covid-19 range impacts

Stephen Jacobs

April 2020

Covid-19 Range Impacts

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2

Smaller

companies are

being locked

out of a supply chain that can not

satisfy demand.

Headlines?

Two new lockdown

norms are

emerging.Categories that are settling between

+10% and +20% up.

(Home cooking, home hygiene, BWS.)

Categories in significant decline.

(Convenience and non essential)

Will retailers give preference in

store and in the supply chain to

the first group?

Fast moving core

SKU’s recover

distribution firstthat were stocked in all stores.

With Private Label

taking priority over

brands.


The data we are looking at is transitioning between the 2nd and 3rd phase.

Where are we now?

Past FutureNow

Pre Covid-19

• Volume decline

• Value decline

• Ranges cut

• Promotions de-escalating

Lock Down Panic Buying

• Demand out strips supply

• Ranges crash due to short stocks

• Many promotions and media pulled

Lock Down Norm

• Ranges start to recover

• Convenience options suffer, shelf stable food and home cooking wins

• Channels struggle to adjust

• NPD halted

Lock Down Removed –Recovery

• Recession expected

• Will new habits stick


How have ranges changed across Sectors?

Source: IRI Total Store

• With demand outstripping supply ranges have been reduced by -15% due to low stock, with a marginal recovery in WE 4 th April 2020. Non-

Food has seen a greater impact at -20%, compared to Food at -12%.

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

1 w/e 18 Jan,

20

1 w/e 25 Jan,

20

1 w/e 01

Feb, 20

1 w/e 08

Feb, 20

1 w/e 15

Feb, 20

1 w/e 22

Feb, 20

1 w/e 29

Feb, 20

1 w/e 07

Mar, 20

1 w/e 14

Mar, 20

1 w/e 21

Mar, 20

1 w/e 28

Mar, 20

1 w/e 04 Apr,

20

% Change in Average Number of Lines Sold

TOTAL STORE FOOD NON FOOD


How have ranges changed across departments?


• Non Food departments have been hit harder than food with little signs of a fast recovery. Given that pubs and restaurants are now closed it’s

not surprising that BWS ranges have seen the least reduction and the fastest recovery.

% Change in Average Items per Store Selling


What do the new lockdown norms look like for departments?


• BWS, Ambient, Frozen and Household are all benefiting from the new lockdown norms and look to stabilize between +10% and +20% in the

short term. Chilled and Impulse had less impact and look to have a small negative going forward. However Pet, Healthcare and Personal Care are now in double digit declines, this could be both a result of stockpiling and lower onward demand.

53.6%

84.7%79.8%

88.3%

30.7%

23.5%

55.8%

97.6%

50.6%

10.5%12.9%

5.3%

11.9%

-4.7%

-14.2%

-6.5%

-12.8%

-31.6%

23.1%17.8% 17.0%

11.0%

-0.2%-3.8%

-12.4%

-22.1%

-29.3%

BWS AMBIENT GROCERY FROZEN HOUSEHOLD CHILLED IMPULSE PET HEALTHCARE PERSONAL CARE

Value Sales %Change vs YA 1 w/e 21 Mar, 20 Value Sales %Change vs YA 1 w/e 28 Mar, 20 Value Sales %Change vs YA 1 w/e 04 Apr, 20

IRI Total Store Market


How do range changes compare to performance across departments?


• Range has declined across the board, but 4 out of the 10 departments delivered a significant improvement in performance, while Personal

care, Health care and Pet sales have slumped.

-23

.5%

-21

.8% -1

6.1

%

-13

.8%

-13

.4%

-10

.9%

-10

.1%

-9.0

%

-5.9

%

-29

.3%

-22

.1%

11

.0%

-0.2

%

17

.8%

-3.8

%

-12

.4%

17

.0% 2

3.1

%

-29

.3%

-11

.6%

4.1

%

-1.0

%

12

.7%

-4.4

%

-16

.6%

14

.1%

26

.0%

PERSONAL CARE HEALTHCARE HOUSEHOLD CHILLED AMBIENTGROCERY

IMPULSE PET FROZEN BWS

IRI Total Store Market We 4th April 2020

ACV Avg Items per Store Selling %Change vs YA Value Sales %Change vs YA Volume Sales %Change vs YA


How have ranges changed across Food Categories?


• Categories fall into two groups: Pasta, Flour, Canned Beans, Bread…. That have less range with much higher sales and Sandwiches,

Frozen Rice, Chilled Ready Meals… that have less range and falling sales. Will retailers adjust their shelf space allocation and supply chain priorities in favours of the first group?

-36

.1%

-35.6

%

-31

.3%

-30

.6%

-29.1

%

-28

.3%

-26

.5%

-25.1

%

-22

.6%

-22

.2%

-20

.9%

-20

.2%

-20

.1%

-20

.1%

-19

.4%

-19.4

%

-19

.1%

-19

.0%

-18.3

%

-18

.3%

49

.1%

-62.2

%

1.2

%

110.7

%

36

.4%

11

.4%

-10.1

%

-41.0

%

-5.4

%

4.6

%

29

.1%

-13

.3%

20

.2%

-19

.5%

-16

.1%

-1.2

%

28

.0%

8.9

%

38

.4%

-0.9

%

24.3

%

-59.3

%

-14

.1%

80

.1%

26

.9%

14

.5%

-14

.7%

-42.4

%

-5.8

%

1.1

%

36

.8%

4.2

%

8.2

%

-22

.8%

-8.3

%

-9.0

%

17

.7%

5.7

%

27

.4%

11.7

%

DRY PASTA SANDWICHES ROLLS FLOUR / BREADMAKING

CANNED BEANS& PASTA

BREAD FROZEN RICE BABY MILK FROZENDESSERTS

PREPACKEDPIZZA & BREADS

PULSES CHILLED RICE RICE BABY FOOD &DRINKS

CHILLED READYMEALS

TEA CANNED &PACKET VEG

FRESH MILK SAUSAGES PORRIDGE

ACV Avg Items per Store Selling Value Sales Volume Sales

% Change on Last Year, IRI Total Store Market We 4th April 2020

Categories with the largest % range reduction.


Week Ending 4th April 2020

Top line – Ranges have not fully recovered and it looks like Tesco are building back the

old range as fast as they can, giving priority to the core fastest selling ranges, with Private Label having priority.

Ranges are recovering with total numeric distribution down -38% on the period prior to the

panic buying.

Tesco have prioritized their Own Label core SKU’s over branded product.

Of the core range of 8 lines that are stocked in all stores, 3 are in almost full supply. The two branded line in this range have -64% less distribution now.

As you go through the breadth of the range that is sold in larger stores, it’s clear distribution is

much lower, with -41% less range available now, with 10 out of 53 line out of stock. The out of stock lines are made up of value and premium options like Organic, Whole-wheat.

Tesco Pasta Range


How have ranges changed across Companies within Ambient Grocery?


• The bigger players are fairing better. While they are seeing some of the largest range reduction in number of lines stocked, they have

broader ranges and are “staying in the game”, with their core fast selling lines. Smaller players see their smaller ranges cut by a few lines, but this translates into a 100% reduction, putting them on the side lines until the supply chain can recover.

Companies with the largest actual range reduction,


-100.0%

-35.7%

-11.5%

-9.9%

-29.1%

-100.0%

-69.8%

-53.2%

-78.3%

-100.0%

-31.2%

-10.1%

-41.9%

-80.1%

-24.4%

-30.8%

-10.8%

-100.0%

-22.5%

-16.2%

-10.0

-10.0

-10.1

-10.2

-10.7

-11.3

-11.5

-12.8

-12.9

-13.7

-13.7

-14.3

-14.9

-15.4

-18.9

-20.1

-22.4

-29.8

-32.6

-178.1

-200 -180 -160 -140 -120 -100 -80 -60 -40 -20 0

VISNUKUMAR TRADERS

TR SUTERWALLA & SONS

MCCORMICK & COMPANY

UNILEVER

WARBURTONS

ROTHBURY BAKERY

DORSET CAKE COMPANY

CULLODEN FOODS

COTTAGE DELIGHT

S BARON

JOHN WEST FOODS

ASSOCIATED BRITISH FOODS

AMSCAN

DRAPERS BAKERY

MARS

NUTRICIA

PREMIER FOODS

RG MACDONALD

THE KRAFT HEINZ COMPANY

PRIVATE LABEL

Change vs YA %Change vs YA

Note this slide has been replicated for

every department on hidden slides.


How have ranges changed across Non-Food Categories?


• In Non Foods the picture is very different with most categories in a performance downturn, that is significantly greater than the range

reduction. This could start a downward cycle of: lower performance -> less range -> lower performance -> less range…..

% Change on Last Year, IRI Total Store Market We 4th April 2020

Categories with the largest % range reduction.

-53.4

%

-53

.1%

-52

.4%

-48

.8%

-47

.4%

-46

.6%

-44

.0%

-42.4

%

-41

.6% -36

.1%

-35.6

%

-35

.4%

-34

.8%

-32.7

%

-32

.5%

-32

.3%

-31

.7%

-30

.0%

-29

.9%

-29

.6%

-75.8

%

-78.8

%

-74.7

%

-2.3

%

-73

.5%

-88.9

%

-63

.2%

-48

.4%

-20.6

%

-63

.2%

-55

.2%

-62

.5%

-51

.7%

-47

.1%

1.9

%

-11.2

%

-53

.4%

-57

.9%

-48.2

%

-58

.1%

-70.3

%

-80

.5%

-39

.9%

-25.4

%

-72

.0%

-88.4

%

-62

.2%

-58

.7%

-30

.5%

-59

.5%

-42

.0%

-56

.3%

-56

.2%

-51.4

%

-20.0

%

-16.5

%

-68.2

%

-55

.1%

-51

.0%

-56

.0%

SUNCARE COSMETICS INSECTREPELLANTS

TOILET TISSUE(WET)

SHOECARE TRAVELSICKNESS

HAIRACCESSORIES

HEALTHCAREDEVICES

PAEDIATRICANALGESICS

COSMETICACCESSORIES

LIPCARE FRAGRANCES OTHERHAIRCARE

PAEDIATRICCOUGH LIQUIDS

FACIAL TISSUES BABY WIPES FOOTCARE CAR AIRFRESHENER

FOODSUPPLEMENTS

& SLIMMING

STYLING AIDS

ACV Avg Items per Store Selling Value Sales Volume Sales


How have ranges changed across Companies?


The impact in range reduction is broadly similar across the three groups with bigger branded companies slightly better off and Private Label

worse off regarding range. Bigger branded companies are gaining most sales growth, with fewer promotions driving up value.

% Change on Last Year


-1.3%

8.5%

6.0%4.3%

-17.3%

-12.7%

-15.1% -15.1%

Private Label Big Companies - Top 50%of Branded Sales

Small Companies - Bottom50% of Branded Sales

Total

Value Change Range Change


Are customers trading up to larger packs?

Source: IRI Tesco Sales Web

The following categories are showing Volume growth ahead of Unit growth indicating customers are trading up to larger packs. These tends to

be categories that are purchased with higher frequency or categories you would not want to run out of.

Categories you would not want to run out of

OTC SKIN TREATMENTS

INSECT REPELLENTS

VITAMINS & MINERALS (INC ANTI-TIREDNESS) AND NUTRITION

SUNCARE

CLEANING PRODUCTS & POLISH

HOUSEHOLD SUNDRIES

HAIRCARE

DEOS & PERSONAL WASH

OTC PAIN TREATMENTS

Categories with high frequency

CRISPS, SNACKS & NUTS

SOFT DRINKS

CONFECTIONERY

BWS

FRESH MEAT

BISCUITS

AMBIENT DESSERTS

FRESH EVERYDAY MILK

SAVOURY FROZEN

FRESH FISH

CHILLED DAIRY & DESSERTS

BREAKFAST CEREALS

PETCARE

BAKERY

PRESERVES & SPREADS

SWEET FROZEN

CHILLED MEALS

HOT BEVERAGES


What changes have we seen in past recessions?

Source: IRI unless stated otherwise)

IRI Measureso Own Label share improves.

o Brands promote harder.o Food and Drink spend switches to in home.

o Increased price sensitivity.

o Prices increases are suppressed.

o Non Food sales hit harder with prices rising

faster than food.o Fewer NPD launched.

o Pack size reductions to hit key price points.

External measureso Taxes Increasing (VAT).

o Consumer confidence is a key measure.o Customers are looking for reliable quality

brands with less focus on innovation and

aspiration (IGD).


Conclusion


Things are changing like never before making forward trends hard to predict. We will not

know the full picture until the supply chain recovers and most of the stockpiling has worked its way through the system allowing customers to shop again based on their new demand. This set of data gives the first indications of what the new lock down norms might look like.

With a big shift towards home cooking and hygiene, as convenience is no longer the pull it was.

Range has moved towards the core range (easier to manage big volumes). With smaller

players side-lined, they could be in a tough place not knowing if and when they might return to the fixture.

The immediate outlook is less about strategy and more about achieving the most with

limited resource. With staffing levels low and in store movement restrictions in place capacity is limited, we could be operating at this capacity for some time.

NPD in the pipeline that delivers on convenience as a USP will be questioned, any NPD will have to be very convincing, if it is to find its way into the system with limited capacity.

If your brand falls on the side of a positive lock down trend your challenge will be meeting that new demand, but if you fall on the negative path tough decisions will need to be made, if you can survive the lock down being side-lined.

If the short and medium term challenges were not enough for brands to consider, things are

likely to change again once the lock down starts to be lifted.

We are only at the end

of the beginning,

not the beginning of

the end.

covid-19 range impacts

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