THE TETRA PAK INDEX ISSUE 11 / 2018 INSIGHTS & OPPORTUNITIES Online Grocery foreword_02 Thoughts from Dennis Welcome to the 11th annual Tetra Pak This year’s Tetra Pak Index provides insights Packaging has a key role to play in all of this. Index, which focuses on the rise of online into this new omnichannel world of grocery It’s part and parcel of home delivery, impacting grocery and the unique opportunities it shopping. It’s based on consumer research significantly on both customer satisfaction presents for the food and drink industry. conducted in five countries, plus interviews with and logistics (light weight and space efficiency e-retailers in North America, Europe and China, are key factors). And while its primary purpose The power of the internet is transforming and a global market segmentation study. will always be one of protection and the grocery trade, just as it has revolutionised preservation, it now offers rich potential for so many other retail sectors. There were some It highlights four key trends. Convenience, personalisation and a consumer experience initial challenges. But with most of these now which is driving online demand in all that can both surprise and delight. Thanks addressed, online grocery shopping is on an geographies, as consumers look for ways to smart technology, every package sold unstoppable march, taking an ever-greater to make their time-crunched lives easier. can now carry a unique digital identifier, share of the food retail market. Technology, which is transforming both creating the opportunity for direct one-to-one supply chains and the consumer experience. conversations with consumers (as well as Physical stores are also being reinvented Sustainability, as environmental issues become helping drive efficiencies across the entire through digitalisation, providing consumers more important for consumers, brands supply chain). with extra information on products, personal and retailers, and governments alike. offers and recommendations, automated And personalisation, as marketers look for Looking ahead, this omnichannel revolution cash-free checkout and more – as well as new ways to attract consumers online, build in grocery is not merely going to continue, supporting hubs for rapid local delivery. relationships and drive loyalty. it’s going to accelerate. We look forward to Indeed, offline and online are now merging working with our customers to harness the into an “omnichannel” age, where consumers opportunities it presents. expect to be able to buy whenever, wherever and however they choose, with the ubiquitous smartphone acting as their compass. DENNIS JÖNSSON PRESIDENT & CEO, TETRA PAK GROUP contents_03 contents Overview Analysis Trends 05 Growth & disruption 11 Market forecast: resisters, laggards, 16 Convenience 06 Redefining the consumer experience pioneers, leap-frogging pioneers 19 Technology & performance 08 Physical retail: reinventing to stay relevant 12 Retailer & consumer needs: 23 Sustainability North America, Europe & China 25 Personal & unique 13 Understanding online grocery consumers 27 Summary 28 Research & references CASE STUDIES 14_Maeil Dairies_Tetra Pak & bigbasket / 17_Di Carlo / 21_Adopt A Cow_Tetra Pak, Ads On Board & Shazam / 22_Puleva / 24_Buzzbox_Koita / 26_JustFoodForDogs overview_04 Overview E-commerce is by far the fastest-growing channel for groceries today. It also has a much wider impact, influencing physical stores – and more. It’s part of a transformation that’s redefining the way consumers buy, experience and react to products, driving innovation and disruption throughout the value chain. overview_05 Growth & disruption Not only do retailers and brands now see We’re now seeing the emergence of online/ To that end, Walmart has acquired Online is by far the fastest growing channel online as a crucial sales channel, they also see offline alliances everywhere, as “bricks and e-commerce companies such as Jet.com for groceries today. Looking at Kantar’s latest it as having an impact far beyond e-commerce: clicks” emerges as the business model of and made significant investments in IT to figures for the global fast-moving consumer its disruptive influence is affecting investment choice in the shift towards an “omnichannel” raise its capabilities. Coming from the other goods (FMCG) market as a whole, online and future plans for all channels. Online approach to retail. “Our strategy is to serve direction, Amazon spent $13.7 billion to buy sales grew 30% in the 12 months to March grocery is being seen less as a battleground customers through e-commerce and our stores Whole Foods, not only to establish a physical 2017, double the figure for the previous year, between insurgent pure players and in a seamless way,” says Walmart CEO Doug consumer-facing presence, but also to turn compared with just 1.3% growth in all FMCG incumbent bricks and mortar vendors, and McMillon.3 “Customers are time-crunched, its stores into a network of hubs close to urban channels.1 And while the picture is very different more as a catalyst for a wider transformation. so we want their shopping experience with consumers. It’s now rolling out free two-hour from market to market, online grocery is “It’s about how online and offline together us to be fast and easy – truly seamless – in all delivery from the grocery chain to Prime expected to continue to grow much faster than can create both a better customer experience the ways they want to shop: in stores, on their subscribers in various US cities, increasing any other channel, albeit from a fairly modest and better efficiency for the entire supply mobile device, or through pickup and delivery.” pressure on traditional retailers to look for base – 4.6% globally. (See also Planet Retail chain,” says Stéphane Roger, Global Director ways to promptly and profitably deliver their figures, below. For more on individual markets of Shopper and Retail, Kantar.2 own fresh food and pantry items. and their growth prospects, see page 11.) In China, e-commerce market leaders Alibaba and JD.com are also investing heavily to Business models • Third party/personal shoppers. Drugstores, Supermarkets Cash & carries, Convenience build an offline presence (see page 08.) “We Hypermarkets Discount Online Currently there are a variety of Services such as Instacart pharmacies & & neighbourhood warehouse & forecourt & superstores stores grocery perfumeries stores clubs stores online grocery models: that pick up from retailers service every piece of the consumer journey,” and deliver to consumers are says Kurt Li, Head of Business Intelligence at 4 2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 2012 2017 2022 • Home delivery. Retailers are increasingly popular, not only Alibaba. “Now, with our bricks-and-mortar increasingly prioritising home with consumers but also with retail presence, our touchpoints are no longer $514bn $412bn $367bn $314bn $481bn $925bn $387bn $799bn $294bn $396bn $770bn $335bn $342bn $305bn $455bn delivery due to consumer retail partners: Sam’s Club, $1,714bn $1,659bn $1,848bn limited to online: we have managed to digitise $41bn $21bn $94bn Target and Costco all use demand. But it’s costly, offline behaviour too.” making it difficult for retailers Instacart for fulfilment and to make a profit, especially delivery in the US. as consumers are resistant to • Direct to consumer. Many (if not Meanwhile, brands are becoming e-retailers delivery charges. most) major CPG companies too, and many (if not most) major consumer • Click and collect. Allows are expected to add direct-to- packaged goods (CPG) companies are Fastest growing channels consumers to browse and consumer services over the next expected to experiment with the direct-to- buy online then collect from few years. Some, such as The consumer model over the next few years. a physical outlet, such as a Coca-Cola Company, Unilever, “This is, without a doubt, the greatest retail store, petrol station, post Procter & Gamble, are doing 2.2% 3.2% 3.8% 4.4% 4.8% 5.8% 17.4 % revolution we’ve seen over the last 50 years,” CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 CAGR 2017-2022 office or other commuter- so already. For example, for friendly locations. It’s the first time in The Coca-Cola says John Carroll, Vice President and General PLANET RETAIL GLOBAL RNG PLANET RETAIL appealing to traditional chains Company’s more than 100-year Manager E-commerce, The Coca-Cola Hyper/supermarkets are still the largest channels globally, with a wide footprint and is bottling history, bottlers are Company.5 “The bricks-and-mortar world and but growth is slow. Convenience and discount are the fastest particularly popular in the now delivering select brands the online world are merging. And it’s all being growing physical formats, while online is growing far faster still US, where superstores are directly to consumers’ homes driven by how and where people are shopping.” larger – Walmart now offers a via a pilot called eFulfillment. drivethrough service in more than 1000 stores, for example. overview_06 Redefining the consumer experience E-commerce redefines the way consumers receive, experience and react to products, creating a new circular model with constant innovation and Share Discovery & search disruption at almost every stage. With Third moment of truth Zero moment of truth more ways to buy and more places to get information than ever before, brand to consumer engagement throughout the path-to-purchase, and afterwards, Buy becomes essential. In fact, the more touchpoints a brand makes with its consumers, the better the impact on perception and satisfaction. Receive First moment of truth Order fulfilment & last mile Discovery & search to 97% and 93% respectively in Hence Facebook now talks about As consumers spend more time China. Such independent reviews “the three-second audition” and Best versus brand probably will be too. overwhelmingly a search engine and online, so it becomes a key and comments are now rated “thumb-stopping content”.