Professional Documents
Culture Documents
July 2009
Channel Opportunities
Pricing and Private Label Strategies
Improving Brand Image, Loyalty and CSR Profile
Key Conclusions
2008 last
quarter
sales
2007 last
quarter
sales
2006 last
quarter
sales
% growth
2007/2008
% growth
2006/2007
Quarter
ends
US$
108.0
106.3
98.1
1.7
8.4
Jan *
Carrefour SA
25.7
25.6
23.5
0.7
10.2
Dec
Tesco Plc
n/a
n/a
n/a
12.0
11.8
Nov
1,464.3
1,439.2
1,379.6
1.7
4.3
Nov
% growth
2007/2008
% growth
2006/2007
Quarter
ends
Note: * January of the following year eg 2008 figures refer to financial year ending January 2009
2008 last
2007 last
2006 last
Currency
quarter net quarter net quarter net
(million)
profits
profits
profits
US$
3,792.0
4,096.0
3,940.0
-7.4
4.0
Jan *
34,164.0
33,141.0
36,169.0
3.1
-8.4
Nov
Notes: Quarterly net profits figures for Carrefour and Tesco not available
* January of the following year eg 2008 figures refer to financial year ending January 2009
%
%
domestic international TOTAL
sales 2008
sales 2008
International
sales 2008
(US$ billion)
Wal-Mart Stores
Inc
73.4
26.6
100.0
93.3
Carrefour SA
49.9
50.1
100.0
65.1
Tesco Plc
70.8
29.2
100.0
31.8
70.7
29.3
100.0
21.5
5
% growth
Perhaps the most potent reaction to the economic crisis from retailers is the pervasive discounting and price cutting
campaigns.
Price wars are set to redefine the retail landscape, with major players cutting prices and focusing on value private label
ranges, especially in the many developed markets facing recession in 2009.
The fall in key raw materials and commodity prices in the second half of 2008 allowed price cuts to take place without
jeopardising retailers' margins, a situation which is likely to be reversed in the longer term.
Tesco has cut prices on some items in Ireland and the UK, in order to compete against the discounter chains Aldi, Lidl and
Netto. A new low-cost range was added to its offering in Ireland and the UK in summer 2008, and has met with success.
Similarly, in Belgium, the supermarket chain Delhaize cut the prices of 500 branded food items in 2008, in reaction to price
pressure from the dynamic discounter operator Colruyt.
Carrefour opted to reduce the prices of 10,000 items by up to 25% in Spain in early 2009, partly as a reaction to the
success of the budget supermarket chain Mercadona, which aggressively cut prices and reduced its assortment of
branded products to focus on private label.
Price wars are particularly apparent in Japan, between the two largest retailers, Aeon and Seven & I, and Wal-Mart's Seiyu
chain, with Aeon announcing discounts on over 5,000 products in March 2009, including 1,700 Topvalu private label items,
while Seven & I dropped the prices of around 2,600 products at Ito-Yokado supermarkets.
9
6
3
0
-3
-6
2008
USA
Japan
China
Germany
United
Kingdom
France
Italy
Russia
Spain
2009
Canada
Four year
trend
2008 retail
sales (US$
billion) *
% growth
2004-2008
CAGR
2004-2008
350
48
10
Carrefour SA
130
36
Tesco Plc
109
64
13
73
59
12
Target Corp
68
35
CVS Corp
20
67
161
27
10
67
59
12
Aldi Group
65
42
Walgreen Co
13
62
61
13
Kroger Co
10
61
15
Auchan Group SA
11
11
59
40
Royal Ahold NV
12
56
Rewe Group
12
13
56
34
14
53
13
17
15
49
61
13
Channel Opportunities
Pricing and Private Label Strategies
Improving Brand Image, Loyalty and CSR Profile
Key Conclusions
11
International sales
Domestic sales
12
13
35
30
25
20
15
10
5
0
2008
10
2003-08
2008-13
% growth
8
6
4
2
0
World
Brazil
China
India
Russia
% breakdown
2008
40
30
20
10
0
Germany USA
Brazil
China
India
Russia
2008
US$ million
8,000
6,000
4,000
2,000
0
Casino GuichardPerrachon SA
Carrefour SA
C&A Mode
Brenninkmeijer & Co
16
Tesco has no plans to venture into Latin America, a move which would require substantial resources and
where it would meet considerable competition from rival players. However, if the Fresh & Easy venture in the
US proves successful, this chain could be adapted and launched in Latin American markets, especially
Mexico.
17
5,000
2004
2008
4,000
3,000
2,000
1,000
0
0.8
2007
0.6
2008
0.4
0.2
0.0
Pantaloon
Retail India
Ltd
RPG Group
Subhiksha
Trading
Services Pvt
Ltd
Reliance
Group
Aditya Birla
Nuvo Ltd
20
US$ million
9,000
2007
2008
7,500
6,000
4,500
3,000
1,500
0
X5 Retail Group NV
5,000
Eldorado OOO
Tander ZAO
Evroset Group
2008
US$ million
4,000
3,000
2,000
1,000
0
Auchan Group SA Inter IKEA Systems
BV
Metro AG
21
10.0
8.0
6.0
4.0
2.0
0.0
08-13 CAGR
400,000
300,000
200,000
100,000
0
US$ million
% CAGR
Channel Opportunities
Pricing and Private Label Strategies
Improving Brand Image, Loyalty and CSR Profile
Key Conclusions
24
Recommendation:
Multinational retailers
seeking to set up
partnerships to enter
India or other large
emerging markets need to
be early entrants in order
to be in a position to find
the most suitable partners.
26
Key Acquisitions
Date
2009
Amount
US$1.5
billion
1.6 billion
July 2008 (US$3
billion)
Companies
New Ranking in
Channel (Country)
#3 in supermarkets
(United Kingdom)
2008
n/a
#2 in hypermarkets
(South Korea)
28
Potential
Bidders
Probability
Lenta, Sedmoi
Russia
Kontinent
Agrokor,
Carrefour,
Wal-Mart
Medium
am/pm (chain
owned by Rex
Holdings)
Japan
FamilyMart,
Lawson
Medium
DSG
International,
Kesa
Eastern
Europe,
Western
Europe
Best Buy,
Gome
Electrical
Appliances
Low
Delhaize,
Jeronimo
Martins
Western
Europe
Tesco, WalMart
Low
Companies
Country/
Region
Following its recent tie-up with Carphone Warehouse, the USbased electronics and appliance specialist retailer Best Buy is
likely to acquire some or all assets of another European
group, such as DSG International or Kesa, despite difficulties
in its home market that reduce its potential to invest abroad. In
particular, the group will seek to acquire out-of-town chains. In
China, the purchase of Jiangsu Five Star Appliance in
February 2009 provides the group with a wide local network,
which makes the group unlikely to make further acquisitions.
As a consequence of the global financial crisis since autumn 2008, and the world economy's sharp downturn, retailers are
expected to become more cautious in making takeover bids. Hence, the owners of the Irish supermarket chain Superquinn
could not find any bidders for the chain at the end of 2008. This prudence is further accentuated by restricted lending by
banks. Gloomier prospects for the economy will also impact retailers in emerging markets. The Chinese group Gome
Electrical Appliances is slowing down capital expenditure significantly in 2009.
However, with shares of some retailers having plunged, cash-rich groups, such as Tesco and Wal-Mart, will be hunting for
potential bargains to increase their global reach. This will be further fuelled by the collapse of many retail chains in the US
and Western Europe. The most likely bidders will be retailers with a discount positioning.
29
Channel Opportunities
Pricing and Private Label Strategies
Improving Brand Image, Loyalty and CSR Profile
Key Conclusions
30
Channel Opportunities
% CAGR
2008-13 CAGR %
1,600,000
12
1,400,000
10
1,200,000
1,000,000
800,000
600,000
400,000
200,000
US$ million
14
Trend to Watch:
Retail channels are
set to become more
blurred, as
companies offer more
services, such as
online ordering for
in-store collection.
31
Channel Opportunities
2008
US$ million
60,000
50,000
40,000
30,000
20,000
10,000
0
Beyond price
Channel Opportunities
2008
18,000
16,000
US$ million
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Channel Opportunities
Channel Opportunities
200
160
120
80
40
0
World
Asia Pacific
Australasia
Eastern
Europe
Western
Europe
35
Channel Opportunities
36
Channel Opportunities
37
Channel Opportunities
Channel Opportunities
Hence, the battleground between the largest retailers will move towards smaller formats in the US (Tesco vs
Wal-Mart vs Seven & I) and in Western Europe (Carrefour vs Tesco). A greater focus on convenience should
help to generate higher margins. In Japan, convenience stores are expected to continue expanding faster than
supermarkets and hypermarkets, and operators will increasingly innovate in order to target specific
demographic groups such as elderly people.
Forecast Occupants Per Household
at 1 January 2008-2013
% period growth
2008-2013
Hypermarkets
France
Supermarkets
Germany
Discounters
Japan
Convenience
stores
UK
USA
Asia-Pacific
-2.8
China
-2.6
Japan
-2.3
North America
-1.0
USA
-0.9
Western Europe
-0.7
France
-1.5
Germany
-1.3
UK
-0.5
39
Channel Opportunities
Pricing and Private Label Strategies
Improving Brand Image, Loyalty and CSR Profile
Key Conclusions
40
Wider Reach for Private Label, but Low Prices Remain Key
Retailers seek wider target through broader positioning
Private label innovations will continue to aim at targeting a wider
range of consumers through varied positionings, from budget to
premium, and encompassing food and non-food.
In the US, the strong performance of the Trader Joe's chain illustrates
that private label ranges can achieve differentiation through an exotic
offer, while being positioned at the low end of the price scale. US
Grocery retailers are seizing the opportunity to change consumers'
perception towards a greater acceptance of private label, with WalMart relaunching in 2009 its Great Value range.
Within non-food, the US chain Safeway and the South Korean fascia
E-Mart introduced lines of private label baby products, while the
Japanese retailer AEON launched a range of consumer electronics
produced by Sanyo.
Channel Opportunities
Pricing and Private Label Strategies
Improving Brand Image, Loyalty and CSR Profile
Key Conclusions
43
44
Shopping as entertainment
Adding an entertainment dimension will become more necessary for most
retailers, especially non-grocery retailers vulnerable to competition from
internet retailers. In-store events, such as book signings and gigs, will be
increasingly used by booksellers, stationers and audio-visual stores, such
as at Barnes & Noble and HMV, in order to drive footfall and loyalty. This
will encourage retailers to create store concepts offering more areas to try
products, especially sports goods, electronic goods and computers. The
appeal of the Apple stores shows how product manufacturers can boost
their image by operating stores where consumers can test products.
The development of shopping centres, particularly prominent in most
markets in Eastern Europe, is fuelling the emergence of retail concepts
that combine leisure and shopping in one destination. Grocery retailers
should also attempt to be positioned as leisure destinations, such as the
US supermarket chains Trader Joe's and organic chain Whole Foods.
In-store cafs will be more used by retailers to encourage consumers to
spend more time in stores. Hence, retailers should seek to establish
partnerships with foodservice operators.
46
47
Asia-Pacific
China
Japan
North America
Western Europe
France
Germany
UK
% period growth
48
Channel Opportunities
Pricing and Private Label Strategies
Improving Brand Image, Loyalty and CSR Profile
Key Conclusions
49
Key Conclusions
50
Key Conclusions
51
Key Conclusions
Schwarz
Discounters are set to win over other grocery retailing formats, and Schwarz is well
positioned to pursue its steady international expansion.
Tesco
Higher profits, thanks to strong operational efficiency in its domestic market, combined
with a strong multi-format brand, give Tesco an edge over Carrefour, at least in the short
term, despite a significantly inferior global reach.
Carrefour
A struggle to make enough profits in the French market is undermining its global
expansion. However, if it becomes more efficient in France, and successes with Dia in
Spain could show how to achieve this, Carrefour's multi-format strategy including
discounters, coupled with its wider international reach could make it a winner against
Tesco in the longer term.
Seven & I
The strength of the 7-Eleven brand and a flexible franchise model will help the group's
international expansion, but it will be constrained by market saturation in Japan.
International expansion will be stepped up, while the development of budget chains will be
an asset.
52
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