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Industry Outlook
/ Authors
Grocery Channel
John RandSenior Vice President
Mike PagliaSenior Analyst
Alida DestrempeAnalyst
April / 2012
About Kantar Retail
Cannondale Associates, Glendinning Management Consultants, MVI and Retail
Forward combine to create Kantar Retail, the world’s leading retail insights and
consulting business. Kantar Retail (www.kantarretail.com) works with leading
retailers and branded manufacturers to transform the purchase behavior of
consumers, shoppers and retailers. The company solves client issues from
strategic to tactical and provides organizations with the skills and capabilities to
act. Kantar Retail offers clients better internal alignment and project efficiency,
from insight through strategy to activation, and across marketing through
category to sales. Kantar Retail has nearly 400 employees and offices in 15
markets around the globe. The company is headquartered in London and is part
of the Kantar Group of WPP.
Kantar Retail
Two Easton Oval Suite 500 Columbus, OH 43219 USA 1.614.355.4000
10th Floor 245 First Street Cambridge, MA 02142 USA 1.617.4100
6 More London Place Tooley Street London, England SE12QY UK +44.207.031.0251
• Macro Environment 6-14
• A Glimpse of Major Players and Performance 15-42
• A Look at “The Big Three” 43-64
• Shopper Loyalty is a Muddle 65-89
• The Supermarket Pricing War 90-119
• Key Channel Initiatives 120-161
/ Table of Contents/ Table of Contents
3
/ / A Glimpse of Major Players and A Glimpse of Major Players and PerformancePerformance
• Channel Performance 16-20
– Forecast Snapshot by Channel– Edible/Non-Edible Sales
• Changes in Rank – Scale Does Not Equal Success 21-32 – Retailer Rankings– Channel Growth Comes from the Middle
• Market Share- Who is Winning and Losing? 33-42
4
ChannelCAGR
'06-'11ECAGR
'11E-'16E
Apparel 1.0% 4.4%
Clubs 5.2% 5.5%
Category Specialist -0.1% 3.3%
Convenience 1.4% 2.9%
Department -2.2% 2.5%
Discounter 7.8% 7.8%
Drug 5.0% 4.6%
Supercenter 5.3% 3.1%
Mass Merch (no SC) -3.1% -0.7%
Non-Store Retail 9.5% 11.7%
Supermarket 2.4% 3.5%
KR Channel Totals 2.4% 4.2%
US Sales by FormatUS Sales by FormatSupermarkets Growing Share
$323 $364 $432
$72$113
$197$128
$110
$106$201
$259
$302$130
$166
$208
$44
$64
$94
$109
$98
$111
$45
$48
$56
$364
$363
$426
$99
$128
$167
$100
$105
$131
-
400
800
1,200
1,600
2,000
2006 2011E 2016E
Sale
s in
Billi
ons (
$)
Apparel
Clubs
Category Specialist
Convenience
Department
Discounter
Drug
Supercenter
Mass Merch (no SC)
Non-Store Retail
Supermarket
Source: Kantar Retail analysis; Company Reports
NOTE: Data as of 11/17/2011
5
Where Else Do Conventional Grocery Where Else Do Conventional Grocery Shoppers Go?Shoppers Go?
If 100% of the sample shops grocery stores, the following %’s also shop these
channels:
22%
22%
26%
29%
29%
30%
31%
35%
39%
43%
44%
65%
Dollar General
Best Buy
Dollar Tree
Lowe's
JCPenney
Kohl's
The Home Depot
CVS/pharmacy
Walgreens
Target/Super Target
Amazon.com
Walmart/Walmart Supercenter
Source: Kantar Retail ShopperScape®, January – December 2011
(Past Four-Week Shoppers, January-December 2011)
6
Non-Edible Grocery Sales %Non-Edible Grocery Sales %
$706$706 $887$887 $1,086$1,086
US
D B
illi
on
s
43%38% 36%
15%20%
19%
5% 5%4%
17% 16%17%
6% 5%5%
9% 9%10%
1% 1%1%
4% 5% 7%
0% 1% 1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2011E 2016E
Non Store Retail
Discounter
Department
Cash and Carry
Convenience
Drug
Mass Merch Excluding Supercenter
Hypermarket
Supermarket
Note: %s are Kantar Retail estimates
Supermarkets have the highest % of non-edible sales, yet losing ground.
Source: Kantar Retail analysis; Company Reports
7
Edible Sales % by ChannelGrocers Lose Share But Still Dominant
$445$445 $554$554 $679$679
58%53% 51%
17%21% 20%
2% 2%2%
2% 3% 3%
6% 5% 5%
9% 10% 11%
1% 1% 1%4% 5% 6%0% 0% 1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2011E 2016E
Non Store Retail
Discounter
Department
Cash and Carry
Convenience
Drug
Mass Merch Excluding Supercenter
Hypermarket
Supermarket
Supermarkets share declines in edibles are quite modest compared to past
years.
Source: Kantar Retail analysis; Company Reports
8
/ / A Glimpse of Major Players and A Glimpse of Major Players and PerformancePerformance
• Channel Performance 16-20
– Forecast Snapshot by Channel– Edible/Non-Edible Sales
• Changes in Rank – Scale Does Not Equal Success 21-32 – Retailer Rankings– Channel Growth Comes from the Middle
• Market Share- Who is Winning and Losing? 33-42
9
Top 3 US Grocers Account for USD162 Billion by Top 3 US Grocers Account for USD162 Billion by 2016E2016E(US Supermarket Sales)
US Rank2011ESales
Retailer 2006 2011E 2016ECAGR
('06-'11E)CAGR
('11E-'16E)2006 2011E 2016E
CAGR ('06-'11E)
CAGR ('11E-'16E)
2011E Sales
2011E Sq Ft
1 Kroger 56.0$ 75.1$ 95.7$ 6.0% 5.0% 119.4 125.0 128.4 0.9% 0.5% 19.4% 17%
2 Safeway 34.6$ 34.6$ 36.9$ 0.0% 1.3% 71.5 72.3 71.9 0.2% -0.1% 8.9% 10%
3 Supervalu* 34.2$ 29.2$ 29.7$ -3.1% 0.3% 87.0 77.5 83.7 -2.3% 1.5% 7.6% 10%
4 Publix 21.5$ 26.1$ 31.3$ 3.9% 3.7% 40.8 49.3 55.9 3.9% 2.5% 7% 7%
5 Ahold 20.3$ 24.4$ 27.5$ 3.8% 2.4% 36.9 38.7 40.2 0.9% 0.8% 6% 5%
6 Delhaize 17.2$ 18.8$ 20.1$ 1.8% 1.4% 56.9 59.7 60.5 1.0% 0.3% 5% 8%
Top 3 US Supermarket 124.8$ 138.9$ 162.3$ 2.2% 3.2% 277.9 274.9 284.0 -0.2% 0.7% 36% 37%
Top 6 US Supermarket 183.9$ 208.1$ 241.2$ 2.5% 3.0% 412.5 422.6 440.7 0.5% 0.8% 54% 57%
All Other US Supermarket 154.6$ 179.0$ 226.9$ 3.0% 4.9% 336.1 322.4 391.9 -0.8% 4.0% 46% 43%
Total KR US Supemarket 338.4$ 387.1$ 468.0$ 2.7% 3.9% 748.6 745.0 832.5 -0.1% 2.2% 100% 100%
Sales (USD billions)KR Top Supermarket Retailers
* Figures include Save-A-Lot. Does not include wholesale.
Square Footage (millions) % of US Totals
Kroger leads, Safeway follows, and Supervalu is just trying to stay in the race.“All Other” grocers beyond the Top 6 continue to keep pace in growth
Kroger leads, Safeway follows, and Supervalu is just trying to stay in the race.“All Other” grocers beyond the Top 6 continue to keep pace in growth
Source: Kantar Retail analysis; Company Reports
10
(Total Edible Grocery Sales Only)
““Fifty-Fifty” for the Top 10 GrocersFifty-Fifty” for the Top 10 GrocersNational Retailers Ranked Top 5, Yet Remaining are Regional
2006 2011E 2016E1 1 Walmart $ 87,902 $ 131,364 $ 161,325 23.5% 8.4% 4.2%2 2 Kroger 47,179 63,363 82,623 11.3% 6.1% 5.5%3 3 Costco 22,612 33,476 46,634 6.0% 8.2% 6.9%4 4 Safeway 27,835 25,983 28,427 4.6% -1.4% 1.8%6 5 LOSS LEADER Supervalu 28,770 24,971 24,406 4.5% -2.8% -0.5%5 6 Up Publix 17,544 21,610 25,509 3.9% 4.3% 3.4%7 7 Ahold 16,604 20,035 22,927 3.6% 3.8% 2.7%9 8 Down Delhaize 13,909 15,804 17,517 2.8% 2.6% 2.1%8 9 Up Aldi/Trader Joes 7,506 13,335 19,906 2.4% 12.2% 8.3%
10 10 H-E-B 9,067 12,082 14,653 2.2% 5.9% 3.9%278,928 362,022 443,926 64.8% 5.4% 4.2%
12 11 Down Wakefern 8,024 11,031 14,343 2.0% 6.6% 5.4%11 12 Up Target 4,963 9,091 14,377 1.6% 12.9% 9.6%
CAGR '06-'11E
CAGR '11E-'16E
Top 10 (Edible Grocery Only)
Rank 2016E
Rank 2011E
Expected Movement
RetailerEdible Grocery Sales (USD Millions) % of US
Total ('11E)2006 2011E 2016E1 1 Walmart $ 87,902 $ 131,364 $ 161,325 23.5% 8.4% 4.2%2 2 Kroger 47,179 63,363 82,623 11.3% 6.1% 5.5%3 3 Costco 22,612 33,476 46,634 6.0% 8.2% 6.9%4 4 Safeway 27,835 25,983 28,427 4.6% -1.4% 1.8%6 5 LOSS LEADER Supervalu 28,770 24,971 24,406 4.5% -2.8% -0.5%5 6 Up Publix 17,544 21,610 25,509 3.9% 4.3% 3.4%7 7 Ahold 16,604 20,035 22,927 3.6% 3.8% 2.7%9 8 Down Delhaize 13,909 15,804 17,517 2.8% 2.6% 2.1%8 9 Up Aldi/Trader Joes 7,506 13,335 19,906 2.4% 12.2% 8.3%
10 10 H-E-B 9,067 12,082 14,653 2.2% 5.9% 3.9%278,928 362,022 443,926 64.8% 5.4% 4.2%
12 11 Down Wakefern 8,024 11,031 14,343 2.0% 6.6% 5.4%11 12 Up Target 4,963 9,091 14,377 1.6% 12.9% 9.6%
CAGR '06-'11E
CAGR '11E-'16E
Top 10 (Edible Grocery Only)
Rank 2016E
Rank 2011E
Expected Movement
RetailerEdible Grocery Sales (USD Millions) % of US
Total ('11E)
Note: %’s are Kantar Retail estimates. Data as of 11/17/11
Source: Kantar Retail analysis; Company Reports
Total Edible Grocery Sales Only
11
Growth No Longer Consolidated to a Few Growth No Longer Consolidated to a Few Large, Efficient PlayersLarge, Efficient Players
1 Kroger $75,056 $95,716 $20,661 27.5%2 Walmart (supermarkets only) 4,132 13,239 9,107 12.1%3 Whole Foods 9,834 15,620 5,787 7.7%4 Publix 26,066 31,295 5,229 7.0%5 Wakefern 11,666 15,095 3,429 4.6%
$126,753 $170,966 $44,213 58.9%6 H-E-B 15,933 19,309 3,376 4.5%7 Ahold 24,392 27,498 3,106 4.1%8 Wegmans 6,240 9,180 2,940 3.9%9 Safeway 34,563 36,863 2,300 3.1%
10 Meijer* 10,372 12,655 2,283 3.0%11 Winco 4,619 6,208 1,589 2.1%12 Delhaize 18,782 20,089 1,307 1.7%13 Hy Vee 6,792 8,038 1,246 1.7%14 Sprouts 1,139 2,353 1,213 1.6%15 Giant Eagle 6,357 7,430 1,074 1.4%
$255,943 $320,590 $64,647 86.2%16 Tesco 958 1,964 1,007 1.3%17 Fresh Market 1,090 1,694 603 0.8%18 Ingles 3,390 3,960 570 0.8%19 DeCA 5,293 5,856 563 0.8%20 Harris Teeter 4,286 4,830 545 0.7%
$270,959 $338,895 $67,936 90.5%Top 20 Total
Rank % Sales Added (US Supermarket Sales)Sales Added 2011E-2016E
% of Total Sales Added 2011E-2016E
Top 5 Total
Top 15 Total
RetailerSales 2011E
(USD millions)Sales 2016E
(USD millions)
*Total Grocery only. NOTE: All data as of 11/17/11
Source: Kantar Retail analysis; Company Reports
Top 20 Supermarket Retailers Account for 90% of Sales Added from 2011-2016
12
Growth From the MiddleGrowth From the Middle
2nd and 3rd tier grocers account for roughly 30% of growth through 2016E. Includes:
• Ahold• Delhaize• HEB• Wakefern• Winn Dixie• Whole Foods
Sales Growth as a % of Total Growth: ’11E – ’16E
47.4%
16.0%
11.1%
16.0%
7.1%
2.8%
0% 10% 20% 30% 40% 50%
Top 3
Rank 4-6
Rank 7-9
Rank 10-20
Rank 21-35
Rank 36-50
Source: Kantar Retail analysis; company reports
NOTE: Data as of 11/17/2011
13
157 156
71
27
48
34
62 62 63 64 63
-
25
50
75
100
125
150
175
2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E
Mill
ions
of
Squa
re F
oota
ge A
dded
(KR
Chai
ns)
Total Square Footage Added By KR ChainsTotal Square Footage Added By KR Chains2006-2016E2006-2016E
14
2012E –2016E Average:63 MM SqFt
2008 – 2011E:Square footage added by only most well-grounded
chains
2006–2007 Average:156.5 MM SqFt
Source: Kantar Retail analysis; Company Reports
Stores Are Getting Smaller as WellStores Are Getting Smaller as WellMedian Total Store Size – Square Feet
30,000
40,000
50,000
Source: Kantar Retail analysis; Food Marketing Industry Speaks 1996 - 2011
Sq
ua
re F
oo
tag
e
15
Scale Doesn’t Always Equal Success:Scale Doesn’t Always Equal Success:Regional Retailers Doing Better
-4.00%
0.00%
4.00%
8.00%
12.00%W
hole
Food
s
Weg
man
s
Wak
efer
n
Win
co
Ahol
d
Krog
er
H-E
-B
Publ
ix
Gia
nt Ea
gle
Supe
rmar
ket
Delh
aize
Safe
way
Supe
rval
u
2011E Supermarket Sales Growth Over PY
2011E Supermarket Sales Growth Over PY
Source: Kantar Retail analysis; company reports
16
ForecastForecast
$200
$400
$600
$800
$1,000
$1,200
2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E
Ahold Delhaize Giant Eagle H-E-B Publix Wakefern Wegmans
KRO
SWY
SVU
Regional Stores Perform BetterRegional Stores Perform BetterAverage Sales Per Square Foot
Source: Kantar Retail analysis; company reports
$200
$400
$600
$800
$1,000
$1,200
2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E
Ahold Delhaize Giant Eagle H-E-B Publix Wakefern Wegmans
KRO
SWY
SVUKroger, Safeway, Supervalu
17
Regional Store GrowthRegional Store GrowthSlight Growth Across all Banners
Source: Kantar Retail analysis; company reports
751
1,627
384299
197
1,173
27376
768
1,649
403312
197
1,216
29179
50
250
450
650
850
1050
1250
1450
16502010 2011E
18
Regional Performance OutlookRegional Performance OutlookAbove Industry Average
Retailer Store '11E - '16E CAGR
Sales '11E - '16E CAGR
Ahold US 1.10% 2.80%
Delhaize US 0.80% 2.00%
Giant Eagle 2.30% 3.60%
H-E-B 2.40% 4.00%
Meijer 0.50% 4.00%
Publix 3.20% 3.90%
Wakefern 2.30% 5.40%
Wegmans 2.90% 8.00%
Supermarket Channel 1.40% 3.50%
Source: Kantar Retail analysis; company reports
Greater than industry average
Greater than industry average
19
Implications:Implications:
• CPG companies have historically invested more with large-scale retailers– Unfortunately, scale alone is not a predictor of success– It was before the recession– But we’re in the post modern marketplace now– Real dollar sales growth is coming from companies with
smaller scale• Standard or all-channel approaches to customers aren’t very
well aligned to the unique circumstances of working with regional retailers
Source: Kantar Retail analysis
20
/ / A Glimpse of Major Players and A Glimpse of Major Players and PerformancePerformance
• Channel Performance 16-20
– Forecast Snapshot by Channel– Edible/Non-Edible Sales
• Changes in Rank – Scale Does Not Equal Success 21-32 – Retailer Rankings– Channel Growth Comes from the Middle
• Market Share- Who is Winning and Losing? 33-42
21
Store Productivity vs. Market ShareStore Productivity vs. Market Share
Share in Market
Sto
r e P
rod
uct i
vit
y (
Sale
s p
er
sq
uare
foot ) Hi Share/Hi
ProductivityDefend and Grow
Hi Productivity / Low Share
Invest and Grow or Harvest
Low Share/Low Productivity
Market exits / Swaps
High Share / Low ProductivityDecline or
Change
A market level look at your retailer allows you to target your resources more
effectively
Source: Kantar Retail analysis
22
Before Going Further…Here’s the Key to Before Going Further…Here’s the Key to Understanding These ChartsUnderstanding These Charts
Banner name
Sales per sq. ft
Directional change of market share (‘09-’11)
Store count in market
Banner name
Sales per sq. ft
Directional change of market share (‘09-’11)
Store count in market
Source: Kantar Retail analysis
23
Store Productivity vs. Market ShareStore Productivity vs. Market ShareHouston
WMT Superctr
($396)
Kroger($629)
HEB($949)
Fiesta Mart($366)
Randall's($469)
$200
$600
$1,000
0.0 18.0 36.0
33
110
83
76
35
33
110
83
76
35
Sto
r e P
r od
uct i
vit
y
( sal e
s p
er
sq
uare
f o
ot )
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
Houston belongs to H-E-B
HEB is the one regional chain whose market share takes up nearly two-thirds of the local supermarket dollar in two Texas metro
areas. The retailer’s habit of tailoring individual stores to
the specific needs of neighborhoods has fueled much of that growth and strong market position.
24
Store Productivity vs. Market ShareStore Productivity vs. Market ShareAtlanta
Sto
r e P
r od
uct i
vit
y
( sal e
s p
er
sq
uare
f o
ot )
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
Regional and National Grocery vs. Walmart:
Kroger has held its own and even made strong gains while
competing with Walmart in Atlanta, as it continues to
implement strategies such as renovating stores as well as
improve areas where Walmart doesn’t have its greatest
strengths.
Publix is also gaining share in Atlanta which has come after
years of expansion, marketing, and focus on
quality and store presentation. Publix also is only in five Southern states,
which could give the company a better handle on the
southeastern consumer.
Kroger$629
Publix$528
WalMart$390
Ingles$308All American
$260
$220
$510
$800
0 18 36
148
79
156
56
24
25
Cincinnati is Kroger Territory
Kroger is the dominate retailer in Cincinnati and has
either the number 1 or 2 market share position in all
markets of operation. Kroger has been able to maintain and
grow its market share by offering competitive low
prices and loyalty programs that offer shoppers discounts.
Store Productivity vs. Market ShareStore Productivity vs. Market ShareCincinnati
Sto
r e P
r od
uct i
vit
y
( sal e
s p
er
sq
uare
f o
ot )
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
Kroger($629)
WMTSuperctr
($396)Meijer($386)
G.E.($450)
Save-A-Lot($321)
$250
$500
$750
- 25.0 50.0
243
117
29
42
14
26
West Coast is Safeway’s Core
Market, yet Kroger Leads Share
Safeway’s core operating market is in the West Coast. Yet within the Los Angeles
market, Kroger banner Ralphs stores are more productive and are gaining share faster
than Safeway. Ralphs has the potential to continue to gain
share profitability in the future as the retailer recently launched a new EDLP strategy
for its stores.
Store Productivity vs. Market ShareStore Productivity vs. Market ShareLos Angeles
Sto
r e P
r od
uct i
vit
y
( sal e
s p
er
sq
uare
f o
ot )
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
Vons($434)
Ralphs($495)
Albertsons (SVU)($330)
Stater Bros.($641)
$250
$500
$750
- 12.5 25.0
167
396
272
27
Philadelphia: A Market of Regional Dominance
Regional supermarkets are the key players that are
gaining store profitability on top of share within
Philadelphia, where national retailers such as Supervalu
and Walmart are losing their dominate position.
Store Productivity vs. Market ShareStore Productivity vs. Market SharePhiladelphia
Sto
r e P
r od
uct i
vit
y
( sal e
s p
er
sq
uare
f o
ot )
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
SuperValu$587
Weis$345
AholdGiant Food
$643
Walmart$390
A & P$845
$0
$450
$900
0 18 36
135
61
137
53
121
28
Florida is Publix Territory
Publix continues to be the dominate player within many Florida markets as Florida is
the retailer’s primary operating state and it
saturates the market. With its strong brand and store
penetration, Publix continues to gain share and beat
competitors by emphasizing service and a family-friendly
image.
Store Productivity vs. Market ShareStore Productivity vs. Market ShareMiami
Sto
r e P
r od
uct i
vit
y
( sal e
s p
er
sq
uare
f o
ot )
Share in Market
Source: Kantar Retail analysis; Trade Dimensions Market Scope data
$220
$510
$800
0 30 60
28
235
91
3110
Publix$528
Target$290
WalMart$390
Winn-Dixie$301
Sedanos$275
29
Retail Leadership Coming From One of Two Retail Leadership Coming From One of Two Basic AreasBasic Areas
Leaders are growing in one of two primary ways:
– Market Density – Maximize Market Share - Tailors• Market density and saturation• Format prototyping• Store of the community• “I know the markets I operate in”
– Consumer Segmentation – Expand Share of Wallet From a Chosen Focused Consumer - Choosers
• Differentiated brands/stores/experiences• New category introduction• Loyalty card for 1:1 marketing• Aggressive brand marketing• “I know the person/people I’m selling to”
30Source: Kantar Retail analysis
John RandSenior Vice President
John.Rand@kantarretail.com617-588-4133
Mike PagliaSenior Analyst
Mike.Paglia@kantarretail.com617-588-4123
Alida DestrempeAnalyst
Alida.Destrempe@kantarretail.com617-588-4133
John RandSenior Vice President
John.Rand@kantarretail.com617-588-4133
Mike PagliaSenior Analyst
Mike.Paglia@kantarretail.com617-588-4123
Alida DestrempeAnalyst
Alida.Destrempe@kantarretail.com617-588-4133
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