ITALY COUNTRY RETAIL SCENE REPORT August 2012 KANTAR RETAIL 6 More London Place, Tooley Street, London, UK / Tel. +44 (0)207 031 0251 / www.KantarRetail.com INFORMATION / INSIGHT / STRATEGY / EXECUTION © Kantar Retail 2012 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com Index I. Key Themes .......................................................................................................... 2 II. Socio – Economic Background .............................................................................. 3 III. Key Players in the Grocery Retail Sector ............................................................ 11 IV. Grocery Retail Channels ..................................................................................... 19 V. Conclusion ........................................................................................................... 25 © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 1 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com I. Key Themes Private Label Due to the country’s difficult economic situation, Italian household spending is under pressure and shoppers are looking to cut their expenses as much as possible. Private labels are thus seen as a key way for shoppers to cut their grocery expenditure. Private labels are underdeveloped in Italy compared to France, representing only around 25% of sales, whereas French retailers can generate around 40% of their sales through their own brands. Italian retailers are aggressively expanding their assortments of private labels, and heavily promoting their own brands. National Champions The Italian grocery market is dominated by national retailers, from multi-channel retailers to discounters. These national champions accounted for 45% of the Italian grocery retail market in 2011. They are also amongst the fastest growing in the market. Conad and Esselunga saw particularly strong growth of around 5% year-on-year, during the period from 2006 to 2011, when international retailers, such as Auchan or Carrefour, grew at less than 2% a year. Regional Differentiation The Italian retail landscape is different between the North and the South of the country. In Southern Italy shops are usually smaller than in North and Central Italy, where hypermarkets are more developed. On the other hand, discounters are stronger in the South where local players such as Eurospin and MD Discount are expanding quickly. This regional difference will remain as the difference in wealth between the two regions is a well-established fact, but retailers, (locals, nationals, and internationals), are looking to expand in regions where their store network is underdeveloped. © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 2 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com II. Socio – Economic Background Italian Population As of 31st December 2011, Italy had a population of 60.6 million people, spread across around 25 million households. This translates to 2.4 people per household, slightly less than the EU27 average of 2.5 people per household. This number has been constant over recent years. The Italian population increased in 2011 by 286,000 due to immigration. Italy’s population density is 200 inhabitants per square kilometre (sq km). By comparison, the average population density for the EU27 is 116.6 inhabitants per sq km. 46% of the Italian population are concentrated in the North (Figure 1). Figure 1: Population in Italy Population Region Share % 2011 North West 16,120,067 27% North East 11,643,194 19% Centre 11,950,322 20% South 14,186,373 23% Italian Islands 6,726,486 11% Source: Italian Statistical Institute (Istat) The North and Centre represent 66% of the population (Figure 2). Rome, 2.7 million inhabitants, and Milan, 1.3 million inhabitants, the two biggest cities in Italy are located in this region. The North is also the wealthiest region of Italy, while the South is home to the majority of the less affluent. 68.2% of poorer citizens live in South Italy. In this region almost one family in four live under the poverty line. © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 3 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com Figure 2: Population density in Italy Source: Eurostat The retail landscape reflects Italy’s North-South division. In the South of Italy, stores tend to be smaller and local chains more widespread, while in the Centre and North large retailers are more developed. Some exceptions are, however, noticeable. Southern regions such as Sardinia and Abruzzo have the same kind of grocery retail organisation, meaning larger stores. Some Northern regions as Lazio, Tuscany and Liguria have development levels of modern retail similar to some southern regions. Economic Indicators i) GDP and Government debt Italy’s Gross Domestic Product (GDP) growth follows the European trend, but has a worse performance overall than the European average. In 2010, after a short-lived bounce back, Italy has seen its GDP falling again much faster than the European average, putting the country GDP growth near zero in 2011 (Figure 3). © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 4 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com Figure 3: Annual Real GDP Growth Source: Data - Eurostat; Chart – Kantar Retail Italy was hit by the 2011 crisis and will continue to be affected in the coming years. The IMF forecasts that Italian GDP will contract by 1.2% in 2012, and 0.3% in 2013. Figure 4: Government Deficit/Surplus as % of GDP Source: Data – Eurostat; Chart – Kantar Retail Government debt levels have started improving at a better rate than the European average since 2009 and are coming closer to the Maastricht criteria of an annual government deficit of no more than 3% of GDP (Figure 4). With the recent fiscal reforms © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 5 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com from Mario Monti’s government, strongly supported by the European Commission, the debt level as % of GDP is expected to improve. Figure 5: GDP Components for Q1 2012 Source: Data – Istat; Chart – Kantar Retail The major component of the Italian GDP is final consumption expenditure which represented 52.3% in the first quarter of 2012 (Figure 5). ii) Unemployment In 2011, the unemployment rate reached 8.4%. Even though the number is high and has increased in recent years of crisis it still remains below the European average of 9.7%. The long-term unemployment rate, representing the inability of people looking for work to find a job in after a year or more, is however higher than the European average; 4.4% compared to 4.1%. In the four first months of 2012, however, unemployment continued to grow to meet the European Union average of 10.2% in April 2012 (Figure 6). Due to the current economic situation unemployment is expected to remain high. © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 6 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com Figure 6: Unemployment by month (July 2011 – May 2012) Source: Data – Eurostat; Chart – Kantar Retail Even though unemployment has been slightly below the European average, Italy has had a high rate of long-term unemployment, which has been growing over the past few years. In 2008, 45% of the unemployed were unable to find a job for at least one year. This number reached 51.3% in 2011. The people mainly affected are women and people under 29 years old. iii) Consumer confidence and household expenditures The consumer confidence index in Italy has decreased sharply over the past few years, from 109.1 in December 2010 to 85.3 in June 2012, showing the insecurity that Italians are feeling towards the economy (Figure 7). © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 7 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com Figure 7: Italian Consumer Confidence Index Source: Data – Istat; Chart – Kantar Retail Compared to the European Union average, the economic sentiment indicator, a mix of five confidence indicators (Industrial, Services, Consumer, Construction, and Retail Trade confidence indicators), Italians are less confident than other Europeans (Figure 8). Figure 8: Economic Sentiment Indicator © 2012 KANTAR RETAIL | 2012 Italy Retail Scene | www.kantarretail.com 8 245 First Street 6 More London Place T +44 (0) 207 0310272 Suite 1000 London F +44 (0) 207 0310270 Cambridge, MA 02142 SE1 2QY [email protected] USA UK www.kantarretail.com Source: Data – Eurostat: chart – Kantar Retail After a short increase in confidence in November 2011, with the appointment of Mario Monti as Prime Minister, confidence has been decreasing since December 2011 when the government implemented austerity measures. The average monthly household consumption expenditure was EUR 2,488 in 2011, an increase from EUR 2,453 in 2010. The median monthly expenditure is lower, at EUR 2,078. The gap between the lowest and the highest monthly expenditure is EUR 1,633.