Offering value and differentiation around the world
We supply fresh prepared foods and produce to international grocery retailers (as well as foodservice providers). As we primarily develop products which are sold under retailers’ own brands it is vital that we know our customers inside out and we can demonstrate flexibility and commitment in helping them achieve their strategic goals.
Our initiatives, in partnership with our retail customers, reflect many of the grocery retail developments that are underpinning today’s environment. We have provided a snapshot below of just some of latest key developments.
Developing and emerging markets are fuelling growth
The three largest grocery retail markets are the US, China, and Japan, and together they account for nearly one third of the world’s grocery retail spend. However, it is the developing and emerging markets e.g. China, India, Russia and Brazil that continue to fuel the growth of the sector, and this trend is expected to continue going forward.
The Institute of Grocery Distribution estimates that the grocery retail markets of China and India will each grow at a compound annual growth rate (CAGR) of 13.2% between 2008 and 2012, outpacing any other country in the top ten. In addition, Russia’s grocery retail market is forecast to grow at a CAGR of 11.6% in the next five years.
A more cautious approach to international retail expansion
In recent years grocery retailers have increased their focus on international expansion, accelerating the pace of grocery retail globalisation. Retailers have been motivated by a number of factors including maturity of home markets, limited opportunities for domestic new store developments, and opportunities to capture new customers in emerging markets characterised by rapid economic growth and rising wealth.
In the short term, however, IGD believes that international expansion is likely to be more cautious and more targeted due to the current economic slowdown. Nonetheless, in the long term, global grocery retailers such as Tesco, Wal-Mart, Carrefour and Metro are expected to focus increasingly on emerging market growth opportunities and reduce their dependence on their domestic markets.
An increasingly value-conscious consumer
With consumer confidence around the world significantly impacted by the global financial crisis, people have become demonstrably more value-conscious. On the whole those grocery retailers who have been able to respond rapidly with a strong value proposition have been the most successful in this challenging period.
In France for example, Carrefour launched a new pricing campaign in August 2008 and cut prices in its Spanish stores. In the UK, Tesco launched a new discounter range and positioned itself as “Britain’s biggest discounter” to compete alongside discount retailers such as Aldi and Lidl whose prominence has been growing rapidly in the UK market.
Premium UK grocery retailers such as Marks and Spencers and Waitrose have also promoted their value for money credentials. Marks and Spencers introduced its ‘Wise Buys’ initiative and Waitrose launched an ‘Essentials’ budget range.
A multi-format approach
Grocery retailers are adopting a multi-format approach in both their domestic and overseas markets to expand their presence. Increasingly this has tended to involve the launch of smaller, more efficient store formats located in neighbourhood areas. For example, in 2008 Tesco opened its first ‘Tesco Express’ in Shanghai, China and at the beginning of 2009 Carrefour opened its first ‘Carrefour Market’ convenience store in Milan, Italy in order to target consumers looking for a quicker and more modern shopping experience.
The demand for convenience stores has been fuelled in the main by smaller household sizes and higher levels of working women. In addition, higher fuel prices coupled with environmental concerns are generating a greater consumer interest towards locally-based shopping.
Developing and expanding retailer brands
Increasingly grocery retailers have been focusing on developing their retailer branded ranges in order to demonstrate their commitment to provide good value for money and grow consumer awareness of and loyalty towards their ‘brand’.
For example, Wal-Mart sells UK subsidiary‘s Asda ‘Extra Special’ premium range in its stores in Canada, Mexico and Japan and Metro aims to generate up to 25% of its total turnover at Real from its retailer branded ranges by 2010.
Rise of the discounter
Hard discounters such as Aldi and Lidl & Schwarz have been and continue to be well-positioned to capitalise on the growing demand for price and value internationally. According to IGD the discount channel is forecast to account for 20% of total grocery spend in Europe by 2012 with share gains achieved through new store developments, (particularly convenience formats) and new retailer branded ranges in fresh and premium foods.
Retailers are reinforcing their ‘green’ credentials
Growing awareness and concern regarding the world’s finite resources have led to a number of environmental and sustainability initiatives being introduced by grocery retailers. Particularly in new store development there has been a greater focus on designing and building stores which consider energy, water, waste and land-use with stores typically constructed out of sustainable materials that use less energy and produce fewer carbon emissions. In the UK, for example, each of the major grocery retailers has opened environmental concept stores and this ‘green’ focus is becoming a fundamental part of retailers’ strategies.