UK Neighbourhood Retailing 2009

Verdict Research Limited, October 2009, Pages: 229

Neighbourhood retailing is outperforming all other locations. The location offers substantial opportunities, but the dynamics of the market are changing. As the market consolidates, growth is becoming more elusive and while substantial opportunities remain, trading conditions are more challenging and the strategies for success very different.

Scope:

- Key metrics of neighbourhood retail: sales growth, space, store numbers, store sizes and sales densities.

- Detailed market analysis (convenience, off-licences, CTNs, food specialists, pharmacies) and profiles of all the leading neighbourhood retailers

- Focus on composition of convenience market (The Co-operatives, Multiples, Symbol Groups, Independents, forecourt retailing)

- Market shares for leading players 2003-2008

Highlights:

- Neighbourhood retailing is benefitting from a shift in shopping habits, an increased demand for convenience, improved standards and the arrival of the grocers. The expansion of the grocers has enticed people to shop locally and the symbol groups to enhance their propositions, encouraging independents to join and consumers to shop with them.

- Competition is intensifying and pressures on food specialists, independents, off-licences and CTNs mounting. With the market consolidating, the easy wins of the past are harder to come by, while the boost received from the arrival of the grocers can not be repeated. Growth is set to become more elusive and the strategies for success different.

- With propositions becoming more comprehensive, the need for CTNs, off-licenses and undifferentiated specialists is diminishing. As the market consolidates, store environments, fresh food and food-to-go will be key battlegrounds and the multiples, with the expertise and investment available to them, are well placed be the big winners.

Reasons to Purchase:

- Benchmark retailer performance against the market. Understand the dynamics of the location, its composition and prospects for each channel

- Identify the growth prospects of key players in neighbourhood retailing

- Analyse the key issues impacting the location and identify thestrategies for success

CHAPTER 1 EXECUTIVE SUMMARY
Food-led neighbourhood to outperform total retail
Neighbourhood retailing creating a virtuous circle
Tesco and Sainsbury feeding virtuos circle and exerting competitive pressure
Takeover of Somerfield cements top place for The Co-operative
Symbol groups recruitment blitz will consolidate market further
CTNs and Off-licences a dwindling format
Grocers look at alternative sites for expansion as market saturates
Symbol groups improve offer, but risk falling behind
Convenience stores benefit from demand for top-up shopping
Diversifying offer to exploit high footfall and desire for convenience
Neighbourhood sales growth becoming more elusive
Power to shift further to grocers and large symbol groups

CHAPTER 2 KEY ISSUES
Exploiting opportunities in outperforming location
Changing shopper demographic
Demand for top-up shopping
Desire for convenience
Adapting to changing dynamics of location
Market consolidating
Competition intensifying
Consolidation to impact future growth opportunities
Flexible formats
Flexible propositions
Symbol groups boost loyalty
Diversify & Differentiate
Threats Remain
CTNs and off-licences lose out to bigger players
Onerous legislation will hit sales and profits
Dwindling need for CTNs & Off-licences
Only highly differentiated food specialists will survive

CHAPTER 3 NEIGHBOURHOOD MARKET
Summary
Supermarkets and symbol groups pressurise unaffiliated independents
Components of neighbourhood retailing
Neighbourhood sales channels
Majority of neighbourhood sales through convenience stores
Space
Multiples and symbol groups slow decline in space
Neighbourhood SWOT analysis

CHAPTER 4 NEIGHBOURHOOD V OTHER LOCATIONS
Sales
Sales growth driven by multiples and symbol groups
Space
Opportunistic retailers help slow declines in neighbourhood space
Sales densities
Boosted by product mix and expansion of multiples
Stores
Vacant stores are snapped up quickly

CHAPTER 5 C-STORES AND SMALL GROCERS
Summary
Despite continued consolidation, market remains fragmented
SWOT analysis
Key messages
Unafilliated independents continue to be recruited by symbol groups
Smaller Grocers – The Co-operative stamps authority and supermarkets exert pressure
Convenience retailing will benefit from changing shopping habits
Constrained household budgets make value key
Growing importance of fresh food and food-to-go
C-stores expand on to forecourts
Waitrose sensibly commits to convenince store expansion

CHAPTER 6 C-STORES: OTHER SYMBOL GROUPS
Introduction
Summary
How Costcutter / Nisa-Today’s relationship evolves will significantly impact on Nisa
Prevalence of wholesalers with a symbol group offer could decline sharply
Fresh produce and own brands become vital aspects of propositions
Key players
Best-one (Bestway)
Key Store (JW Filshill)
Lifestyle (Landmark Group)
Mace (Palmer & Harvey McLane)
Nisa-Today’s

CHAPTER 7 C-STORES ON FORECOURTS
Summary
Still hold opportunities for convenience and food service brands
Key messages
After decline petrol station numbers stabilise
Modern forecourt convenience stores continue to break old stereotypes
Motorists shop spend was resilient despite high fuel prices in 200
Convenience store and oil company partnerships still being pursued
Service station food-to-go remains a growth area
Franchise arrangements increasingly prevalent
BP, Shell and Total continue to prospect for new dealers
BP franchise model successful template for others
SWOT analysis
Store numbers
Key players
BP has strongest shop brand on UK forecourts
Shell develops private label food-to-go range
Esso partnership with Tesco leaves it well placed
Total trio of formats
Almost all Texaco sites are dealer-owned
Smaller fuel retailers partner with branded stores

CHAPTER 8 TRADITIONAL FOOD SPECIALISTS
Summary
Niche players set to capitalise in struggling market
SWOT analysis
Key messages
Food specialists continue to struggle
Niche operators that diversify will prosper
Future for the sector looks challenging
Neighbourhood food specialists in wider context
Multiples and symbol groups encroach on specialists territory
Background of total sales, space and stores
Food specialists sales continue to be pressurised by multiples
Space and stores continue to contract as competition intensifies

CHAPTER 9 TRADITIONAL OFF-LICENCES
Summary
Off-licences face uncertain future
SWOT analysis
Key messages
Specialist off-licences under pressure from all sides
Proposed minimum unit pricing will be of no benefit to off-licences
Specialists need to utilise their strengths to advantage
Problem areas: shallow range, lack of knowledge and prices not low enough
First Quench (Threshers, Wine Rack, Haddows and The Local)
Struggles for survival
Other key players
Bargain Booze
Laithwaites
Majestic Wine
Oddbins
Wine Cellar

CHAPTER 10 NEIGHBOURHOOD PHARMACIES
Summary
Pharmaceutical market defies downturn
SWOT analysis
Key Messages
Local chemists seek to capitalise
Deregulation allows growth for supermarkets and independents alike
Smaller independents struggle against supermarkets and abolishment of PPA
Swine Flu injects boost
Pharmacies compete with GPs
Alliance Boots
Key Messages
Lloydspharmacy
Key Messages

CHAPTER 11 TRADITIONAL CTN OPERATORS
Summary
CTNs face increasingly uncertain future
SWOT analysis
Key messages
Increasingly competitive marketplace
Diversifying offer essential for survival
Provide service to encourage loyalty and spend
CTNs need to adapt store environments following tobacco legislation
Consolidation in newspaper distribution will see more CTNs close
Martin McColl

CHAPTER 12 FORECAST
Retail spending by location in 2008 and 2013
Multichannel retailers will prosper as online spending grows
Neighbourhood retailing to 2013
Sales growth to rise as multiples and symbol groups take over
Convenience stores will prosper in increasingly competitive market
Declines in space and stores will slow as market consolidates

CHAPTER 13 COMPANY DATA ANALYSIS
Summary
Winners & losers
Expansion of The Co-op and Tesco makes them big winners
Neighbourhood retailers sales
Growth driven by expansion of The Co-op and multiples
Market shares
The Co-operative maintains dominance through acquisition
C-store market shares
The Co-operative overtakes Tesco at top of convenience market
Key operating statistics
The Co-operative continues to lead the way

CHAPTER 14 THE CO-OPERATIVE GROUP
Asserts its dominance
Recent key events
Acquisition of Somerfield
The Co-op now has most stores in UK
The Acquisition of Somerfield - what it means for The Co-operative
Financials
Trading performance boosted by Somerfield acquistion
Space
Expansion set to slow after acquisition provides a boost
Market shares
The Co-operative experiences big gains in share
Outlook - Bright
Record refurbishment
Price harmonisation essential
Competition intensifies
Ethical reputation is valued by customers
Common branding

CHAPTER 15 COSTCUTTER
Continues to improve proposition
Recent key events
Reduces joining costs for retailers
Launches consumer loyalty scheme
Biggest TV campaign
Nisa-Today’s rejects Bibby Line bid
Financials
Stores
Market shares

CHAPTER 16 MUSGRAVE
Positions itself for future growth
Recent key events
Financials
Investment depresses operating profits
Space
Musgrave changes format mix
Market shares
Strong sales growth leads to share uplift
Outlook – Musgrave should reap rewards of investment
Resilient performance
Investing in itself is a sensible strategy
The group is also right to sacrifice profits
Improvements to the supply chain are very important
Fresh food will drive growth
Single entity synergies
Challenge to keep Budgens strong performance going
Consistent store standards imperative

CHAPTER 17 PREMIER (BOOKER)
Continues to grow but challenges remain
Recent key events
Management upholds solid trading performance
Launches new formats and broadens business
Strategy for growth
Three phases for completion by 2010
Financials
Strategies for growth boost trading performance
Premier in the neighbourhood
Space
Continues upwards trend as more stores join symbol
Market shares
Outlook – to grow market share further
Fresh products key
Staples like bread and milk will draw footfall
Standards must be kept high
Booker shoppers could become Premier members
More marketing wouldn’t go amiss

CHAPTER 18 SAINSBURY
To expand convenience offer aggressively
Recent key events
Restructures c-store estateProduct development
Then expands once more
Experiments with five formats
Financials
Neighbourhood
Space
Expansion to slow after acquisitions boost
Market shares
Sainsbury enjoys consistent growth over the last five years
Outlook – significant gains
Making Sainsbury’s Great Again achieves aim
Focus on convenience
Realigns prices
Market conditions help expansion
Behind The Co-operative and Tesco

CHAPTER 19 SPAR
Performs strongly in increasinlgy competitive market
Recent key events
Works hard to improve offer
Financials
Currency fluctuations affect performance heavily
Space
Greater competition reduces retailer membership
Market shares
Negatively affected by exchange rate
Outlook – aims to build on advantages
Currency fluctuations hide a strong performance
Store of the Future
Marketing improves brand awareness
Loyalty generation sensible
Needs aggressive recruitment
SPAR to thrive

CHAPTER 20 TESCO
Strong growth in neighbourhood yet challenges remain
Recent key events
Continued expansion increasingly meets resistance
Financials
Tesco continues to dominate
Space
Pace of expansion remains high
Market shares
Growth accelerates as space grows and offer evolves
Outlook – opportunities remain challenging
Tesco continues to lead in UK retail
Convenience best option if Competition Commission findings become law
Former pubs could be snapped up
Heightened resistance in rural areas
Symbol groups key advantage over the supermarket

CHAPTER 21 GLOSSARY
Terminology
Abbreviations

LIST OF TABLES:

Table 1: Neighbourhood sales breakdown 2007-2009e
Table 2: Neighbourhood sales breakdown and its share of sectors 2009e
Table 3: Neighbourhood sales, space, density & store nos 1998-2009e
Table 4: Neighbourhood retailing SWOT analysis 200
Table 5: Retail location definitions 200
Table 6: Retail sales by location at current prices 1998-2009e
Table 7: Retail selling space by location 1998-2009e
Table 8: Sales densities by location at current prices 1998-2009e
Table 9: Store numbers by location 1998-2009e
Table 10: C-stores and small grocers SWOT analysis 200
Table 11: Petrol forecourts SWOT analysis 200
Table 12: Neighbourhood food specialists SWOT analysis 200
Table 13: Neighbourhood and total food specialists sales 2009e
Table 14: Total food specialists sales 1998-2009e
Table 15: Total food specialists sales value by activity 2004-2009e
Table 16: Total food specialists store numbers and space 1998-2009e
Table 17: Off-licences SWOT analysis 2009
Table 18: First Quench key operating statistics 2004-2009e
Table 19: Pharmacy operators SWOT analysis 2009
Table 20: Alliance Pharmacy key operating statistics 2002-2008e
Table 21: Alliance Boots UK key operating statistics 2005-2010e
Table 22: Lloydspharmacy key operating statistics 2004-2009e
Table 23: Lloydspharmacy – pharmacy profile 1999-2009e
Table 24: CTN operators SWOT analysis 2009
Table 25: Martin McColl key operating statistics 2004-2009e
Table 26: Key neighbourhood retailers UK turnover record 2004-2009e
Table 27: Share of neighbourhood market – leading players 2004-2009e
Table 28: Leading n’hood retailers key operating statistics 2008/09e
Table 29: The Co-operative Group company overview 2009
Table 30: The Co-operative food retail key operating statistics 2004-2009
Table 31: The Co-operative Group trading record 2000-2009
Table 32: The Co-operative Group food retail trading record 2002-2009
Table 33: The Co-operative Group store profile 1998-2009
Table 34: Co-op Group store analysis (incl former Utd Co-op) January 09
Table 35: Co-op Group store numbers incl Somerfield at March 2009
Table 36: Costcutter company overview 2009
Table 37: Costcutter key operating statistics 2004-2009
Table 38: Costcutter estimated UK store profile 2003-2009
Table 39: Musgrave company overview 2009
Table 40: Musgrave retail key operating statistics 2004-2008
Table 41: Musgrave store profile 2002-2008
Table 42: Premier (Booker) company overview 2009
Table 43: Booker Group key operating statistics 2004-2009
Table 44: Booker Group trading record 2002-2009
Table 45: Premier store profile 1998-2009e
Table 46: Sainsbury company overview 2009
Table 47: Sainsbury UK supermarkets key operating statistics 2003-2008e
Table 48: Sainsbury group trading record 1998-2009
Table 49: Sainsbury neighbourhood retail trading record 2003-2009e
Table 50: Sainsbury store profile 1998-2009
Table 51: Sainsbury store profile March 2009
Table 52: SPAR company overview 2009
Table 53: SPAR sales via HQ and UK store numbers 2004-2009e
Table 54: SPAR sales via UK head office 2000-2009e
Table 55: SPAR UK retail trading record 2005-2009e
Table 56: SPAR store profile 1999-2009
Table 57: Tesco company overview 2009
Table 58: Tesco retail key operating statistics 2004-2009
Table 59: Tesco group sales & UK trading record 1998-2009
Table 60: Tesco neighbourhood retail trading record 2004-2009e
Table 61: Tesco store profile 1998-2009
Table 62: Tesco store profile February 2009

LIST OF FIGURES:

Figure 1: Neighbourhood retailing 200
Figure 2: Neighbourhood opportunities 200
Figure 3: Achieving growth as dynamics of location change
Figure 4: Number of unaffiliated independents 2005-2013e
Figure 5: The threats in neighbourhood retailing
Figure 6: Neighbourhood market – sales 2004-2009e
Figure 7: Components of neighbourhood market – sales 200
Figure 8: Components of neighbourhood market – stores 200
Figure 9: Components of the market 2008 and 200
Figure 10: N’hood density, space & stores y-o-y change % 1998-2009e
Figure 11: Neighbourhood sales growth % vs total store retail 1998-2009e
Figure 12: Sales growth by location 1998-2009e
Figure 13: Y-o-y change % in n’hood space vs total retail 1998-2009e
Figure 14: Space growth by location 1998 to 2009e
Figure 15: Y-o-Y change % in store numbers n’hood vs retail 1998-2009e
Figure 16: Y-o-Y change % in store numbers by location 1998-2009e
Figure 17: Convenience market sales growth 2004-2009e
Figure 18: Components of convenience market – sales 2009e
Figure 19: Components of convenience market – stores 2009e
Figure 20: Forecourt sales growth 2004 to 2009e
Figure 21: Leading oil companies n’hood sites with a shop 2007-200
Figure 22: N’hood forecourt shops penetration of petrol stations 2005-200
Figure 23: N’hood petrol station fuel brands & shares of shop sites 200
Figure 24: Neighbourhood food specialists sales growth 2004-2009e
Figure 25: N’hood vs total food specialists sales growth 2004-2009e
Figure 26: N’hood vs total food specialists store number growth 2004-09e
Figure 27: Total food specialists sales growth 1998-2009e
Figure 28: Total food specialists store number growth 1998 to 2009e
Figure 29: Off-licence sales growth 2004-2009e
Figure 30: Neighbourhood Parmacists sales 2004-2009e
Figure 31: Alliance Boots pharmacy market share 2004-2009e
Figure 32: Alliance Boots share of NHS market 2004-2009e
Figure 33: Alliance Boots share of OTC market 2004-2009e
Figure 34: Lloydspharmacy retail pharmacy market share % 2004-2009e
Figure 35: Lloydspharmacy share of NHS and OTC markets % 2004-2009e
Figure 36: CTN sales growth 2004-2009e
Figure 37: Retail spending by location 2008 and 2013e
Figure 38: Neighbourhood sales 1998-2013e
Figure 39: Neighbourhood sales 2008 and 2013e
Figure 40: Neighbourhood space 1998-2013e
Figure 41: Neighbourhood store numbers 1998-2013e
Figure 42: Neighbourhood winners & losers in sales & space 2008/09
Figure 43: Market share changes of profilled n’hood stores 2008 on 2007
Figure 44: C-stores market shares 2007-2009e
Figure 45: The Co-operative food operating profit to January 2004-2009e
Figure 46: The Co-op n’hood sales and growth to January 2004-2009e
Figure 47: The Co-op Group neighbourhood market share 2004-2009e
Figure 48: The Co-op Group convenience-store market share 2004-2009e
Figure 49: Costcutter neighbourhood sales and growth to April 2004-2009e
Figure 50: Costcutter neighbourhood market share 2004-2009e
Figure 51: Costcutter c-store share 2004-2009e
Figure 52: Budgens neighbourhood sales and growth to Dec 2004-2009e
Figure 53: Londis n’hood sales and growth to December 2004-2009e
Figure 54: Musgrave NI n’hood sales and growth to December 2004-2009e
Figure 55: Musgrave GB n’hood sales and growth to December 2004-2009e
Figure 56: Musgrave neighbourhood market share 2004-2009e
Figure 57: Musgrave c-store market share 2004-2009e
Figure 58: Booker Group n’hood sales and growth to March 2004-2009e
Figure 59: Premier neighbourhood market share 2004-2009e
Figure 60: Premier c-store market share 2004-2009e
Figure 61: Sainsbury n’hood sales and growth to March 2004-2009
Figure 62: Sainsbury neighbourhood market share 2004-2009e
Figure 63: Sainsbury c-store market share 2004-2009e
Figure 64: SPAR n’hood sales and growth to December 2004-2009e
Figure 65: SPAR neighbourhood market share 2004-2009e
Figure 66: SPAR c-store market share 2004-2009e
Figure 67: Tesco neighbourhood sales and growth to February 2004-2009
Figure 68: Tesco neighbourhood market share 2004-2009e
Figure 69: Tesco c-store market share 2004-2009e

- Best-one (Bestway)
- Key Store (JW Filshill)
- Lifestyle (Landmark Group)
- Mace (Palmer & Harvey McLane)
- Nisa-Today’s
- BP
- Tesco
- Shell
- Esso
- Bargain Booze
- Laithwaites
- Majestic Wine
- Oddbins
- Wine Cellar

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