmacy is currently a strong competitor, under common ownership Lloyds might be able to reduce service quality to increase profits without being concerned about losing customers to a rival.

“By selling the LloydsPharmacy in those areas to a new owner with the relevant expertise and the incentive to attract customers through its service quality, we can ensure that customers do not lose out from this deal.”

The 12 areas are: Beaconsfield, Bracknell, Cardiff, Christchurch, Kempston, Kidlington, Leeds, Liverpool, Luton, Reading/Theale, the Sandy/Potton/Biggleswade area and Warlingham.

Source: Retail Week 29th July 2016

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Consumer confidence drops to lowest level since 1990Confidence among consumers has dropped to its lowest level in 26 years thanks to the Brexit referendum, according to the latest data from research institute GfK.

British consumer morale plunged to -12 this month – compared to -1 in June – the biggest decline in the monthly Consumer Confidence Index since March 1990.

This is also a further 3-point drop from the -9 recorded by one-off post-Brexit index in early July, although the rate of decline has slowed dramatically since the immediate aftermath of the referendum.

"We've seen a very significant drop in confidence, as is clear from the fall in each of our key measures," GfK head of market dynamics Joe Staton said.

"Its future trajectory depends on whether we enter a new period of damaging economic uncertainty or restore confidence by embracing a positive stance on negotiating a new deal for the UK.“

Scotland had the lowest consumer morale in the UK, where it plummeted by 14 points to -22 in the first two weeks of July. Staton said calls for a second Scottish independence referendum may have attributed to that.

Other consumer surveys have indicated various results since the Brexit vote, with Deloitte earlier this week releasing data showing it has remained the same as it was before the referendum.

GfK's monthly Consumer Confidence Index dates back to 1974.

Source: Retail Gazette 29th July 2016

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Number Of New Product Launches Falls By 13% As Supermarkets Cut RangesThe number of new products being launched by manufacturers into UK retail stores is falling significantly, according to a study of the performance of new grocery products from launch, published by IRI.

As the likes of Tesco cut their ranges to remove slower selling items, resulting in 1,000 fewer packaged grocery items on shelves (a drop of 6.3%), the study shows that 13% fewer new branded items were launched in 2015 compared with 2013.

IRI’s 2016 New Product study shows a drop in the number of new products launched in both food and non-food categories. The number of new private label items launched also fell, but twice as quickly – by 26%. This trend is continuing into 2016, with the rate of new product innovation falling further.

According to IRI, first year sales of branded NPD contributed just 2% to overall sales in the UK across 2014 and 2015, down from 3% (based on a similar study of new products by IRI in 2011). While NPD is recognised as a key driver in category growth, encouraging consumers to trade up at a premium price, there were less new branded items launched across food and non-food sectors.

“As UK retailers look to rationalise their ranges, new products are finding it harder and harder to get listings. At the same time, however, suppliers are producing fewer new products, largely due to budgetary pressures brought about by massively high trade promotion costs and squeezed margins as market prices drop,” commented Tim Eales, author of the study and Director of Strategic Insight at IRI.

“We are also seeing new products not being supported by trade promotions as much as they used to be, which is contributing to their price premium having increased and, arguably, negatively impacting rate of sale. Delisting is happening more often and more rapidly under the scenario of more aggressive range management by retailers. All of this culminates in a big drop in the contribution of NPD to overall grocery sales, a serious concern given that it is recognised as the lifeblood of an industry that is struggling to cope with a number of serious challenges.

IRI’s study also shows that new products are finding it harder to achieve distribution in multiple retailers. On average, the maximum distribution achieved by new products in multiple retailers in the latest study was 44%, 5 points lower than when IRI measured it in 2010/11. It was 3 points lower for food products and 9 points lower for non-food products.

Eales commented: “Achieving good distribution is essential to maximise sales of new products, but this is getting harder and harder to do. To be successful with new product development, manufacturers will often aim for 75% distribution within 12 weeks. In fact, what we’re actually seeing is that only 1 in 20 new launches achieve this target in multiple retailers, and only 1 in 7 ever achieves that level of distribution at any point in their life. It seems that as retailers concentrate on reducing range, it has become more difficult to grow distribution for new products.”

Source: NamNews 29th July 2016

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Tesco Launches Free Fruit For Kids InitiativeTesco has unveiled its latest initiative to improve its image and win back customers – offering children free fruit while their parents are shopping in its stores.

The scheme is being launched in over 800 Tesco stores across the UK with the retailer saying the move is aimed at creating healthier eating habits amongst children. Research has shown that only around 10% of children are eating the recommended five portions of fruit and vegetables every day.

The move comes after Maria Simpson, a Tesco checkout worker from a store in Lincolnshire, suggested giving free fruit to parents for their children to eat during shopping trips as an alternative to sweets. The idea was taken up by the store and was so well received by customers that Tesco trialed the initiative in Scotland to see how it might work on a bigger scale.Matt Davies, Tesco CEO for UK and ROI said: “We’re Britain’s biggest greengrocer, so we want to make it easier for parents to get their children eating more healthily.”

“As a Dad, I know it can be tricky getting children to eat their fruit and vegetables, so we’re hoping this initiative will help create healthy eating habits that will stay with children as they grow up.”

The initiative has been welcomed by health experts and charities. Simon Gillespie, Chief Executive of the British Heart Foundation, said: “It’s great to hear about Tesco’s new ‘Free Fruit for Kids’ initiative. It’s a positive step towards improving children’s health throughout the UK and helps parents ensure their children get their five portions of fruit and vegetables every day.”

Helen Dickens, Diabetes UK Interim Director of Prevention of Type 2 diabetes, added: “Eating fresh fruit is an important part of a healthy diet, and this exciting new initiative from Tesco will make it even easier for parents and children across the country to swap less healthy snacks for one of their five a day.”

The initiative marks the latest step in Tesco’s drive to make it easier for customers to eat more healthily. In 2014 Tesco became the first major retailer to remove sweets and chocolates from its checkouts across all its store formats.  Whilst last year, Tesco announced that all the children’s lunchbox-sized soft drinks it sells would have no added sugar in them.

Source: NamNews 29th July 2016

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GB market shares – July 2016The latest Kantar read of the GB grocery, the first measure of the market since the EU referendum, shows a return to fractional growth despite sector deflation remaining at -1.4%. Once again all Big Four players show sales declines, while discounter growth slowed but remained in double digits.

+£31.3bn

Impl

ied

y-o-

y sa

les

grow

th

%

Tesco28.2%

Sainsbury's16.3%

Asda15.5%

Morrisons10.7%

Co-op6.4%

Aldi6.2%

Waitrose5.1%

Lidl4.5%

Iceland2.1%

Others5.2%

Lidl Aldi Iceland Co-op Waitrose

Tesco Sainsbury's

Mor-risons

Asda

12.5%11.0%

2.8% 2.1% 1.6%

-0.7% -1.1% -1.8%

-5.6%

Market growth: +0.1%

Source: Kantar Worldpanel, 12 weeks to 17 July 2016

GB market shares

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

Stephen Hall

Friday 29th July


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