GROCERY

INSIGHT UPDATE JUNE 2012

Grocery market growth drops in May
The latest Kantar Worldpanel market share figures, covering the 12 weeks to 13th May 2012, show that UK market growth dropped back to 3.1%, following growth of 5.0% in the last period. In the four weeks to 13 May 2012, the figures show that the grocery market decreased by 1.0% 12 weeks to 15 May 2011 (% share) 31.1 16.9 0.6 17.5 16.5 12.1 6.9 0 6.9 4.4 2.6 2.3 1.9 0.6 1.8 2.2 12 weeks to 13 May 2012 Sales growth (% share) (Y-o-Y %) 30.8 1.9 17.4 6.5 0 -100 17.4 2.8 16.5 3 11.9 1.2 6.5 -3 0 -98.9 6.5 -3.5 4.5 7 2.8 11.3 2.8 25.4 2 8.8 0.6 1.5 2 9.2 2.2 3.5

Tesco Asda Netto Total Asda Sainsbury's Morrisons The Co-operative Somerfield Total The Co-operative Waitrose Lidl Aldi Iceland Farm Foods Other multiples Total symbols & independents

Source: Kantar Worldpanel

Asda pulls further ahead As the only one of the big four retailers to be trading ahead of the market in this period, Asda's performance continues to benefit from the addition of Netto stores. Sainsbury's growth of 3.0% put it only slightly behind the market total while Morrisons and Tesco continued to lag, with growth of 1.2% and 1.9% respectively and displaying drops in market share. Discount and premium continue to shine Aldi has reported another all-time record market share of 2.8% following growth in the period of 25.4%, with Lidl following close behind with the same market share and growth of 11.3%. Waitrose is continuing to develop, with strong growth of 7.0% demonstrating its continued outperformance, following on from a good Easter. On-going impact of events While these market changes seem in sharp contrast to the performance of the previous period, they reflect the boost of good weather and the key events of Easter and the Royal Wedding in the previous year. Retailers will be hoping the benefit of good weather and major events will recur with the Jubilee celebrations in the coming weeks. (IGD)

TESCO INSIGHT UPDATE JUNE 2012 Tesco to invest millions in ready meals

After relaunching its entry tier private label last month, Tesco is taking its next step to improve over 8,000 private label products this year, with its ready meals receiving a makeover. Tesco is investing millions of pounds to improve the quality of its ready meals across all ranges. The first meals to be upgraded will include those in the Oriental, Indian and Tex-Mex categories. With over 300 products from the nations favourite cuisines delivering improved value. Tesco will be supporting the launch with a 2-for-5 promotion in-store and an advertising campaign using the slogan, '20 per cent more at no extra cost'. A second phase of the launch will be introduced later in the year, with a further 700 meals to be upgraded. (IGD)

Tesco launch latest Clubcard voucher exchange

Tesco has announced the 'Summer Exchange', its latest spend-related mechanic that offers Clubcard holders the option of exchanging 5 of Clubcard vouchers for 10 of exchange tokens. The exchange will run from 14 May-13 June. Vouchers can be redeemed against a variety of non-food categories that Tesco believe families will be buying for the summer. These categories are clothing, gardening & BBQ, toys, b iking & camping, electricals, baby, furniture, phone, opticians and pet food. The promotion is the most recent of a series of similar mechanisms employed by Tesco since it announced its aim to be the best all round value for money retailer as part of its 6-point plan to 'build a better Tesco'. The Clubcard will continue to play a strong role in delivering value to customers as Tesco seeks to drive loyalty and improve customer perception on price and more seasonal and promotional events can be expected. (IGD)

Tesco continues vouchering to drive basket spend

Following its 10 voucher off an 80+ shop, Tesco has followed this up this with another spend-related weeks, fuel prices remain close to their all-time high, and consumer awareness of travel costs is
mechanic, offering 5p off per litre of fuel per 50+ basket. Though oil prices have slackened in recent

intense. Linking money off fuel deals with in-store spend is a strong driver of traffic, and has been

tactically used intermittently over the last few years, especially by Tesco and Sainsbury's in a variety of guises. (IGD)

ASDA INSIGHT UPDATE JUNE 2012 Asda remain leaders in fastest growth of top 4 grocers
As the only one of the big four retailers to be trading ahead of the market in this period, Asda's performance continues to benefit from the addition of Netto stores. The latest data from Kantar reveals that Asdas sales growth year on year is up to 6.5% with a market share of 17.4% (IGD)

Asda release Q1 results Asda has continued the momentum from a strong Christmas with LFL sales growing 2.2% for the 12 weeks to
2012 has begun on a strong note for Asda Total sales, excluding acquisitions, VAT & fuel Measured portfolio expansion Three new stores were added in the quarter taking the total to 544, including 32 Supercentres, 310 Superstores, 27 Living Stores and 175 Supermarkets. (IGD) 31 March, excluding acquisitions, VAT & fuel. (IGD)

grew by 7.1%. Customer numbers grew by 2.9%

with average basket spends increasing 2.1%. Doug McMillon, CEO of Walmart International has attributed the strong comparable sales to core growth in grocery and children's apparel and has added that UK gross profit was "relatively flat" on a year earlier. (IGD)

EDLP, quality and service prove to be a winning combination With the Asda Price Guarantee attracting more than 500,000 online checks p er week in Q1, it appears that customers are responding well to its relentless focus on price. Commenting on the results Andy Clarke, CEO and president of Asda said "I'm proud of the work our stores, depots and teams at Asda House and George House put in during the quarter, to build on our end-of-year momentum and deliver market-leading growth. Customers really valued our price leadership, the on-going improvements in quality and our commitment to warm and friendly service". (IGD)

Online m aintained its strong performance

Asda is an increasingly significant online player,

with Q1 sales growth of 19.2%. To take the business forward, Asda is keen to develop a multi-platform approach across stores and online, with mobile increasingly positioned at the heart of the strategy. Asda will seek to build on recent m-commerce and e-commerce progress in the next quarter. (IGD)

SAINSBURYS INSIGHT UPDATE JUNE 2012 Sainsbury's reports encouraging 2011/12 results
Despite challenging market conditions, S ainsbury's has released an encouraging set of annual results for the year to 17 March with total sales (inc. VAT, ex fuel) up b y 4.5% and like-for-like sales by 2.1%. Revenues ex VAT increased 5.6% to 22.3bn. Underlying profit grew by 7.1% to 712m. (IGD) Sainsbury's enhances its online experience & launches 'mobile' grocery shopping In order to continue capitalising on the rapid growth of online grocery shopping, Sainsbury's has enhanced its offer to make sure that customers are more likely to get the products that they want.

Shoppers can also now access and buy the full range of Sainsbury's groceries from their phones and handheld devices, through Sainsbury's new mobile shopping site. The launch of the mobile site for Sainsbury's marks an important step forward, helping it to potentially attract a different customer to its online offer alongside providing greater convenience to existing shoppers. It builds on recent smart p hone app and m-commerce website development from across retail, with Ocado and Tesco among the pace setters in the grocery sector to date. (IGD)

Five key points for Sainsburys growth going forward (IGD)

Business remains in very good shape and is well placed to continue its recent growth with a focus on events in 2012

Food remains the core focus

New channels remain a key growth area

Committed to a strong, but slower, pace of new store development Though retaining strong growth prospects in food, Sainsbury's growth will be from a more diversified base in the future

MORRISONS INSIGHT UPDATE JUNE 2012

Morrisons' slower Q1 but positive outlook

Morrisons has reported ex fuel LFL sales d own 1.0% in Q1 (up 0.9% incl fuel), citing the impact of the challenging economic backdrop and the high price of commodities. These results represent a slowdown in performance for Morrisons, indeed in recent years the retailer has a very consistent record of delivering like-for-like sales growth. As well the wider economic pressures holding back consumer spending, the retailer has been contending with a very strong competitor set and a tough comparative.

It is also worth noting that total sales this quarter has been held back b y a relative modest contribution from new space, with the bulk of Morrisons space opening p rogramme weighted towards the tail end of this year. Morrisons work on new store formats, though highly impressive, still at this stage has only limited reach across the estate and therefore only a modest impact on like-for-like performance across the group. Morrisons now has 31 new fresh format stores trading, putting it on course to h its its target of 48 stores in this format by the end of H1. As more new format stores are rolled out, these will provide a boost to wider group performance, particularly given the highly enthusiastic customer response to initial store openings.

Morrisons private label and range are a further area of focus having already made great strides here, with January's launch of M Savers becoming the fastest growing value b rand in the market, while the M Kitchen brand continues to build. Development is on-going in this area, with the NuMe h ealthy eating range, launched this week, just the latest move.

Looking ahead, Morrisons has a clear strategy to take advantage of summer events, while its recent investments in new manufacturing facilities will support its drive to offer greater value and high quality own brands. At the same time Morrisons continues to build its position as a multi-format, multi-channel retailer, through its development of the M Local format and by putting the groundwork in place for its expected online launches. Morrisons has also made it clear that it will continue to pursue a balanced mix of promotions to engage shoppers at a time of continuing pressure on household budgets. (IGD) Morrisons to revamp instore bakeries
At the end of this month, Morrisons is relaunching its instore bakeries to highlight new ranges and baking methods. This move comes as M orrisons looks more widely at its brands to ensure they fully meet customers' needs and follows the recent relaunch of ranges of produce, salads, cakes, desserts and antipasti. Morrisons is anticipating 4,000 products will be relaunched this year under its brand review programme. (IGD)

SO WHAT SHOULD WE DO? 1. The consistent trend over the last few months has been that the top and bottom ends of the market are thriving. Talk to your Clients about tailoring some activities by socio-demographic needs at the top & bottom ends. StoreSight can help identify which stores would be most suitable for this. 2. Review the market performance of store groups on your Clients callfile vs how your Clients brands are faring in those store groups. If your Client is less than +6.5% in ASDA, for instance, consider action plans to address this - perhaps upweighting resource around key activities, the use of tactical teams, additional POS etc. If your Client is faring better than the overall store group, the Field can use this to highlight to stores how that important the Clients brands are in driving sales for them. 3. Ensure the 3 new ASDAs are included in your callfile thinking. 4. The growth of m-commerce may mean stores become more affected by online activity. Field teams should continue to monitor for resulting availability challenges. Ask Clients which products in their portfolio have a higher propensity to be involved in online shopping and assess whether a specific action plan is required to monitor and ensure excellent availability of those SKUs.