Global food retailers are facing shifting boundaries on all fronts, from the emerging Far Eastern markets to the maturing hard-discount sector and rise of non-food. Whether they view these changes as opportunities or as threats will determine their future, delegates at the 2005 CIES World Food Business Summit in Budapest heard a fortnight ago.
“These are difficult times,” CIES chairman Claude Hauser told more than 600 captains of industry from businesses as diverse as Wal-Mart, Australia’s Woolworths, Turkish retailer Tansas and German clothing-to-coffee chain Tchibo. “But there are clear opportunities in the shifts we’re seeing.”
Adapting store formats, looking beyond discounting and diversifying from traditional categories are all solutions being adopted by retailers across the world, said Hauser.
A key theme at the summit was the growth of the discerning discount shopper. Commerzbank financial analyst Jürgen Elfers said the discounters’ ride in the fast lane of top and bottom-line growth was continuing apace, with Lidl heading for double-digit uplift this year to E40bn sales.
As a result, the margins of mainstream retailers and suppliers are under pressure; hence the phenomenal increase in own-label ranges across all major retailers, Elfers added. In Belgium, Delhaize has achieved 33% own-label penetration, while France’s Leclerc is aiming for 50%.
Among the leading threats to mainstream supermarkets is, of course, Aldi. Stephan Grünewald, MD of German market research body Rheingold Institute, described the social phenomenon of ‘Aldi-isation’.
Grünewald compared research from 2002, which highlighted consumer need for reduced complexity of range and predictability of prices, with the institute’s 2005 study. This revealed that the euphoria surrounding discounters had died down - in the mature German market, at least. “German shoppers have accepted hard discounting and the thrill has gone.” However, Grünewald warned, this did not mean the golden age was over. Rather, Aldi had become a part of their everyday routine.
Nonetheless, the normalisation of Aldi does create opportunities for retailers, he added. “We’re now seeing brand discrimination. People want brands again, and the grey world of Aldi can put them off.”
One retailer that has taken on the discount market is Leclerc. Co-president Michel-Edouard Leclerc said although he did not have ambitions to be a discounter, French legislation, such as the Loi Galland that prevents retailers passing on brand supplier rebates to consumers, had forced the company’s hand. To enable growth in a constrained sector, Leclerc had adapted by opening hard discount stores, which are not restricted by the same law, to complement its hypermarkets.
New formats were also central to the development of Spar International as a means of catering for the changing needs of consumers, said CEO Gordon Campbell.
It has opened two new-generation flagship stores, one in Ireland, which merges the food-to-go, impulse and top-up elements of a c-store with the core value lines and meal-replacement offers of supermarkets. He referred to this as the future of ‘new convenience’ - a hybrid of convenience and supermarket shopping. “This is where we see the way forward for Spar stores.”
After discussing Spar’s recent entry into China and India and its plans for Romania this year, Campbell also talked of the necessity for retailers to diversify. He described Spar’s creation of a “series of worlds” for non-food with dedicated areas being tested for the kitchen, health and beauty, and baby and children’s departments, among others.
An underlying theme of the summit was the increase in the importance of non-food within the grocery industry. But delegates also noted the opportunities for grocery within non-food retail.
Tchibo CEO Dieter Ammer explained how coffee and non-food fitted together to create a unique format, while Ikea Food Services MD Jan Kjellman spoke of the significance of mini Swedish supermarkets in its furniture stores across the world.
CIES chief executive Alan Clay conceded that a blurring of the boundaries between food and non-food needed to be addressed in future summits as the importance of the category grows. “We want to open up the event for non-food retailers and we’re looking proactively at how we can do it,” said Clay.
The forward-looking message at the end of the summit was that the challenges facing the industry should be seen as opportunities. However, concluded Hauser, whether they involve RFID technology or reviving former Communist economies such as Hungary, the changes are not for the faint-hearted.