EUROPE QUARTER BY NUMBERS Q4 2017 1 Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. Copyright © 2017 The Nielsen Company CONTENTS SECTION 1 THE BIG PICTURE: EUROPE WEST Message from Olivier Deschamps…………………..…………………….………03 EUROPE AT A GLANCE Key economic drivers………………………………………………………….……04 Looking through Europe West FMCG lens………………………………...……06 COUNTRY SNAPSHOT Belgium……….………………………………………….…………………………..07 France……….………………………………………..….…………………………..10 Germany……….……………………………………..….…………………………..13 Italy……………………………………………………….…………………………..16 Netherlands..….…………………………………….……………….………………19 Portugal……….……………………………………..………………….……………22 Spain………………………………………………………………….………………25 United Kingdom.……………….…………………………………….………………28 IN THE INDUSTRY Retail Channel Universe Update……...………………………..…………………93 2 Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. THE BIG PICTURE: EUROPE WEST Welcome to the first edition of Europe Quarter by Numbers that includes key Western European markets for Q4 2017, complimenting the view of Central and East Europe already in place. Our ambition is to provide context and insight into how broader macroeconomic factors are influencing consumer sentiment and spending patterns in the retail scene. After tough times in the last few years, 2017 showed a dynamic economic environment across Europe, with positive consumer confidence in the region reaching some of the highest levels seen for some time. While nations can draw similarities among the positive impacts on Olivier Deschamps consumer sentiment, Europeans diverge in the national issues of greatest concern - terrorism Retail Services Lead Markets remains high on the list and health is definitely a key priority with countries like Portugal showing notable peaks. Encouraged by lower risk of terrorism and better economic conditions, tourists flocked to the region in 2017 (+8%), particularly in Mediterranean countries. France was still the number one global tourist destination and Spain is about to exceed USA. Western European countries also remained strong with the best economic growth see in 10 years. GDP increased +2.5% in 2017 and is now stable following recovery from a number of economic and political crises over the last decade. Among Eurozone's largest economies, GDP growth slowed slightly in Germany, Italy and Spain in Q4, but picked up in France, Netherlands and Belgium. In this favorable context, the FMCG industry rose with significant value growth across the region, led by Iberia where both Portugal (+6.7%) and Spain (+5.3%) are growing fast. In every market inflation is feeding growth, but volumes are also doing well in 2017, benefitting also from better weather than in 2016 leading to a direct impact on Beverage categories. The exceptions being both Belgium and Netherlands where volumes are declining by -0.3%. Putting money into savings is the first priority for the majority of markets and consumers continue to navigate the retail environment with a savings mindset, seeking the best deals when shopping. Discounters like Aldi and Lidl are pushing hard across the region and gaining share, modifying the retail landscape. Another key trend is the rapid increase of digital initiatives that will lead to an explosion of e-commerce in the coming years. Best examples are now France and UK where e-commerce has gained 6% share of FMCG and increasing with online `clicks` growing still faster than store “bricks”. This is within the context of a moderately inflationary environment in Western Europe at the end of 2017. We have seen recently that growth in FMCG is getting harder and harder to achieve but winners can be found across all sectors and markets with many examples of companies, segments and channels performing strongly. Without a doubt, where we see massive and sustained growth is among small players, doing much better than the bigger players across countries. In a number of markets, local brands are capitalizing on revived “local pride”, leveraging an appeal from consumers toward local consumption and a push from retailers towards premium, local champions, who frequently offer products with health and wellness benefits, organic ingredients or “free-from” claims. Private Labels are also gaining traction across these markets (except in France), at a time when many retailers have revamped their own brands, upgrading ranges and investing in communication. That said, big or small, retailers or manufacturers, it’s up to all the players in the industry to understand the nuances by market and connect with local consumers. 3 Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. EUROPE WEST MARKETS AT A GLANCE ECONOMIC PULSE OF CONSUMERS AROUND EUROPE The Nielsen Consumer Confidence Index measures perceptions of local job prospects, personal finances and immediate spending intentions. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively. CONSUMER CONFIDENCE INDEX GDP GDP Q4 2017 vs Q4 2017 vs Q4 2017 (annual % Inflation (annual % Inflation Q4 2017 Q3 2017 Q3 2017 growth) growth) Belgium 85 -10 1.7 2.0 2.4 1.2 France 79 8 UK 96 -3 1.5 2.8 1.7 1.1 Italy 68 3 2.9 1.6 Germany 103 0 3.2 1.6 Spain 93 0 3.1 1.3 Netherlands 101 0 2.1 1.8 Portugal 84 0 CONSUMER CONFIDENCE INDEX Positive consumer sentiment across the region with record high indices in various markets – only declining in Belgium and UK GDP and Inflation reflect % change per annum to Q4 or latest available data Source: Economist Intelligence Unit (EIU)/local government sources 4 The Conference Board® Global Consumer Confidence Survey is conducted in collaboration with Nielsen. Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. EUROPE WEST MARKETS AT A GLANCE CONSUMER SENTIMENTS IN EUROPE WHAT ARE THE TOP 2 CONCERNS IN THE NEXT SIX MONTHS? Type of concern 40 33 34 30 26 27 23 23 21 19 19 19 20 17 18 20 15 16 13 14 10 10 0 EU BE DE ES FR GB IT NL PT Health Terrorism EU BE DE ES FR GB IT NL PT Health 1 -5 2 -3 -1 3 0 -3 5 Terrorism -6 -7 -3 -20 -4 -10 -10 -4 -14 Bars reflect Q4 2017. Table shows comparison to Q3 2017 WHO’S SPENDING, SAVING AND INVESTING? After living expenses, how is spare money spent 60 51 51 50 48 47 50 44 45 45 42 40 38 37 40 31 29 27 28 28 30 22 20 10 0 EU BE DE ES FR GB IT NL PT Putting into savings New clothes EU BE DE ES FR GB IT NL PT Putting into savings 1 9 0 3 -1 0 -6 1 0 New clothes 1 4 6 -1 -2 3 -1 0 3 Bars reflect Q4 2017. Table shows comparison to Q3 2017 Putting money into savings is #1 priority for majority of W. Europe markets, spend on clothes is important in Germany, Italy and Spain 5 The Conference Board® Global Consumer Confidence Survey is conducted in collaboration with Nielsen. Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. LOOKING THROUGH EUROPE WEST FMCG LENS FAST MOVING CONSUMER GOODS MARKET DYNAMICS – Q4 2017 Weighted average – WEST EUROPE – 8 countries BE FR DE IT NL PT ES GB 6.7% 5.3% 2.9% 3.2% 4.0% 3.7% 2.8% 0.5% 3.1% 2.9% 2.8% 1.8% 1.4% 1.7% 3.2% 3.2% 3.8% 2.1% 2.1% 1.4% 1.3% 1.2% -0.3% -0.3% Unit value change Volume change Nominal growth WHERE ARE THE FMCG GROWTH OPPORTUNITIES? Average volume growth Q3 2017 & Q4 2017 UK (+1.7%) GERMANY (-0.4%) NETHERLANDS (-0.6%) BELGIUM (-0.5%) FRANCE (+0.7%) ITALY (+2.1%) PORTUGAL (+1.5%) SPAIN (+2.8%) Avg. volume growth decreasing versus last period Colour coding indicates growth or declining trend compared to same 6 month period year ago Avg. volume growth increasing versus last period 6 Average volume growth of Q3’17 & Q4’17 vs Q3’16 & Q4’16. Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. BELGIUM SNAPSHOT While Belgium’s economy is growing significantly, the growth remains minimal compared to neighboring markets. The European Commission believes Belgium’s growth in 2018 will be the second slowest in the Eurozone. After several quarters hovering around the 70 to 80s, consumer confidence has stabilized at 85. Half of Belgian people believe that the country is in a recession at the moment, with a little less than one third believing it is a good time to buy the things they want or need. The FMCG market grew 1.3% in 2017, which is slower than GDP growth and with volume Pedro Lima Managing Director sales dropping slightly. In addition, Belgium’s FMCG price gap has widened versus Benelux neighboring countries over the past 15 years, creating cross-border competition for consumers. Over half of Belgians surveyed say they’ve changed spending to cut down on household spending, with 57% saying they have switched to cheaper grocery brands to save on household expenses. In mature markets like Belgium, the struggle for manufacturers is to find growth opportunities. While elusive, they are present. In Belgium, capitalizing on local footprint and distribution channels are major growth drivers for total FMCG. This year most growth was driven by Hard Discounters, due to introduction of national brands and premium products, and Large Supermarkets, which successfully offer a wide assortment at competitive pricing. Superettes remain small but experienced the largest growth. There are great opportunities for manufacturers who successfully innovate with local niche products, giving them a local relevance and authenticity that resonates well with consumers. Strong, established brands, particularly within Impulse categories, can benefit from growth by listing at Hard Discounters - even without compromising on price. Experimenting with pack sizing can also be a tactic to combat rising costs, with Millennials in particular open to smaller sizes, especially if it helps keep them healthier.