On the Grocery Frontline

Asian Trader talks to Kantar’s head of retail and consumer insight, Fraser McKevitt, about the emerging new landscape in grocery and what trends to expect in the near future

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A shopkeeper wears a protective mask while working at a convenience store in Stoke Newington on April 14, 2020 in London, United Kingdom. (Photo by Hollie Adams/Getty Images)

Thanks to the pandemic there are more changes happening in retail this year than perhaps in the whole previous decade – or even longer.

Trends that were developing have been accelerated and fortunes good and bad have been wildly exaggerated, seemingly at random.

Statistics and figures are flung every which way with confusing abandon, and it is difficult to separate noise from signal, fact from conjecture.

Last week we learned that as lockdown eased, shopping patterns were starting to return to normal. But this week, with the new three-tier keep-indoors-and-don’t-socialise system in place, there is once again “panic” (or “planning”) buying and people staying at home and shopping locally – probably for the foreseeable future.

Kantar has just announced that growth intake-home grocery sales again accelerated to 10.6 per cent in the four weeks to 4 October, as shoppers geared up for new restrictions, having previously fallen back toward around 8 per cent growth, down from a lockdown high of 13 per cent. And a disproportionate amount of that growth is of course in the convenience channel.

Just when you thought you could finally take some time off …

Meanwhile, online grocery sales in the past month were up 76 per cent on a year ago, with 20 per cent of UK households now“Ocado-ing” or similar. Digital food shopping at 12.5 per cent has not declined over the past month, says Kantar – which means that, fad or not, ordering in is probably here to stay.

Iceland, which believe it or not is 50 years old next month, is also flying high, with the nation rediscovering the delights of frozen fare that Bejam introduced to the UK when Iceland was a mere ice-cube-in-arms.

Iceland’s astonishing 17.3 per cent growth now means it owns a very significant 2.3 per cent of the grocery sector (Aldi is on eight per cent).

Asian Trader recently sat down for a chat with with Fraser McKevitt, head of retail and consumer insight at Kantar to find out what is going where.

Lockdown effects: online and offline

Asian Trader: Our heads are still spinning. Explain what’s been going on.

Fraser McKevitt

Fraser McKevitt: Lockdown, yes. Five years  of change happened to the online grocery sector in five months during knockdown. For now we have reached peak online but it’s not going to settle back down to where it was before. And the majority of those sales for the grocers who were online have been stolen from big box retailers.

And it did grab some sales from the discounters, Aldi, and Lidl. I don’t think online is ever going to return back to where it was because people have learned learn how to do it. In particular, people who didn’t particularly shop online, so people in rural areas, particularly older people. It’s a bit daunting to do an online shop for the first time, but then you do it once and you realise it’s not difficult..

AT: People are just getting used to it, are they?

FM: Yes, they’re getting used the setup of the passwords and all that and the other thing is simply more people are at home. On the positive side, perhaps they’re working from home and on the negative side perhaps not.

The other channel winner has been convenience stores in all shapes and sizes. So both from the mults, like Co Op as well and Tesco Express, Sainsbury’s Local, etc. And, of course, where your primary interest is, the independent sector.

And the main reason people shop [in convenience] is it’s convenient for me in the sense of:if it’s there now when I need it, and if I’m travelling, if I’m going to work and if I’m going to wherever it might be, I might well shop there.

And while we can’t break out in our data the neighbourhood and city centre stores, it stands to reason that my local Tesco Express in my far flung suburb or town is going to be doing much better than the one in Holborn.

The area that has really  suffered is big stores, the likes of the Big Four. That points to the fact that we didn’t we didn’t want to go to those shops during the height of Covid. We were learning to live without them because there were queues outside and they felt unsafe.

AT: You said that the discounters were hit less than the big mults.How much traffic have they stolen in this period? And how much are they going to keep?

FM: So the discounters have had stellar growth rates over the last ten years and now a slower Covid period. I think that is because of two things. First, price become became less immediately important where something was stocked. Where can I get in and out safely? Where is it going to be so I don’t have to travel. And then the other one is their stores, because they were large enough that you had to queue to get in, but still pretty small with their limited ranges, so you can’t get everything in one go.

So the shopper figures if she is going to make just one shopping this trip this week, it’s probably not to a discounter.

People line up outside an Iceland supermarket on Roman Road in Bow on March 21, 2020 in London, England. (Photo by Hollie Adams/Getty Images)

AT: And yet Iceland, which is kind of a frozen discounter, I guess,is up double the average of the big stores, just like symbols and independents are up three times that amount. Iceland is going great guns. And if you go to your local Iceland, it’s absolutely rammed.

FM: Two things are going on there. One, frozen food has had a moment in 2020. It was people doing fewer shops, but making big stocking-up trips, and particularly, just buying a lot more. I don’t know if you’ve got kids, but I spend my entire life making lunches for children. And frozen food speaks to that very well. And there’s a lot of things that kids like in frozen food.

The other thing about Iceland is the location and the demographics of their stores and the demographics of their shoppers, who are not necessarily always people who are driving to the shops. So the fact that Iceland is in convenient locations where most people live, meant that they have continued to do very well. And of course they do. Frozen food by its nature is often cheaper than chilled food, partly due to the easier distribution.

AT: Old ladies love it! They’re going to buy a metric tonne of stuff they couldn’t shift otherwise, and then they get their personal chauffeur to bring it home after them.

FM: Well, exactly. And that that just speaks to the point about the demographic profile of Iceland shoppers biased towards people who perhaps haven’t got a car, and the fact that they’ll deliver it for you. And of course, the other great thing about that method of doing deliveries is it strips out quite a lot of cost. Because I’m the person that has to go around the supermarket taking things off the shelves.

But when you are picking and doing that for people, somebody’s got to pay the bills, and of course that’s then a member of staff cluttering up the aisles. Well, you take it off.

Restaurant boom and gloom

AT: Okay, restaurants. They were booming these last months, you say. But that was at 50 per cent discount, and with pent-up demand from the summer when nobody could go out.

That’s not going to continue, is it, because the eat out offer is over and now we have the 10pm curfew and enhanced lockdown options, and furloughs ending, so a lot of people are going to be out of work. What will it do to hospitality and the on-trade?

FM: It’s a gloomy story, you’re quite right. We look at our data each Monday, Tuesday, Wednesday, built on the previous one. So people really did get more confident. They actually believed that it would work. I remember the first time I used it, I was at this restaurant wondering whether it was actually going to do this voucher thing – and it did, it all worked – it seems like the entire country was out eating.

Clearly, out of home the whole sector is much more dependent on consumer confidence with disposable income and employment than is take-home groceries.

Even if you’re in financial trouble, take-home groceries are the last thing you cut back on.

A sign advertises the “Eat Out to Help Out” discount at a restaurant on August 05, 2020 in London, United Kingdom. (Photo by Leon Neal/Getty Images)

So it’s very easy to save money by not going out to play, by not taking my family out to Sunday lunch. As people’s economic circumstances worsen, we are going to see a lot of problems for that sector. And you must remember, there were too many out-of-home options on the high street anyway.

I would expect that out-of-home will suffer a pretty rough next 12 months. That does of course have an upside for the take-home grocery sector. And not only is their volume shifted out-of-home to in-home, but also it just changes the price frame reference a little bit as well.

So if I was going to go and spend 20 pounds at Nando’s, suddenly spending 10 pounds on an evening meal from my local convenience store might be a lot more than I normally spend in store, but can start looking like a bit of value.

Bargains galore or high prices?

AT: Which brings me neatly on to my last question, which is about promotions and activities returning. During the lockdown, PMPs were cut to the bone, promotions were cut like mad, promotional budgets vanished. And also the small pack sizes that you typically get sold in smaller shops went as producers streamlined their production and concentrated on big packs of suited multiples better. So do you see that changing back a little bit?

FM: We are we are on the verge of an almighty rumble over price and value in the supermarket sector. You have seen the rumours as well as I have about Tesco moving to everyday low pricing I don’t know if that’s true or not. But that’s what’s out there.

AT: They’ve got to try and take on the discounters to survive now.

FM: Well, they have, and this is all rooted in the fact that Tesco – and not just Tesco but the rest of the bigger retailers, too – were complacent, post- the 2008 financial crisis, about the threat of discounters posed.

I don’t think they’re going to be complacent in this recession. So therefore that means that they will be doing everything they can to convince people that they can get the value that they need in their current store rather than shifting more of that money towards Aldi and Lidl.

And one element of that, of course, is promotion. It’s not the whole answer but we’re at very low levels of promotions at the moment and it is starting to tick back up and I think it will ramp up considerably.

We see different attitudes. Many retailers are moving away from the multi-buy at the moment and are just trying to offer straight price cuts.

The logic behind that is if this is three for two pounds as a multibuy that makes me pay more than I would have done. So at the till I actually end up spending a little bit more versus the price cut, which means it’s 50p off, which means I can save money and the actual overall basket is cheaper.

We are moving in that direction. And there’s many ways to do pricing and promotion. So people are going to try a lot of stuff.

EDLP only works if the whole store gets a reputation for being cheap. Then I will go to a supermarket because I know it’s a cheap place to shop. If I just walk in and I think there aren’t any deals, that’s not good enough. I have to be surprised how cheap the new frontline prices are.

AT: EDLP it is, then.

FM: We shall see.