Agenda • Grocery and Convenience retailing in the UK • Overview of SPAR in the UK • UK economic outlook and the impact on retail • Two big internal drivers of change; Promotions and Private Label • Retailers and Brand owners working in harmony • Conclusion Events and economics Outlook for retailing Source: Oxford Economics/ONS Internet sales per capita 2010 Source: Passport GMID,2011 Price of overall consumer basket 2010 UK price relative to Euro area 2010 Grocery Retail Market Size Grocery sector performance has remained solid, although market growth will slow through H2 2009 and into 2010 as grocery inflation falls 160 10% 146.3 139.6 9% 140 133.1 128.2 123.5 119.8 8% 115.0 120 111.3 106.3 7% 99.8 100 93.3 96.6 6.5% 6% 4.9% 80 4.7% 5% 4.2% 4.9% 3.8% 4.8% 3.8% 4% 60 3.5% 3.3% 3.3% 3% (%) Growth YOY 3.1% 40 2% 20 Grocery Retail Market Size(£bn) RetailMarket Grocery 1% 0 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: IGD Research UK Grocery Market Facts Source: IGD UK Grocery Retailer Sales 45 40 35 30 25 £Bn 20 15 10 5 0 Tesco Asda Sainsbury Morrison Coop SPAR M&S Londis Costcutter Nisa Premier Martin Budgen Simply McColl Food Source: IGD Analysis / Verdict – 2010 & 2011 sales data Format Focus - Convenience IGD forecasts the convenience sector will be worth £41.4bn by 2014 45 30% 41.4 39.1 40 36.8 34.4 25% 35 32.1 30.3 30 20% 25 15% 20 15 10% 10 6.9% 6.0% 7.0% 6.3% (%) Growth YOY 5.9% Market Size (£bn) Size Market 6.1% 5% 5 0 Convenience Grocery Retail Retail Grocery Convenience 0% 2009 2010 2011 2012 2013 2014 Convenience is benefiting from the recession: consumers seek to shop more frequently, more locally and more last minute Source: IGD Research UK Convenience Retail Sector Key Facts Source: IGD Convenience players and “new” entrants 4 3,5 3 2,5 2 £Bn 1,5 1 0,5 0 Tesco Express SPAR Coop M&S Simply Londis Costcutter Nisa Premier Sainsbury's Martin McColl Budgen Convenience Food Local Stores Source: IGD Analysis / Verdict – 2010 & 2011 sales data Spar in perspective Founders purpose • SPAR was founded in the Netherlands in1932 by Adriaan Van Well and was originally know as DESPAR. • The name DESPAR in Dutch stands for ‘Door Eendrachtig Samenwerken Profiteren Allen Regelmatig ‘ this translates into English as ‘All Benefit from Joint Co- operation’. • The word SPAR in Dutch means fir tree and from the start the fir tree symbol was used to identify the organisation SPAR Worldwide • SPAR operates in 33 countries spread over 4 continents • 2010 SPAR’s retail sales were in excess of €27bn from 12,680 outlets Beginnings of SPAR UK – Over 50 years ago The secret of SPAR success Customer Manifesto We are a group of local independent store owners and managers living, involved and ‘Tuned in’ to our communities. We are passionate about the food we provide and our aim is to offer our customers better stores, better products and the services they want – locally. Our aim is to make the places we live, better places to live. Retail Mission To provide the most profitable solution for Independent retailers in the convenience market Who are our typical retailers? SPAR organisation in numbers £3bn Retail Sales 15 million customer transactions 2560 stores 1322 retailers 5 RDCs 1 CO SPAR Customers convenience needs ranking What factors are important in choosing which convenience store to use? -Mean rating of importance out of 10 Fair price 8.47 Nearest store 8.35 Fast service 8.35 PRIMARY Stock availability 8.34 NEEDS Staff 8.31 Quality Fresh fruit & veg 8.27 Wide range 8.21 Store environment 8.08 Quality - fresh meat 8.07 SECONDARY Community 7.9 NEEDS Offers & promotions 7.89 Other services 7.59 Selection of healthy food 7.38 Quality - own label 7.21 Parking 7.16 Ethically-minded 7.14 TERTIARY NEEDS Source food locally 6.95 Choice & ideas for quick meals 6.77 Good to buy a snack 6.43 Data Source: HPI U&A Convenience Shoppers What we sell in a typical SPAR store Grocery Food 5% Grocery Non Food 4% 6% 18% Impulse Soft Drinks 2% Impulse Crisps House & Home 2% Confectionery 6% Bread & Cakes Chilled 4% Frozen 24% Fresh Fresh meat 12% Produce News & Mags 2% 6% 1% 5% Tobacco 3% BWS Retail development • Optimising the retail opportunity – Every customer has a reason to visit you – Better range fit means higher basket size – Selling goods at the optimum price The key drivers Store type The formats EUROSPAR EUROSPAR Community Supermarket Affluent Neighborhood Value SPAR Neighborhood Affluent Less Affluent Urban Lifestyle EXPRESS In-Transit SPAR- Shopping Missions - there for you, and you, and you… “I need to buy some items in-between my + + Top-Up big weekly shop” “I want a quick & Meal for easy meal + + Tonight solution” Special “I need a gift” + + Occasion “I’m hungry now” Food- + + to-Go “I need my daily Daily Life essentials” + + EUROSPAR – small supermarket c 800sq mt Neighbourhood – all under 300 sq mt Urban Express In Transit So this is where we are today….. PAUL VALERY, 1871 - 1945 However adapting to a changing market is essential – just ask these guys………………. 1980's 1990's 2000 - present Bejam's Carrefour Aberness Foods Fine Fare Crazy Prices Alldays Galbraith Supermarkets Circle K Bells Hintons David Greig Day & Nite International Food Giant Europa Law's Gateway Fresh Express Lennons Grandways GT Smith Liptons Normans Hillards Mainstop Presto Jacksons Sperrings 7-Eleven Kwik Save Victor Value Shop Rite Morning Noon & Night Wm Low Somerfield Safeway Change comes in lots of different ways. Grocery Multiple Retailers Promotional Sales In Grocery Multiples Spend on Offer is more intense with 35% of all Sales now being sold on offer Top 4 Grocery Multiple Retailers Promotional Sales Without a `loyalty ` scheme in October, Morrison's have now overtaken Tesco for the top promotional slot Source: Nielsen Homescan Grocery Multiples What Has Had The Biggest Positive Impact on Your Business This Year (Spontaneous) Value communication Private label S Budget Recent private label initiatives Source: company websites Premium OL is again the fastest growing sub brand, as budget OL turns negative. With ‘Dining-in’ the new dining out, Premium OL is an option for retailers to differentiate their offer and provide shoppers quality at a price they can afford. The focus on Premium is expected to continue in 2011. Grocery Multiples 4 weekly data: % Growth Premium Budget Standard Healthy 50% 2009 2010 2011 40% 30% 20% 10% 0% -10% -20% 3-Oct-09 2-Oct-10 8-Aug-09 5-Sep-09 7-Aug-10 4-Sep-10 11-Jul-09 10-Jul-10 31-Oct-09 30-Oct-10 18-Apr-09 17-Apr-10 13-Jun-09 23-Jan-10 12-Jun-10 21-Feb-09 21-Mar-09 28-Nov-09 26-Dec-09 20-Feb-10 20-Mar-10 27-Nov-10 25-Dec-10 19-Feb-11 16-May-09 15-May-10 22-Jan-11 4 weeks ending Categories coded with sub-brands attribute account for 58% Sales sold through Grocery Multiples Grocery Multiples market for data 4 w/e 19th February 2011 *Standard includes Standard OL, Free From, Kids & Discounter Brands Source: Nielsen Homescan With the exception of Frozen, OL contracted across all categories for the second year running, as branded promotions averaged the year at 46%. Very High OL categories 94% 94% Own Label Value Shares within the category 92% 91% High 78% 77% OL categories Medium OL categories 56% 54% 52% Very Low 50% 51% 50% OL categories 36% 34% 35% 34% 33% 31% 25% 24% 21% 20% 16% 15% Deli Dairy Liquor Frozen Bakery Beauty Health& Poultry Household Soft Drinks Soft Fruit & Veg& Fruit Dry Grocery Dry Meat Fish& Meat Confectionery 52 w/e 23-Jan-10 52 w/e 22-Jan-11 Source: Nielsen Homescan – Total FMCG Grocery Multiples 52 w/e 22nd January 2011 vs 52 w/e 23rd January 2010 69% of shoppers agree their main store’s own label is as good as brands with pre and new families agreeing the most ... the new generation of shoppers ..? “My main store’s own label products are generally as good as the well- known brands” % Respondents agreeing 13% 2011 69% 18% 2010 68% 2009 67% 69% 2007 67% Agree Neither Agree nor Disagree Disagree 2006 70% Key Buyer groups opinion to statement: Agree Disagree 2005 70% • Pre Family (116) • Established Family (114) 2004 67% • New Family (112) • Older Couple (112) • Maturing Family (107) • Older Singles (113) 2003 69% Source: Nielsen Homescan Survey (GB) January 2011 Supplier & retailers Partners or….? Customer engagement Engage the customer by: Listening to the customer re: their strategies and goals for the short and long-term Understanding the customers’ shoppers Sharing your company and category strategies on a consistent and constant basis and endeavour to stay on strategy Adapting to change and variances in the market and situation Follow up with customer by: Maintaining contact with senior management to sustain buy-in Conducting regular business reviews and assessments Leveraging key relationships within the customer Applying performance measures that highlight continuous improvement Key Enablers Internal strategic alignment Top to tops with retailer senior management Shopper insight & understanding Cross functional alignment & human resource capability Information technology/tools © Copyright and Proprietary information property of Advantage Group International and associated subsidiary companies UK Retailers among the most satisfied with supplier performance 30 30 29 26 18 16 16 11 Canada UK USA Australia Spain Germany Italy France 2008 Advantage Mirror Report PRIORITIES FOR MANUFACTURER SUPPORT AS IDENTIFIED BY RETAILER (COMMERCIAL) 2008 2009 2010 Priorities Spain Portugal France Italy Belgium Holland Germany UK Rusia Has brands/products that provide adequate margin levels to enable