Tesco Commits To Keeping Prices Down, With Help Of Suppliers

The pledge by Tesco – echoing that of Sainsbury’s, Lidl and Aldi in recent days – suggests the sector faces a price war at a time when suppliers are looking to pass on higher commodity and supply chain expenses.

Tesco stated that it will try to mitigate inflation for consumers through its cost-saving programme. The retailer also plans to buy stock in larger volumes and vowed to work collaboratively with suppliers to keep down prices.

NamNews Implications:

• One could say that in keeping prices down for the past 10 years…
• …state-of-art retailers have exhausted all slack in the efficiency system…
• …meaning there is little further scope for squeezing savings.
• Besides which, as suppliers know, scale purchasing can rarely translate into significant price discounts..
• Meanwhile, with very real inflationary costs already in the system…
• …the market has to move prices in tandem, obviously by instinct rather than by discussion.
• In which case, it only takes one retailer holding back on price increases to gain a real competitive advantage…
• (Say a discounter large enough to lower profits at the expense of its global portfolio)
• i.e. Hold onto your hats, folks!

#Inflation #Competition #SupplierFairShare #GSCOP

Aldi Won Christmas On Social Media

Analysis by Social Media Management platform Maybe* ranked the major supermarkets according to those who most successfully engaged customers from social media posts across Facebook, Twitter and Instagram.

The analysis showed that whether it was gin or caterpillar shaped birthday cakes, Aldi led the way throughout 2021 in the social media stakes with its ongoing disputes with Marks & Spencer.

NamNews Implications:

• Humour: a high-risk, high payoff strategy.
• Requires careful handling, reader-insight, and generosity...
• …but ‘Bingo’ if it strikes a chord.
• (and is worth/easy to pass on/re-share)
• We are entering even more serious, inflationary times...
• ...but well-placed humour has to pay dividends.
•  But it needs to translate to sales, rather than simply leave a warm glow...
• (but feeling better helps!)

#Controversy #competition #Humour

Recovery Continues At Boots Ahead Of Potential Sale

Walgreens Boots Alliance (WBA) raised its full-year profit guidance yesterday after both its US and UK businesses delivered better-than-expected sales performance during its first quarter, aided by vaccination activity and surging online sales.

In the UK, comparable retail sales at Boots jumped 16.3%, recovering from the significant declines last year when its high street and travel sites were impacted by lockdowns, and shoppers turned to supermarkets for their health & beauty needs.

NamNews Implications:

• Clearly the future of Boots lies in success online…
• (and optimising their consumer franchise in terms of patient/healthcare)
• Especially given the assessment anticipated from Private Equity companies.
• Meanwhile, suppliers proposing online-based initiatives will have the most appeal in the current situation…

#BootsTakeover #BootsFuture

Tesco And Discounters Best Performers Over Christmas Period; Supermarkets See Record Own Label Sales As Inflation Accelerates

Given weaker overall sales than 2020 when Covid restrictions boosted demand in supermarkets to record levels, the market share data from Kantar showed consumers treated themselves during the festive season, but with more premium own-label ranges as inflation in the sector pushed up the cost of grocery shopping.

NamNews Implications:

• Note Tesco Finest & Sainsbury’s Taste the Difference as premium O/L performers
• (particularly if you subscribe to the belief they are better than National Brands…)
• Also ‘grocery price inflation reached 3.5% in December’ as a rehearsal for Inflation-2022!
• …driving discounter share growth resulting from an inevitable discounter-driven price war.
• As always, key is how your Christmas sales compared, by format and category.

#LatestGroceryShares #ChristmasTrading2021

Consumers Buying More Premium Own-Label Ranges Despite Rising Prices; Tesco And Discounters Gain Share

All the major grocery retailers in the UK saw their sales fall over the 12 weeks to 28 November against tough comparatives with last year when Covid restrictions were reintroduced. The data from Kantar also suggests that rising food prices aren’t impacting people’s desire to treat themselves over the festive period.

Take home grocery sales fell by 3.8% during the period as consumers ate out more compared with 2020. However, sales remain strong compared with the market before the pandemic, and grocery spend was 7.0% higher in the latest 12 weeks than in 2019.

NamNews Implications:

• Key issue is growth of premium private label at the expense of equivalent national brands.
• The fact that the quality of premium private label can be equal or even better than national brands at the same price…
• …means better value for money…
• …and probably a permanent shift in allegiance.
• A backdrop of the remorseless growth of online and the discounters…
• …where higher pipeline inflation has not really kicked in yet.
• Means seatbelt tightening a default option for 2022…

#PremiumPrivateLabel #DiscounterShare #OnlineShare

WBA Exploring Sale Of Boots

Following on from rumours last month, a new report has suggested that Walgreens Boots Alliance (WBA) is lining up advisers to explore options for its Boots chain in the UK, including a sale that could value it at as much as £10bn.

According to Sky News, WBA will hire Goldman Sachs to examine the hiving off of the health & beauty chain, potentially via a sale or separate listing.

NamNews Implications:

• NAMs have two options:
• Await a formal announcement re new owners.
• Conduct some what-ifs on possible outcomes and steal a march on rivals.
• Either way, one outcome will be possible prices & terms disparities re a new retail rival.
• (…off or online…)
• In which case, best harmonise now before the new combo do it on your behalf…
• Or in the case of a PE purchase, prepare for a whole new way of dealing with Boots.
• See The Implications of Private Equity Takeover of a Mult

#TradeConcentration #Consolidation #Takeover

Aldi’s Christmas Ad The Most Effective

Research by Kantar, which combined consumer survey responses with facial recognition AI technology, has found Aldi’s ‘Kevin the Carrot’ campaign to be the most effective of 24 festive adverts tested this year.

It scored in the top 6% of all UK ads in terms of being both ‘distinctive’ and ‘enjoyable’, and was also the campaign that sparked the most conversation. After Aldi, Coca-Cola was the second-best overall, followed by Lidl...

NamNews Implications

• A particular emphasis on friends and family says it all...
• Note: Retailers (especially discounters!) came late to advertising!
• Watch again for proof positive

#DiscounterWinners

Issa Brothers Mulling Merger Of Asda And EG Group

The entrepreneurs and private equity partners TDR Capital have recently been reviewing options to break up their 6,000-strong global forecourt empire. However, Bloomberg News reported on Friday that a merger of their two businesses is being discussed to create a combined entity valued at around £26bn, including debt.

NamNews Implications:

• A listing in the short or even medium-term i.e. going public unlikely (debt)…
• Australian petrol sites sale a probability to simplify holdings (and raise some cash)
• Suppliers should anticipate amalgamation, if only to optimise buying power…

#Amalgamation #Simplification #CoreBusiness #Optimisation

Retailers Putting Up Prices At Fastest Pace In 30 Years Amid Early Christmas Shopping

Faced with mounting cost pressures, retailers in the UK are putting up prices at the fastest rate since 1990 whilst benefitting from early Christmas shopping due to fears over supply disruption.

In the CBI’s quarterly Distributive Trades Survey, the balance of retailers reporting higher selling prices stood at +77% in November. That was the highest level since May 1990, with the pace of rises expected to be broadly similar next month.

NamNews Implications:

• We have all experienced the inflation drivers in 2021.
• So no surprises then…
• Only issue is by how much?
• How about 5% for starters…
• …or perhaps a more realistic 10%?

#Inflation #CostPrices

Lidl GB Returns To Profit; Sets New Store Target

Latest accounts for the year to 28 February 2021 show Lidl GB recorded a pre-tax profit of £9.8m, compared to a loss of £25.2m in the previous 12 months when it invested heavily in store openings, recruitment, and its supply chain.

Lidl’s total sales rose 12% to £7.7bn, boosted by 55 new openings and raised demand for food & drink in supermarkets during the pandemic.

NamNews Implications:

• NPBT 0.1% is still very slender, but on the right side of breakeven.
• And these discounters have more experience of excelling on slender margins than most…
• And Lidl continuing to invest during loss-making lockdown…
• …shows they are still a threat to the UK mults.
• Meanwhile, Brexit caused ‘an increase in administration for importing and exporting goods in and out of the UK’
• ‘Our stores in Serbia and Switzerland are very used to dealing with these issues’…
• …referring to countries that are outside the EU but do much of their trade with the bloc.
• i.e. All showing Lidl are still a threat to the UK mults.

#DiscounterThreat #DiscountersProfitable

A major first: Aldi Reveals Its Sales And Profits In Ireland For The First Time

The discounter, which has a 12.7% share of the country’s grocery market, usually wraps its Irish figures into accounts filed for its UK business. However, in an extensive interview with The Irish Times, the Managing Director of Aldi Ireland, Niall O’Connor, revealed for the first time its local revenues and profits.

Aldi Ireland’s pre-tax profit margin was 3.6% last year, compared to 2.1% for Aldi UK.

NamNews Implications:

• A breakthrough NamNews item…a precedent for all.
• Astonishing that Aldi have lifted the lid…
• Hopefully this means other retailers will follow?
• (Especially given the paragraph above on Financial sunlight…
• …meaning retailers with UK registered HQs have to divulge Irish profits).
• If Tesco and M&S go it will be difficult for the others not to…

#RetailMarginsIreland #EUDisclosureRules

Niall O’Connor, Group Managing Director at Aldi Ireland. Photograph: Alan Betson

Unilever Sells Tea Business To Private Equity Firm

CVC Capital Partners is buying the bulk of Unilever’s tea division for €4.5bn after beating off competition from rival private equity groups in an auction.

The business being sold is called ekaterra, which controls a portfolio of 34 tea brands, including Lipton, PG Tips, Pukka Herbs, T2, and TAZO, that generated revenues of €2bn in 2020. It employs around 20,000 people worldwide with 11 production factories in four continents and tea estates in three countries

NamNews Implications:

• NamNews readers are familiar with the PE playbook…
• Rivals can anticipate a new kind of competition in the brands sold off.

#TeaCategory

A weekend warning from the NamNews Team!

#hospitality #lockdown

Amazon’s Just Walk Out Tech ‘Makes Every Other Grocery Store Obsolete’

Amazon's Just Walk Out technology removes the need for cashiers and significantly increases the speed at which customers can shop and exit the store. More importantly, it saves Amazon millions of dollars in labour costs annually in every store, providing a significant competitive advantage. 

“Between 2027 and 2030, Amazon has the potential to sell more groceries than Kroger. Between 2030 and 2035, it has the potential to sell more groceries than Walmart".

NamNews Implications:

• A pointer for all retailers?
• And if Amazon also supply the technology…
• Watch this space…

#Inovation #WalkOutTech

Dunnes Takes Lead In Irish Grocery Market As Shoppers Prepare For Christmas

Latest figures from Kantar show grocery sales in Ireland fell by 4.8% year-on-year over the 12 weeks to 31 October as more normal trading conditions returned to the market. However, growth is still strong compared with pre-pandemic levels and sales were up 8.9% versus the equivalent period in 2019.

Emer Healy, retail analyst at Kantar, commented: “October brought the full easing of Covid-19 restrictions as well as a well-timed bank holiday weekend and shoppers have been making the most of newfound freedoms. Dining out is firmly back on the table, bringing a welcome boost to the hospitality sector as friends and families returned to bars and restaurants. With fewer meals eaten around the kitchen table, we’ve seen supermarket sales drop by 8.4% in the latest four weeks. Irish shoppers spent €86.1m less on groceries this month compared with the equivalent period last year when the nation was in lockdown.”

NamNews Implications:

• Aldi and Lidl with a combined market share of 25.4% vs mults average of 22%…
• …and growing at an average 12.5% vs pre-Lockdown.
• Shows that the discounters remain a threat…
• …especially with high inflationary pressures in the pipeline.

#IrelandDiscounters #PostLockdown