The Institute of Grocery Distribution has just published forecasts
of growth in the grocery market to 2020. In a nutshell they endorse trends
already highlighted for online and discounters, saying that sales will continue
to power ahead in these sectors. They signal that growth rates in convenience
stores will decelerate, and that big stores, whilst remaining the place where
most of us will do most of our grocery shopping, will show a sales decline.
One could challenge the exact numbers, for example the near
doubling of online and discounter sales seems optimistic, but the shape of the
growth makes sense, and whilst pages of commentary have been written about the
effect of the forecasts on the grocers themselves, few write about the impact
on suppliers – which could be huge.
Here’s why.
The key issues are the nature of the shopping environment in
the growth sectors, and the steps mainstream supermarkets will take to maintain profits as sales through
bigger stores start to fall.
Consumers shop online for reasons of speed and convenience.
Sitting in front of a small computer screen, or worse still, fiddling with tiny
buttons on an even smaller smartphone or tablet, they just want to call up a
previous order, tick what they need, possibly look at what’s on “special” and
check out. Few can be bothered with browsing through hundreds pages of products
on the off chance that they see something that takes their fancy. So, if a
product is not on a favourites list, or being sold at a discount then it will
not be bought.
Discounters too offer a different shopping environment.
Typically they offer a very narrow range and stock few national brands. So the
chances of getting listed by an Aldi or Lidl are small, which means that many
suppliers will miss out on the discounters’ growth potential.
Convenience stores, who may be growing more slowly over the
next years, but will still be a big sector, can only stock a limited range
because of their size.
On the other side, mainstream grocers, grappling with
falling sales in their big stores, are on a mission to streamline, which means
stocking fewer brands and fewer pack sizes.
The outcome of all these factors means that the winners in
the next 5 years will be:
-
big
global companies who can buy their way into wherever they want to go. Examples
are Coca Cola, Unilever, Nestle
-
middle ranking companies who own leading brands
with a loyal following. Examples would be Warburtons, McVities , Mueller
-
suppliers of retailers’ own brands who can
operate at lowest costs
-
niche
specialist players who appeal to supermarket operators because they offer
something genuinely different, and who only require a listing in a small number
of big stores to be viable.
Companies who may need a strategic rethink are those with brands
which are rarely top of mind, non essential,
poorly advertised and promoted, and often bought on impulse because they
caught the eye in store. Examples of this middle group might be Dairy Crest,
Premier Foods, and smaller confectionery and soft drinks companies.
The impact on suppliers does not stop there. These middle
ranking businesses also have suppliers and they too will be squeezed. Either
their products will not be required, or they will have to offer sharp prices to
maintain the business. We saw signs of this with Premier Foods “pay to stay”
demands. Premier swiftly saw the injustice of this. Other businesses might not.
No comments:
Post a Comment