Retailers and suppliers need to keep up with the rapid pace of change in grocery
There is real hope, though not certainty, that we are now plotting a way forward out of the worst of the Covid disaster. With that in mind, and with holidays approaching for many, it is a good time to reflect on the situation and prospects for our industry.
Pre Covid, the key dynamic in UK Grocery was the rise of the Discounters. That stalled in 2020, with Aldi’s share in particular struggling, but we are now seeing a next wave. Aldi achieved their highest ever share in recent Kantar data.
Then during Covid’s first year, the biggest dynamic was the shift to online shopping. Online’s share has recently dropped back, with over half the population now double vaccinated. But it remains about double its pre-Covid level and is likely to grow further in the long term. And recently we are seeing remarkable levels of activity and investment in “last mile” delivery (Gorillas, Snappy Shopper etc). It is already clear that there is a willingness to pay for delivery on smaller baskets, in certain circumstances. It is less clear is how many people will pay and how often. Tim Steiner of Ocado recently raised this question.
Deliveroo and Uber Eats have also seen huge growth. Again, much of that new behaviour will endure, albeit not at 2020 peak levels.
Convenience stores saw a boom in the first lockdown but their market share has recently dropped back to levels similar to pre Covid.
So there is a lot of change. But what does this all mean for suppliers and retailers?
For Retailers, it will be about tracking and understanding these channel shifts and deciding which ones to be famous for. So in Discount, this is primarily the battle between Aldi and Lidl, though B&M and others might have something to say on that. In Convenience, CoOp have brilliantly planted their flag – can anyone respond? In Meal for Tonight and Treat Occasion, M&S have great history and are revitalised. Ocado might claim to be delivering best for big shops online, but Amazon lurk. In last mile delivery, it is anyone’s to win. For the Big 4 (increasingly a misnomer), the reality is they need to win in several or all these channels.
For suppliers, it will be about keeping an eye on the exciting, emerging channels, serving them affordably, but not taking the eye of where the mass of volume will remain for the foreseeable future – the established Grocery players, who expect and deserve the lion’s share of attention and investment.
The pace of change isn’t slowing. Working life isn’t getting any simpler. Looking on the bright side, we are working at a fascinating time, in a fascinating industry. All together now for the next phase.
Jeremy Garlick is a Partner of Insight Traction, consulting with FMCG and Retail companies. He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.