JLP 'never knowingly underinflated' Raises Inflation Concerns

After hailing the success of its recovery programme yesterday, the head of the John Lewis Partnership added to warnings from across the retail and manufacturing sectors that Russia’s invasion of Ukraine will lead to a further jump in inflation.

Chairman Sharon White said that the conflict meant inflation would be “more persistent” and at a higher rate than previously expected.

She highlighted that the group was facing “significant persistent pressures” on costs, adding: “As far as we can, we’re trying to absorb the cost pressures … not all of these pressures are absorbable.”

Both the group’s Waitrose and John Lewis chains have been forced to increase prices on certain items in recent weeks, with prices at the supermarket chain rising by between 3% to 4% compared with 2% last year.

White said: “We’re expecting inflation to be more permanent, more persistent, and certainly at a higher level than when we were all gathered for half-year results [in September].

NamNews Implications:

• '…invasion of Ukraine will lead to a FURTHER jump in inflation’
• The key word is ‘further’ …
• …in that most of the current inflation predictions (everywhere) are based on pre-Ukraine trends.
• i.e. ‘prices at the supermarket chain rising by between 3% to 4%’ are ‘historical, pre-Ukraine.
• We are now in uncharted territory, again (following Covid Lockdowns…)
• Given the risk that JLP will be 'never-knowingly-underinflated' suppliers need to take the initiative.
• Waitrose suppliers need more precision re inflation…
• …and should explore ‘what-ifs ‘ starting at 10%…
• …before opening discussions with the customer.
• In other words, the supplier has to take the lead this time…

#UkraineInflation #NormalInflation #NAM-Initiative

Grocery Price Inflation Accelerates; Discounters Gaining Share

Latest industry data confirms that prices in the grocery sector are continuing to rise, with further upward pressure likely to come from the conflict in Ukraine. With the market still contracting from last year’s pandemic-driven highs, Aldi and Lidl were the only physical retailers seeing growth and gaining share on the main multiples, apart from Tesco.

Take-home grocery figures from Kantar show that overall supermarket sales fell by 3.7% during the 12 weeks to 20 February in comparison with last year when the winter lockdown meant people were eating more meals and snacks at home.

However, sales remain 8.4% higher than the same period before the pandemic in 2020.

NamNews Implications:

• With the global Covid fears/uncertainties now replaced by Ukraine worries, consumers are spending cautiously...
• ...despite increasing their work-driven on-the-go consumption.
• Time for suppliers to justify why they are not optimising their potential business with the discounters?
• Especially given that Tesco and Ocado are the only other retailers growing at the expense of the rest…

#OnTheGoConsumption #FearUncertainty #Inflation

Sainsbury’s Closing Cafes As It Overhauls Eat-In And Takeaway Food Offer

Sainsbury’s is set to close 200 of its in-store cafes and some of its hot food counters as part of an overhaul that will see it roll out its new Restaurant Hub food hall format.

The retailer stated that it wants to transform its eat-in, takeaway and home delivery food and drink offer to give customers a better experience. Sainsbury’s has been trialling The Restaurant Hub concept at its Selly Oak store in Birmingham in conjunction with the Boparan Restaurant Group (BRG). It features a range of restaurant brands, including Caffè Carluccio’s, Gourmet Burger Kitchen, Ed’s Diner, and Slim Chickens.

The two companies are planning to open 30 more The Restaurant Hubs in the next year, with the intention to accelerate the roll-out if the format proves popular.

Sainsbury’s will also open another 30 Starbucks coffee shops in its supermarkets in the next twelve months, bringing the total number to 60. Working with BRG and Starbucks, Sainsbury’s plans to overhaul its offer in 250 supermarkets over the next three years

NamNews Implications:

• Lockdown and Takeaways says it all…
• But one of many fundamental shake-outs arising.
• Benefits for those businesses that can recognise the change, and act decisively…
• How about you?

[Just one of 12 news items in today's NamNews bulletin]

#LockdownDamage #HospitalityChange

Tesco’s Price Matching Scheme Now Following Aldi’s Price Rises

Amid soaring food prices, Tesco’s ‘Aldi Price Match’ scheme has gone into reverse.

The scheme had originally been conceived as a way of Tesco improving its competitiveness by cutting prices on everyday products to match Aldi to halt shoppers switching to the discounters.

According to trade publication The Grocer, Tesco is now raising the price of matching lines to keep up with increases at Aldi.

The report noted that Tesco’s determination not to let the pressure off the discounter despite cost inflation, meant Aldi was raising prices on some price-matched lines ahead of an identical increase by the supermarket giant. This has meant that Aldi was briefly more expensive than Tesco on some lines involved in the scheme.

NamNews Implications:

• All depends on shopper perception.
• The real bargain-hunters will capitalise on some of the Tesco price-lagging…
• But in general, most shoppers will simply ‘see’ the Aldi Price Match initiative in action…

GSK Unveils New Name For Consumer Healthcare Spin-Off

GlaxoSmithKline (GSK) has revealed that its Consumer Healthcare business will be called Haleon following its planned spinoff and stock market listing this summer.

The name, pronounced “Hay-Lee-On”, was inspired by the merging of the words ‘Hale’, which is an old English word that means ‘in good health’ and Leon, which is associated with the word ‘strength’.

The demerger of the Consumer Healthcare business is planned to take place by mid-2022, creating a standalone entity with sales of around £10bn from brands such as Sensodyne, Voltaren, Panadol and Centrum.

Once separated from GSK’s pharmaceuticals and vaccines operations, the new company will be led by the unit’s current Chief Executive Brian McNamara and recently appointed Chairman Designate Sir Dave Lewis, the former boss of Tesco. Haleon will be headquartered at a new campus in Weybridge, which is expected to open at the end of 2024 and will include an R&D centre and a shopper science lab.

NamNews Implications:

• Combination of new name and ‘separate’ existence, ‘independent’ of group…
• …means more focus on consumer optimisation.
• Time for rivals to reassess relative competitive appeal…

Price Rises Drive Growth At Nestlé, With More To Come

The world’s largest food manufacturer has posted its strongest growth in developed markets in a decade as it benefitted from price rises and robust demand for coffee, pet food, and vegan products.

Over the year to 31 December, Nestlé’s sales rose 7.5% on an organic basis to CHF87.1bn (€83.2bn), of which 2% came from price increases to offset “significant cost inflation”. This trend accelerated in the final quarter of the year, with prices up 3.1%.

The group stated that growth was also supported by continued momentum in retail sales, a steady recovery of out-of-home channels, and market share gains.

Nestlé’s coffee business was the single largest contributor to growth in 2021. Sales of Starbucks-branded products jumped 17.1% to CHF3.1bn, whilst the Nespresso division reported growth of 8.8% to CHF6.4bn

NamNews Implications:

• Nestlé is big enough in most markets to be able to ensure appropriate price rises across its brand and retail portfolios.
• “Significant cost inflation” has been factored into its price increases…
• …in a “super volatile environment”.
• Rivals need to reassess relative competitive appeal, by category, retailer and geography…
• ..Now

#ShelfPriceInflation #CostPriceInflation #Negotiation #Power

Sale Of MFG Moving Forward

Following recent rumours, it appears that the £5bn sale of Motor Fuel Group (MFG), the forecourt operator controlled by the new owners of Morrisons, is going ahead.

According to Sky News, Clayton, Dubilier & Rice (CD&R) has lined up Citi, Deutsche Bank, Goldman Sachs, and Royal Bank of Canada to sell MFG, which operates around 900 sites across the UK.

MFG has grown substantially since CD&R bought it in 2015 for £500m. Three years later, the private equity firm paid £1.2bn to add MRH, the market leader, creating a group operating under fuel brands such as BP, Esso, Shell and Texaco.

MFG’s profits are understood to have risen about tenfold since CD&R’s acquisition with the company investing heavily in its convenience retailing proposition, featuring the likes of Costa Coffee, Greggs and Subway at many of its sites.

NamNews Implications:

• MFG will be an attractive acquisition for either fuel companies or PE.
• Either way, any supplier-MFG relationships will be financially driven…
• …in order to maintain the profit impetus.
• Therefore NAMs need to refine their skills in counting cost…
• …and demonstrating the value of their proposals to MFG’s finances.

#Divestment #FinancialKPIs #GarageForeCourt

Morrisons Introduces Plastic-Free Toilet And Kitchen Roll Packaging

Morrisons has launched paper-wrapped toilet and kitchen rolls as part of its drive to reduce plastic waste.

The paper packaging, which is responsibly sourced and FSC certified, is fully recyclable with the toilet paper and kitchen sheets themselves are also made using recycled paper.

Morrisons jumbo kitchen rolls cost £3 (for a two pack) and the toilet rolls £3.50 (for a nine pack). The retailer highlighted that this is much cheaper than some other eco paper-wrapped products which can be as high as £2.80 for a single kitchen roll and £9 for nine toilet rolls.

NamNews Implications:

• Given the extent to which tissue is a narrow-margin business…
• …this pricing differential is going to be problematic…
• …at least for suppliers.

#BrandOwnLabelPremia #TissueProfitability #ScaleEconomies