With some food retailers doing very well and others with profits down, the biggest names in grocery are re-assessing their strategy in the marketplace. Grocery sales growth is at the lowest since 2005 and the supermarkets are jockeying for position and a portion of the market share.
Waitrose, Aldi, Lidl and Sainsbury’s are all doing well. Asda and Co-op are still in growth but behind Waitrose and the discounters. Tesco and Morrison’s both had disappointing Christmas trading and sales are down. M&S food sales are in growth with good Christmas trading.
Aldi have seen the biggest growth so far this year. Their ‘Swap and Save’ campaign showed customers the savings they could make by considering them over the big four, attracting new customers in difficult financial times.
Sainsbury’s is doing better than ever after strong Christmas trading and with 36 consecutive quarters of like for like growth is set to overtake Asda as the second largest grocer in the UK. However with CEO Justin King leaving this summer and changes on the board we could see that slow. They have credited their success to the Nectar loyalty card, and marketing investments such as the “Live well for less” campaign attracting customers.
Asda have pledged invest more than £1bn on a five year strategy focusing on price and quality with their price guarantee campaign. They’ve planned further store openings as well as rolling out click and collect points to over 1,000 stores. The strategy is to undercut the other big four on price and limit the market penetration from the discounters.
Tesco’s seemingly unstoppable appetite for expansion has been curbed by their Chief Executive, Philip Clark, this year by capping the next three years spend at £2.5bn, the lowest for ten years. Their strategy is to carry on investing in c-stores with plans to open around 150 new convenience stores per year, alongside updating existing stores. Their strategy on cost cuts is to invest £200m in reducing prices to compete with the likes of Asda, and also stop the discount retailers taking more of their market share. They will also start to offer more click and collect services, as well as broaden the Clubcard offering.
The Co-op have seen losses of more than £2bn across the business prompting them to sell off the farming and pharmaceutical sides of the business. However the food sales remain strong and in growth through their convenience sites. The Co-op is to carry on investing in c-stores as a neighbourhood and community retailer. They will take on operating advice from their ‘Have your Say’ customer survey and are considering a Waitrose style discounting offer for their member cards.
Morrison’s sales have dropped and they are entering the price warwith the “Prices nailed down to stay down” campaign, another big four response to the threat from discount grocery retailers such as Aldi. They are considering selling off 10% of their properties, potentially freeing up £800m.
Waitrose have continued to grow alongside the discount retailers, nibbling into the market share of the big four. The growth they have seen over the last five years is put down to their investment in good quality at good prices strategy. Plans are in place to broaden its estate, opening 26 new stores this year and creating 2,000 new jobs. Waitrose is also to expand its own brand offering to South Africa.
M&S grocery sales continue to do well, with their biggest food sales day ever on the 23rd December, however they had disappointing clothing sales which have impacted significantly on the retailers trading figures. Their online and international sales are doing well and they plan to invest more in multi channel, launching a new e-commerce platform in the spring and will utilise social media better. Alongside the online side of the business they will also invest in logistics to service expected growth.
It will be an interesting year’s trading for the food retailers, and we are seeing a lot of investment in store on promotional campaigns and changing the look and feel of the shopping experience. We have several large installation roll outs planned with the supermarkets as they implement their strategies to attract shoppers this year.
Copyright Ruck Ltd 2014