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