iri's weekly fmcg news update - w/c 30th january 2017

IRI Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 3rd February

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• Britvic makes strong start to the year• Profits up at Ocado but no news on long awaited overseas deal• Consumer confidence creeps up but shoppers concerned about year ahead• Tough year for Bestway Wholesale• Waitrose concludes financial year with rise in sales• Co-op under criminal investigation as more batteries found in products • Bunnings opens first UK store• Conviviality Plc updates on H1 2016/17 • Reckitt Benckiser in talks to acquire Mead Johnson• GHM discount stores to convert to Poundland • Amazon sales and profits surge, but misses Wall Street targets

Weekly News Summary – 30th January 2017


Britvic Makes Strong Start To The YearBritvic has reported that its first quarter revenue rose a robust 4.3% to £351.0m, underpinned by volume growth of 3.9%.

Its GB unit saw revenue increase 2.2% with the group saying that whilst the grocery channel remained subdued, it delivered growth from its focus on the convenience and foodservice channels.

GB carbonates saw revenue increase of 5.5% with Pepsi Max and 7UP seeing strong growth, along with R Whites which benefitted from a relaunch last year. However, the group said that ARP declined as a result of channel and pack mix.GB Stills revenue fell by 3.8%. The group said that whilst both its Robinsons and Fruit Shoot brands continued to decline, reflecting the challenging categories in which they operate, both showed signs of an improving trend. Meanwhile, J20 grew with a strong Christmas performance led by its Spritz and Glitter Berry variants.

In France, revenue increased 6.3%, boosted by growth of its branded portfolio. In Ireland, revenue increased 6.4%, with both Counterpoint and its branded business performing well. The group said its Ballygowan water brand saw very strong growth, although this adversely impacted average ARP in Ireland.

Meanwhile, Britvic’s International division reported a 19.8% increase in revenue, compared to a 13.8% decline in Q1 last year, largely as a result of a 14.1% increase in volume. The majority of the growth came from its Fruit Shoot brand in the US and revenue also increased in the export markets including Benelux.

Simon Litherland, Chief Executive, commented: “The new financial year has started well with group revenue 4.3% ahead of last year, continuing the good progress we made as a business in the prior year. Encouragingly all our key markets have delivered revenue growth.

“Whilst the external environment remains uncertain, we are confident that the strong execution of our marketing and innovation plans combined with disciplined revenue management and our cost saving initiatives will deliver full year results in line with market expectations.”

Source: NamNews 31st January 2017


Profits Up At Ocado But No News On Long Awaited Overseas DealOcado has posted robust year-end figures, although there was some disappointment that the online grocer did not reveal a long-awaited overseas deal.

For the year to 27 November 2016, the group’s profit before tax and exceptional items rose 21.8% to £14.5m – its third consecutive year in the black. Revenue jumped 14.8% to £1.27bn in what Chief Executive Tim Steiner described as a “challenging retail environment”.

Active customer numbers were up 13.9% to 580,000, whilst total order volumes grew by 17.9% to an average of over 230,000 orders per week. However, average basket value declined by 2.7% to £108.10, impacted by price deflation in the market and continued uptake of its Ocado Smart Pass.

General merchandise revenues grew by over 40%, whilst Ocado own label sales rose by more than 10%.Steiner commented: “We are pleased to announce results today which reflect robust trading in our core business and shows continued progress against our strategic objectives in what has been a challenging retail environment.”

When it released its full-year results last year, Ocado said it was in “advanced” discussions with a number potential international partners for its Smart Platform, a move seen by analysts as the key its long-term future and stock market valuation. However, the group only said today that it was still in continued talks with several international retailers in regards to a partnership.



Consumer Confidence Creeps Up But Shoppers Concerned About Year AheadConsumer confidence edged up in January, although shoppers look set to reign in their spending amid Brexit jitters and the impact of the collapse in the value of the pound.

GfK’s Consumer Confidence Index showed a reading of -5 for the month, a slight improvement on December’s -7. However, the levels are still well below those seen this time last year, suggesting a more difficult year for the retail sector.In January’s survey, consumers reported that they are feeling upbeat about their personal financial situation for the coming 12 months with this index increasing by four points to +7; two points lower than January 2016.

However, the measure relating to expectations for the general economic situation over the next 12 months remained at -23, whilst the major purchase index decreased by two points to +10; six points lower than this time last year.Joe Staton, Head of Market Dynamics at GfK, commented: “Despite strong GDP and record FTSE highs, the combination of Brexit jitters, Blue Monday, and a wobbly pound pushing up prices contributed to keeping UK consumer confidence negative at -5 this month.

He added: “And is the decline in the Major Purchase Index this month a foretaste of slowing consumer spending throughout 2017? Rising inflation and weak income growth is forecast to squeeze households’ disposable income, and these two factors could conspire to depress confidence for the year ahead. It’s certainly difficult to see where the oomph will come from over the short term.”



Bestway announces results for 2015/16 Bestway Group, parent to major UK cash & carry operator Bestway Wholesale, has announced its financial results for the year to 30 June 2016. Sales in its wholesale division were down to £2,170m over the period. This decline was driven by a prolonged period of food price deflation, intense competition and changing consumer habits.

Wider group sales up 9%Boosted by recent acquisitions, including the Co-op pharmacy chain (now rebranded Well), total Group sales reached £3,280m, with overall profit before tax up 6% to £413.3m. However, profitability in the wholesale division fell to £19.7m versus £44.6m in 2015, following the conscious decision to invest in margin to support the independent retail sector.

Significant growth in foodservice and onlineWhile Bestway Wholesale has seen sales in its core independent retail customer base falling, its focus on developing the secondary customer base in the catering channel has continued to pay dividends. Overall Bestway's catering sales were up 5%, benefiting from an expanding customer base in both the contract sectors (such as local authorities) and amongst independent operators. Online ordering is another key area of ongoing development, enabled both by PC and mobile platforms. With over 28,500 registered users, annual online sales are now worth over £240m, of which 15% goes through Bestway's mobile app.

Commenting on the results Zameer Choudrey, Group Chief Executive said:"We have maintained our focus on the three pillars of symbol & club, foodservice and digital. There has been investment in foodservice and symbol & club, which should translate into more positive trading performance going forward. The Best-one and Xtra Local membership continues to grow as we ensure greater discipline and compliance among our affiliated stores."

Source: IGD 31st January 2017


Waitrose Concludes Financial Year With Rise In SalesTotal year-on-year sales at Waitrose rose by 3.3% in seven days to 28 January – the last week in its financial year.The group revealed that the fall of Chinese New Year on Saturday helped sales of Chinese ready meals increase by 31%, while Burns Night saw Malt Whisky sales rise by 11%.

It was also a strong week for BWS category with wine sales up by more than 8%, beer sales by more than 7% and spirits by almost 9%. Gin sales also continued their strong growth, jumping 25%.

Overall, sales in the ambient category were up 1.7%, whilst sales in Chilled, Fruit, Vegetables & Horticulture, and Bakery increased 7.6%. The Meat, Fish, Frozen & Dairy category saw sales fall 1.1%, whilst Home & Leisure was up 7.7%.At sister chain John Lewis, sales rose 3.7% with all three buying areas seeing increases – clothing (+5.5%), electricals (+4.3%), home (+1.9%).

Source: NamNews 1st February 2017


Co-op under criminal investigation as more batteries found in products The Co-op will now be subject to a criminal investigation following the discovery of a battery inside a chocolate Easter bunny.

Products were immediately recalled from 2800 Co-op stores and the retailer has issued a call to the 3000 customers who bought one to return them.

The National Crime Agency and Nottinghamshire Police are conducting an investigation into “alleged product tampering”.This comes just weeks after Co-op had to recall chocolate Santas after customers discovered batteries inside two of them under similar circumstances.

“The health and safety of our customers is uppermost in our minds,” the Co-op stated. “We are concerned about one incident of alleged product tampering involving our hollow milk chocolate Easter bunny foil figure, which has been found to contain a small battery inside. “This follows an incident at Christmas when two similar products were targeted and contaminated. As a precaution, we have begun a UK-wide product recall and have withdrawn the product from sale.

“Customers with one of these products should not eat it, but take the product back to store for a full refund.”

Source: Retail Gazette 1st February 2017


Bunnings Opens First UK StoreBunnings, the home improvement chain owned by Australia’s Wesfarmers Group, has today opened its first store in the UK a year on from when it acquired the Homebase chain for £340m.

The pilot 67,000 sq. ft. warehouse is located on Griffiths Way in St. Albans, Hertfordshire and was converted from a former Homebase outlet. The store stocks more than 30,000 different home and garden lines – a 40% increase compared with the average Homebase. It also features timber cutting, a new tool shop, a ‘colour wall’ with over 3,000 colour tiles, and a paint mixing service.

There is also a 19,000 sq. ft. garden centre, a dedicated DIY workshop area, café and indoor children’s playground.The opening forms part of the company plans to invest up to £500m rolling out the Bunnings Warehouse format in the UK and Ireland over the next three to five years. A second Bunnings store in Hatfield Road, St. Albans will open in April with the group on track to have at least four pilots up and running by the summer.

Peter Davis, Managing Director of Bunnings UK and Ireland, commented: “Our policy is to offer customers the lowest prices, the widest range and best service, and hopefully our first pilot store demonstrates that.”He added: “We are laying strong foundations on which to build the Bunnings Warehouse business in the UK and Ireland for generations to come.”

Source: NamNews 2nd February 2017


Conviviality Plc updates on H1 2016/17 Multi-platform licensed drinks wholesaler, Conviviality has announced its financial results for the 26 weeks to 30 October 2016, showing total revenue up to £782.5m, an increase of 211% on the year driven primarily by the acquisition of Matthew Clark and Bibendum PLB. All three divisions of the business: Conviviality Direct, Conviviality Retail and Conviviality Trading saw growth on the previous half, with overall sales up 4.4%.

Conviviality Retail ends period with 702 storesPrimarily comprising stores operated as Bargain Booze franchises, the Conviviality Retail store network declining slightly over the period, though 19 new stores were opened, offsetting the losses. Like-for-like sales in franchise stores fell by 1.7% in teh six months, reflecting the strength of promotional activity in the comparative period in 2015, but with less discounting, gross margins for these retailers were up 1.8%.

Stronger Christmas tradingTrading over the key festive weeks of November and December was significantly better than the period overall. In the six weeks to 1 January 2017 sales in the retail division were ahead 6.9% on a total basis and +2.1% like-for-like.

Differentiating with social media and new categoriesIn the drive to continue building its unique proposition in the independent convenience retailing sector, Conviviality is a now seeking to leverage its strength in social media to target marketing activities to its local communities. Bargain Booze's Facebook following now exceeds 100,000, enabling the brand to communicate with its customers efficiently and with a wide range of mechanics. Meanwhile the launch of a new vaping range into 150 stores is bringing a new opportunity to the Bargain Booze offer, helping franchisees offset the long term decline in tobacco sales.

Source: IGD 2nd February 2017


Reckitt Benckiser In Talks To Acquire Mead JohnsonReckitt Benckiser (RB) has revealed that it is advanced talks to buy baby formula maker Mead Johnson Nutrition for $16.7bn (£13.2bn).

RB said late last might it was in talks to offer $90 in cash for each Mead Johnson share, a 29% premium to the stock’s closing price before news of the talks emerged.

If successful, the deal would boost RB’s consumer health division and expand its operations in fast-growing countries in Asia, where Mead Johnson holds a large share of the market, as well as in the US. In 2016, the company generated annual sales of $3.74bn.

A statement from RB said: “The parties are presently engaged in a period of due diligence and contract discussion. There is no certainty that any transaction will ultimately be agreed, nor as to the terms on which any transaction might occur.”It added that it expected to finance the proposed deal through cash and debt.

Mead Johnson is the world’s third biggest baby food maker, best known for it Enfamil brand. It has been a bid target after it was spun off from Bristol-Myers Squibb in 2009, due in part to its significant presence in Latin America and Asia. Both Nestlé and Danone had been tipped as logical suitors, although Danone opted to buy Alpro soya maker White Wave for $12.5bn in July last year, ending its interest in the US-based firm.

Source: NamNews 2nd February 2017


GHM discount stores to convert to Poundland GHM (Guess How Much!) the start-up discount chain launched in mid 2016, and owned by Pepkor UK, is to be integrated into the Poundland business, which is now owned by Steinhoff International, the same parent as Pepkor. Andy Bond, the former Asda chief, who initially ran GHM moved over to be Executive Chairman of Poundland in November 2016, and also heads up Pepkor Europe.

Stores to convert in the coming weeksGHM currently runs six stores, and all of these will be converted into the Poundland format in the near future. The business' head office, in Leeds will close. It is not clear whether the stores, located in Hinckley, Isle of Sheppey, Cardiff, Doncaster, Sheffield and Walkden, will be included in the review of the wider Poundland portfolio from which up to 80 stores may close.

Good fit for generic high street discountThe GHM format was initially designed as a broad range variety discount store competing with the likes of B&M, Home Bargains and Poundstretcher. However, as Poundland is now moving away from its strict adherence to the fixed price point, the shift of GHM into the Poundland format is unlikely to prove a major disruption.

Source: IGD 2nd February 2017


Amazon sales and profits surge, but misses Wall Street targetsAmazon has reported lower-than-expected revenue and an unexpected dip in operating profit for its fourth quarter, prompting shares to fall by four per cent due to concerns about the costs of investments including new warehouses and video content.

While net sales for the world’s biggest online retailer rose 22.4 per cent to $43.74 billion (£34.93 billion) in the three month period ending December 31, it missed the average Wall Street forecast of $44.68 billion (£35.68 billion). Nonetheless, the retail giant raked in profits of $749 million (£597.94 million) for that same quarter, up from $482 million (£384.79 million) a year earlier and its seventh consecutive profitable quarter.

For the full year, Amazon reported $136 billion (£108.59 billion) in revenue, a 27 per cent increase from last year's $107 billion (£85.43 billion). The Seattle-based company’s cloud service, AWS, continued to be the main profit driver and remained the company's most profitable business, recording $926 million (£739.13 million) in operating profit.

In the UK, Amazon continue to invest in extending and improving its customer offering in more than 35 physical and digital categories, with grocery and fashion being the main focus areas over the past year.

The retailer launched AmazonFresh last year and signed a deal with Morrisons to allow customers access to 10,000 products, having them delivered to their door in one hour.

Amazon Fashion sold more than 60 million fashion items across its European websites, making fashion one of the fastest-growing categories for the company after adding more than 350 new brands.

Meanwhile, the retailer also launched Handmade at Amazon for artisans to sell their handmade products, Amazon Music Limited, extended its Prime Now service to more than 30 per cent of the UK population, and introduced Amazon Echo smart speakers and Amazon Dash buttons.

Finally, Amazon’s third-party small-to-medium business platform Amazon Marketplace achieved export sales of £1.8 billion in the fourth quarter, up 29 per cent compared to the same period in 2015.

Amazon now employs over 15,500 people across the UK in permanent roles at its head office, fulfilment centres, fashion photography studio, three research and development centres in Cambridge, Edinburgh and London and in Amazon Web Services.

Source: Retail Gazette 3rd February 2017

IRI Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 3rd February

iri's weekly fmcg news update - w/c 30th january 2017

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