© IGD 2010

IGD RESEARCH 2010

© IGD 2010

About IGD

IGD is an International research and training organisation which has been

providing insight on the food and grocery industry for over 100 years

• Quality, detailed research based on primary research

– Board level links with retailers

– Regular face to face meetings and local store visits

– Team of 30 in-house analysts with industry experience

• Providing practical and actionable insight

– Retailing

– Supply Chain Optimisation

– Shopper Trends and Category Management

© IGD 2010

Track over 180 retailers…

© IGD 2010

and over 60 markets…

Argentina Australia Austria Belgium Bosnia & Herzegovina

Brazil Bulgaria Canada Chile

China Croatia Czech Republic Denmark Estonia Finland France Germany Greece

Hungary India Ireland Italy Japan Latvia Lithuania Luxembourg Malaysia

Mexico Netherlands New Zealand Norway Poland Portugal Romania Russia Saudi Arabia

Serbia Slovakia Slovenia South Africa South Korea Spain Sweden Switzerland Thailand

Turkey Ukraine UAE UK USA Vietnam

© IGD 2010

Insight on key issues…

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THE LATEST INTERNATIONAL PRIVATE LABEL TRENDS

© IGD 2010

Grocery proven to be a relatively ‘Safe Harbour’ U

SA

Chin

a

Japa

n

Indi

a

Fran

ce

Braz

il

Russ

ia UK

Ger

man

y

Italy

Mex

ico

Spai

n

Indo

nesi

a

Cana

da

Turk

ey

Kore

a

Aust

ralia

Egyp

t

Switz

erla

nd

Paki

stan Ira

n

Pola

nd

Net

herla

nds

Belg

ium

Arge

ntina

0

100

200

300

400

500

600

700

-10%

-5%

0%

5%

10%

15%

20%

25%

625

470

345

236

208

167

167

164

162

130

102

97 92

65 63 61 53 38 36 35 35 35 34 34 33

2009 Grocery Retail Market Size (€bn) 2009 YOY Nominal Growth % in Local Currencies

Source: IGD Research

© IGD 2010

But growth will remain subdued in 2010

Spain

Greece

Italy

Hungary

France

Germ

any

Denm

ark

Ireland

Netherlands

Croatia

Norw

ay

Portugal

Finland

Estonia

Austria

Lithuania

Latvia

Switzerland

Belgium

UK

Slovenia

Sweden

Czech Republic

Poland

Romania

Bulgaria

Slovak Republic

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

-1.9%

-1.5%

-1.3%

-1.2%

-1.0%

-0.9%

-0.6%

-0.1%

-0.1%

0.2%

0.3%

0.4%

0.6%

0.8%

0.9%

1.0%

1.0%

1.0%

1.2%

1.5%

1.5%

2.0%

2.1%

3.0%

5.0%

5.4%

6.0%G

roce

ry m

arke

t gro

wth

*

Source: IGD Research *Excluding the impact of food price inflation

© IGD 2010

What’s in the pipeline?

• Economic recovery but fitful, inconsistent growth• A more restrictive regulatory environment• Fresh waves of unemployment• Inflation and greater volatility in commodity prices • Possible further price falls in housing markets• Potentially brittle consumer confidence

© IGD 2010

PL growth when the economy is challenging

1988 1989 1990 1991 1992 1993 2000 2001 2002 2003 2007 2008 2009 (Q1)

-6%

-4%

-2%

0%

2%

4%

6%

-5%

0%

5%

10%

15%

20%

25%

30%4%

4%

2%

-2%

3%3%

4%

1%2%

3%

2%

-1%

-6%

15%

18% 18%

18% 18%

20%

20%21% 21% 21% 21%

22%24%

GDP Growth (left scale) PL Unit Share (right scale)

US

GPD

Gro

wth

(%

)

Pri

vate

Lab

el U

nit

Sh

are

(%

)

1988 – 1993

PL share increased from 15% to 20%

2000 - 2003

PL share from 20% to 21%

2007 – 2009 (Q1)

PL share from 21% to 24%

Source: US Department of Commerce, Nielsen

© IGD 2010

Price is at the forefront of product choice

Drivers of product choice

1. Price

2. Know all ingredients

3. Fat content

4. Brand name

2008 2010

Source: IGD Research

1. Brand name

2. Know all ingredients

3. Fat content

4. Price

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Two opposing views of the impact of recession

Swinging Pendulum Total Shift

“Once the recession is over, I think consumers will continue to up-trade

again…consumers will go back to their historic purchasing behaviour”

Chief Executive A

“I think once people discover value for money they will stay with it,

and why shouldn’t they?” Chief Executive B

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This is what shoppers have just told us

Source: IGD Shopper Trends 2010. Arrows denote changes since March 2009

20%

6%

26%

48%

Changed for good - made changes and will stick with them

Changed for now - expect to go back to normal

Expect to cut back if it gets worse

As normal and don’t expect to change

77% of those who have made changes expect to stick with them

+8%

-5%

© IGD 2010

A consistent situation across Europe

Series1

14% 16% 21% 23%8% 7%

7% 10%24%

33%31% 25%

54%44% 40% 43%

No change now or later

No change for now

Changed for now

Changed for good

Source: IGD Research Base: All main shoppers (excluding don’t know) in Great Britain, France, Germany and Spain

Least change

Most change

© IGD 2010

A growing challenge for manufacturer brands

0%

10%

20%

30%

40%

50%

60%

...as a driver of product choice

Source: IGD Shopper Trends 2010

0%

10%

20%

30%

40%

50%

60%

…as a driver of product choice

0%

10%

20%

30%

40%

50%

60%

…as something worth pay-ing a bit extra for

Price Brand name Well know brands20

06

2010

2006

2010

2005

2010

2007

© IGD 2010

Change in brand and private label purchasing by 2012

8%

8%

11%

20%

15%

7%

Less More

Lowest price supermarket own brands

Premium supermarketown brands

Well known brands

Source: Shoppers in 2012: Is your business Ready for Them?

© IGD 2010

Change in ethical shopping by 2012

3%

4%

5%

11%

37%

34%

31%

15%

Less More

Local or regional foods

Foods with high animal welfare claims

Fairtrade foods

Organic foods

Source: Shoppers in 2012: Is your business Ready for Them?

© IGD 2010

United States 31%

Shoppers are buying more private label…

Great Britain

France

Germany

Spain

5%

4%

4%

8%

5%

More brands More private label

33%

33%

26%

37%

Total 31%

Source: IGD Research, 2009

© IGD 2010

Focus on private label is being maintained in US

Retailers are emphasising not only the price advantage of their private labels but are also focusing on the quality

aspect

Source: IGD Research, 2009

© IGD 2010

• 31% of shoppers are buying more store brand products

• 57% of shoppers frequently purchase store brand products

• 90% agree that store brands are as good as national brands

• 91% do not plan to stop buying PL when the recession is over

• 94% of first time purchasers find their purchase favourable

Source: PLMA / GfK 2009

Attitudes of US shoppers

© IGD 2010

Is it all because of the downturn?

Source: IGD Research, 2009

Private Label

Discounters28%

28%

31% 28%

Buying more Begun to make changes to save money in recession

© IGD 2010

Is it all because of the downturn?

Buying more Begun to make changes to save money in recession

Both

14%14% 13%

15%16% 12%Private Label

Discounters

Source: IGD Research, 2009

© IGD 2010

Recession is accelerating existing shopper trends

Private Label

Discounters

“Slowly, over time you gradually try different [private label] products and find the ones you like. But with the economic climate and everything, you find you’re doing it more.”

“We’ve been gradually drifting away from the big superstores.”

Source: IGD Research, 2009

© IGD 2010

…and are buying more at discount stores

Source: IGD Research 2009

Great Britain

France

Germany

Spain

5%

5%

5%

5%

5%

Less from discounters More from discounters

26%

29%

28%

31%

Total 28%

© IGD 2010

What are the triggers for buying more PL?

Buying a bit more to save money• “I am probably buying just a little more own brands as I am starting to count the pennies a

bit.”

Trial and error• “I‘ve bought a private label product and not liked it at all but when I bought another one it

was absolutely fine.”

Recession has accelerated an ongoing process• “Slowly, over time you gradually try different [private label] products and find the ones you

like. But with the economic climate and everything, you find you’re doing it more.”

Recommendation• “We do shopping for an elderly gentleman who lives near us. He started having the basic

products and said they were better than he thought. So there was one item we tried and it was fine.”

Satisfied with the quality• “I used to tease my sister for buying private label then I bought one once and it was alright.”

© IGD 2010

Strengths of private label

Cheaper than brands for equivalent quality

Regularly on promotion

Consistent level of quality

Can trust the supermarket

Used in recipes provided by supermarket

Best quality available

At the forefront of new ideas, tastes and flavours

Source: IGD Research 2009

69

42

24

18

12

6

5

67

41

37

34

7

14

13

77

31

48

50

10

26

7

73

31

22

19

4

3

2

© IGD 2010

Just as good as the alternative brands

Has improved over the last few years

Some stores are better than others

52% 66% 52%

61% 57% 54%

69% 73% 36%

67% 57% 52%

Private label quality perceptions by market

Source: IGD Research 2009

© IGD 2010

39

38

27

42

19

26

16

11

12

7

44

28

29

18

27

16

14

8

10

3

Reliable Quality

Specialist

Wide distribution

Trust companies

Heritage

Best Available

Special offers

Innovation

International

Image

49

29

40

23

17

18

13

20

10

5

37

35

21

20

9

11

17

5

6

1

All mentions (%)

Shoppers’ views on the key strengths of brands

Source: IGD Research 2009

© IGD 2010

Strength of private label and brands compared

Reliable taste/quality 1

Specialist 2

Wide distribution 3

Heritage 4

Trust famous companies 5

Best quality available 6

Special offers 7

International 8

Forefront of innovation 9

Image 10

Arrows connect comparable factors between private label and brandsSource: IGD Research, 2009

1 Cheaper/same quality

2 Special offers

3 Consistent quality by category

4 Trust supermarket involvement

5 Used in supermarket recipes

6 Best quality available

7 Forefront of innovation

Private label Brands

© IGD 2010

Do shopper attitudes differ by category?

• % of British shoppers who would reject private label

37% 21% 10%

Open to buying private label across

whole store

Rejects only 1 category

Rejects 2-3

categories

Rejects 4-5

categories

23% 9%

Rejects 6+ categories

81% of shoppers would buy private label in all but three or less

categoriesSource: IGD Research, 2009

© IGD 2010

Shoppers private label preferences by category

% of British shoppers who would not choose to buy private labels by category

Categories private label is most likely to be rejected for

18%

16%

15%

14%

14%

14%

Alcohol

Breakfast cereal

Laundry & household cleaning

Hot drinks

Frozen ready meals & meat

Bread

6%

6%

7%

7%

8%

8%

8%

Canned & packet

Household paper

Biscuits & cakes

Desserts & ice cream

Confectionery

Dairy products

Jams, preserves & sauces

Categories private label is least likely to be rejected for

Source: IGD Research, 2009

© IGD 2010

The balance is already about right

Rather there be more supermarket private label productsRather there be

more branded products

70%10% 15%

5% don’t know

Most shoppers see the balance about right

Source: IGD 2009

© IGD 2010

Do shoppers have enough private label choice?

39%

31%

43%

39%

50%

63%

50%

53%

The choice of different types of supermarket private label products is more than I need

I like having a wide choice of different types of supermarket

private label products

Source: IGD Research, 2009

© IGD 2010

Predicting future investment trends

Premium

Co Brands

Standard

DiscountLines

EntryLevel

Ethical Entry Level

IGD predicts that investment will be channelled at both ends of the private label spectrum; value and premium, driven by a broadening of the offer, product reformulations and the introduction of new

own label tiers

Quality

Good Better Best

Roll-out of restaurant quality premium ranges e.g. Tesco Finest Collection

Reformulation of value ranges to incorporate ethical credentials e.g. Sainsbury’s Basics

Launch of new discounter brands e.g. Tesco Co-branded products e.g.

Kettle and Kirkland at Costco

© IGD 2010

Shoppers are looking for value and values

Value Values

Heritage

Provenance

Pack size

Ethics

Sustainability

Performance

Promotions

Price

© IGD 2010

Value with Values

© IGD 2010

Aldi Hofer – Austria

The next frontier: carbon footprint labelling

Tesco – UK

Tesco – UK

© IGD 2010

Up to $10 in vouchers at Food Lion (US)

Heightened promotional activity

2 for 3 deal for brands and Pl at Carrefour (France)

10 for $10 Mix and Match at Safeway (US)

© IGD 2010

“Good” is getting “better”

Source: IGD

Delivering both ‘Value’ and ‘Values’, Sainsbury’s sales from its Basics range are up 50% on 2008

Having previously lacked a specific entry-level price label range, Waitrose is currently repositioning a significant part of its core private label offer to a single, unified value-focused brand

By September 2009, 1,400 SKU’s are included under the essential Waitrose brand which also delivers on ‘values’

© IGD 2010

Carrefour Discount – launched in 2009

Source: IGD

Carrefour Discount replaces the No.1 range in Carrefour’s French hypermarkets

except on a few specific lines

© IGD 2010

Bold communication in-store

Source: IGD

Rewe, Germany, Aug 09 Carrefour, France, June 09 Target, USA, June 09

© IGD 2010

Tesco has added a fourth tier

Source: IGD

Value

Standard

Finest

“Discount”(Launched September 2008)

The Discount Brands range is c. 20% cheaper than Tesco standard PL and approximately twice the

cost of Tesco Value

30% of Tesco shoppers are now regularly buying into the Discount Brands range

© IGD 2010

Discounter brands at Tesco

Source: IGD

© IGD 2010

“switch and save” campaigns drive PL growth

Loblaws – Canada

Publix - USA

Sainsbury’s – UK

© IGD 2010

Concepts emerging which cater for growing list of consumer trends

Convenience

Scratch cooking

Health

Value

Cook Asian at Marks & Spencer (UK)

Mein Frischemenu at Real (Germany)

Kies & Wok at Albert Heijn (Netherlands)

© IGD 2010

Value ranges re-engineered to boost credentialsBetter packaging and reformulation to improve the quality / value equation

© IGD 2010

Bundle deals now more important in private labelPrice and convenience with a focus on chilled ready-meals

Source: IGD

Kies & Kok at Albert Heijn

• Shoppers pick 4 different meal components: i) Meat ii) Side iii) Vegetables iv) Sauce

• Appeals to those looking for a quick meal solution, but still wanting to cook

• Flexed by store type

Sainsbury’sMetro Group - Real

© IGD 2010

In-store execution and merchandising

Shelf barkers to sign post shoppers to own label products at Auchan

(France)Pound shop concept

at Tesco (UK)

‘Wall of Value’ at Walmart (US)

Bold in-store displays at Carrefour (France)

Floor advertising at Target(US)

© IGD 2010

Shoppers also helping to refine ranges

© IGD 2010

…and communicating via social media

© IGD 2010

Key takeaways

• A ‘bumpy’ economic climate could be reality for some years

• It’s not just the economy that is driving change, broader trends are emerging in private label which need capitalising on

• Pay greater attention to shifting shopper behaviour

• Ensure the price advantage of private label is maintained – it is the most significant strength identified by shoppers

• Recognise the different levels of shopper expectations in the countries you operate in – one size does not fit all

• The perceived strengths of brands vary by market – tailor communication accordingly

• Long-term retailer relationships should be more important than ever; and shopper insights can provide an excellent platform

• New shopper communication and promotional mechanics are available, ensure you understand them and utilise where appropriate

© IGD 2010

How could IGD help you?

• Enter new markets and distribution channels• Engage your existing customers and prospective new clients• Train and develop your people• Improve your supply chain• Brief colleagues, senior management and investors• Track wider industry trends and developments• Engage with our people and industry network• How can they provide this?

• Access to online services: Retail Analysis and Supply Chain Analysis• Specific projects just for you

© IGD 2010

FOR MORE DETAILS Ian Weide, Senior Business Analystian.weide@igd.com 0468 513 618