FOOD
TILLS RINGING AGAIN AS TOM EDSON
Director, Head of Out-of-Town Investment
It has been six years since Tesco announced its first annual profit drop in two decades, and followed that with a 2014 profit warning. It is now back into growth – and managed to take some headlines away from Aldi and Lidl. Only time will tell what the ramifications of the CMA’s blockage of the Sainsbury’s-ASDA merger will be but it’s certainly left the sector’s second and third largest players with a lot of thinking to do about their strategy going forward.
Meanwhile, the expected entry of Amazon into the mainstream sector has yet to materialise, but the industry watches with interest.
Clearly, one of Amazon’s competitive edges would be its online presence and logistics capability. However, the proportion of total food sales that are now done online appears to have plateaued at around 7%. This is good news for the established operators as online grocery sales have been a long-term conundrum
EXECUTIVE SUMMARY
THE MARKET
RETAIL REIMAGINED
MONEY
IS THIS THE END OF THE GOLDEN AGE OF ONLINE RETAILING?
KNOWLEDGE
SHOPPING WITH A CONSCIENCE
FOOD
GROCERY OUTLOOK IMPROVES The past 12 months has seen much stronger performance in the UK Grocery sector from the traditional ‘Big Four’ through to the discounters who are now an established part of the supermarket scene.
for them. It’s a service that they need to offer but it is not a profit generator.
Customer awareness of better and sometimes cheaper product lines in-store and a move away from a large weekly shop have started to stunt online growth. If the proportion of total sales stays below 10%, it is probably a manageable ‘loss leader’ for the ‘Big Four’ but if the next generation – and Amazon – take grocery increasingly online this will present a challenge for the ‘Big Four’.
Tesco’s acquisition of Booker was completed in 2018 and all the signs are that the merger has been a success, with Booker growing 14.3% during the first quarter of trading of the newly merged company. It also announced a strategic buying alliance with Carrefour in France to seek better terms with suppliers, and started to roll out the ‘Jacks’ discount stores in existing mothballed stores and new sites.
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