Global Retail Roundup Memo: Selected News and Insight On Food and Grocery Retailing Throughout the World

United Kingdom

United Kingdom-based retailer Tesco's Ireland branch has launched a new merchandising scheme in an attempt to increase sales amid that nation's slumping economy.

Tesco-Ireland has created what it is calling "value zones" inside its Ireland stores in which the retailer has over 1,000 "cash saver" food and grocery items offered at everyday low price discounts. The "cash saver" "value zones" are differentiated in the Tesco stores in Ireland with a store-with-in-a-store-type scheme, featuring black and amber colored signage and point-of-purchase materials touting the "cash savor" values theme.

A number of the over 1,000 staple items in the "cash saver" zone are natural and organic versions, primarily Tesco's store brands, of basic staple items like peanut butter, cereals and related items.

Denmark-based small-format, no frills grocery chain Netto also is responding to the slumping UK economy. It plans to launch a major price-cutting initiative in all of its UK grocery stores in which the grocer will cut the prices of key, everyday food and grocery staple items across all categories. The German retailer says the total item price reductions will amount to ~6 million-p (British Pounds) total.

Netto already is a discount food and grocery retailer in the UK and throughout Europe where it has over 1,000 small-format discount grocery markets in Denmark, Germany, Poland and Sweden, in addition to the United Kingdom.

Netto is owned by Dansk Supermarket Group which is in turn owned by A.P. Møller-Mærsk Gruppen, a £3 billion company, which has business interests in oil tankers, logistics and distribution , along with retailing.

Netto-UK claims it saves shoppers 20% compared to conventional supermarkets, the small-format discount retailer is challenging German based Aldi and Lidl head to head in the no frills, small-format discount supermarket sub-segment. However, it competes against every other food and grocery retailing format and store size as well, as do Aldi and Lidl.

Netto currently has about 200 stores throughout the UK and is opening about 20 new stores in the nation each year as part of its long term growth plan.

Netto stores are limited assortment, but do offer a variety of natural, organic and specialty food and grocery items at discount prices. They also are putting an increased emphasis on these and other sustainable products as the "green" movement continues to grow in the UK despite the poor economy at present.

Wal-Mart, Inc.-owned UK retail chain Asda has moved ahead of Sainsbury's to become the UK's number two sales leader in the online ordering-home delivery food and grocery retail segment, according to data just released from research firm TNS Worldpanel. The firm's latest figures show Asda growing its online sales at 71.8% for the 12 weeks to June 15, 2008.

Earlier this year Asda made a major financial investment in improving and growing its online business. That investment appears to be paying off for the Wal-mart-owned chain, which also is the UK's number two brick and mortar food and grocery retailer.

Tesco is the largest overall brick and mortar and online food and grocery retailer in the UK, followed by Asda and then Sainsbury's. Although Sainsbury's is number three overall behind Asda and Tesco, until these online sales figures came out this week it was number two in online sales, ahead of Asda. The brick and mortar and online rankings are now the same: Tesco number one, Asda number two, and Sanisbury's in third place respectively.

Germany

Germany-based international food and grocery retailer Metro Group is obviously doing something right, even in what is becoming a world-wide economic slowdown.

Metro Group has reported half yearly growth of +7.1% to €31.7bn, with international sales contributing over 60% of revenue for the first time. In the second quarter, turnover grew +6.9% to €16.1bn.

Those are seriously strong numbers even in a thriving international economy.

Metro Group, which sells hard and soft goods in addition to food and groceries, operates three primary formats: large combination food, grocery and general merchandise hypermarkets (called Real Hypermarkets), cash & carry-style stores and consumer electronics stores.

Below is a sales and profits breakdown by each format:

Real Hypermarkets
Increased sales of €5.6bn, up +6.3%
Like-for-like sales growth of +6.5%
1.7m additional customer visits
Sales growth of +33.5% in Eastern Europe to €1.3bn

Cash & Carry
Turnover growth of +6.1% to €15.7bn
Eastern European sales increase of +14.4% to €6.0bn
+14.6% growth in Africa/Asia
EBIT increase to €410m, up +6.9%
Eight new stores

Consumer Electronics
Sales increase of +12.1% to €8.4bn
German sales up +7.4% to €3.9bn
Eastern European sales leap of +43.1% to €1.0bn
EBIT growth of +11.3% to €137m
19 new stores

Metro Group had global sales of $88,034 billion in fiscal year 2008, making it the world's fourth largest retailers behind number three Tesco, number two France's Carrefour and number one U.S.-based Wal-Mart, Inc.

The global retailer operates stores in 31 countries in addition to Germany. Those countries are: Austria, Belgium, Bulgaria, China, Croatia, Czech Republic, Denmark, France, Greece, Hungary, India, Italy, Japan, Luxembourg, Moldova, Morocco, Netherlands, Pakistan, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Spain, Sweden, Switzerland, Turkey, Ukraine, UK, Vietnam.

Metro Group CEO Dr. Eckhard Cordes says its cash & carry division was a big contributor to its impressive half-year numbers in terms of the company's food and grocery sector. He also said improvements made to its hypermarkets division, which has been faltering a bit, helped as well. He added the hypermarket division has become a major renewed focus for the glabal retailer, including plans to grow its number of hypermarkets in many international markets. That renewed focus includes a new marketing campaign for the Real Hypermarkets which the retailer launched earlier this year.

As part of its new marketing program for its hypermarkets, especially throughout Europe, Metro Group is touting natural, organic and sustainable food and grocery products, along with increasing the number of items in these categories the retailer sells in its hypermarkets.

India

A. Srinivas, a writer for the Indian Hindu Business Line publication, argues on a piece today that the global "food crisis" is being caused primarily by people in the developed world, and now people in the rapidly developing countries like India and China, eating too much of the "wrong foods" like meat.

In his piece, "Lifestyle changes and food crisis," A. Srinivas argues people in the developed world are eating more than what is good for their health. The increase in demand for meat products, thanks to the popularity of fast food and eating out, is the single biggest reason for the depletion of grain supplies that has precipitated the food crisis.

Since dietary-induced obesity and illness is a major problem in the United States and other parts of the western world, and soaring foods prices especially for meats and dairy products are causing consumers in the developed world to find ways to spend less on food, the writer's argument is good food for thought. Read the article here.

Should consumers in the developed world begin to eat less meat for example in significant numbers, such behavior has numerous implications for food and grocery retailers in the areas of store design, marketing, merchandising and other operational segments of the business.

Additionally, such a behavior change even on a small scale, could be a boon to natural foods retailers in the west because these retailers tend to put far more emphasis on the selling of healthier foods like fresh produce, grains and meat substitutes.

Malyasia

The Malaysian government may be on the verge of allowing foreign hypermarket operators to open smaller outlets via a franchise system.

In a press interview this week, Domestic Trade & Consumer Affairs Minister, Datuk Sharir Samad, said that foreign retailers would be able to open stores which are slightly larger than convenience stores, without being subject to the regulations governing hypermarkets. The stores will still be 30% owned by Malaysians, as required by law. The franchise proposal will be submitted to the Malaysian Cabinet for consideration in the coming month.

This would be good news for international retailers like Tesco, Carrefour and Wal-Mart, who want to open versions of their small-format grocery and convenience stores in Malaysia. Carrefour in particular wants to open some of its Carrefour Express small-format grocery stores in Malyasia.

South Africa

A University of Pretoria, South Africa food scientist says soaring food prices in that country are taking a toll on the health of South Africans.

Food scientist Hettie Schanfeldt says a big part of that problem can be solved with consumer education however.

This story in yesterday's Sunday Independent newspaper discusses the professor's ideas and how she is enlisting South Africa's government and food industry to help her and others do more to educate the nation's consumers about the correlation between rising food costs and healthy eating.

The irony in South Africa, which has seen considerable economic development and improvement in the economic and social lives of many of its people sense Aparthied was ended in 1990, is that many of those who have risen to the middle class are following in the same behavioral patterns of many people in the developed world, which is that they have changed their diets to include much more high fat and unhealthy foods, leading to obesity and other diet-influenced health problems like like diabetes, high cholesterol and high blood pressure.

Australia

Australia is dealing with soaring food and grocery prices just like the rest of the world is currently doing. Prices at the nation's supermarkets have risen by about 14% overall over the last four years, according to the Australian government, with the costs of dairy products, meats and organic products soaring much higher than that.

The Australian Competition and Consumer Commission, the government-appointed body charged with regulating competition in the nation's the food retailing industry, is due to report to the federal Government on grocery prices next Thursday.

The commission has been silent in the main about what its findings will be, which has some in Australia's supermarket industry a bit skittish

However, the commission's former president, Allan Fels, who is now a University professor, tells The Australian, a business and politics publication in the country, he has what he thinks is one significant solution to high food prices in Australia

"The best single way of getting grocery prices down would be to change the town planning laws that hold back retail competition," Professor Fels told the Urban Taskforce industry group in Sydney yesterday.

"I would like to see more retailers and more opportunities for them to compete everywhere. Retail is too concentrated -- the two big retailers (Coles and Woolworths) have something like 80 per cent of dry groceries."

Read Professor fels' other prescriptions for food and grocery retailing in Australia, along with the rest of the article in The Australian here.

Canada

Gilligan, the skipper..and the grocer too: Three-hour tours aboard the S.S. Minnow may soon be coming to a Vancouver Island community near you.

The boat that was made famous for setting aground on the shore of an uncharted desert isle in the 1960s television classic Gilligan's Island is now owned by Ken Schley, one of the owners of the Quality Foods grocery store chain, based on Vancouver Island, Vancouver B.C.

Read about what the creative grocer has cooked up here.

Quality Foods is a very innovative 10-store independent food and grocery retailer. You can learn more about the grocer in this piece we wrote and published on May 3, 2008: Independent Grocer Memo: 'Romancing' Food and the Stores, Innovation and Customer Care Keys to Success for Vancouver Island B.C.'s Quality Foods.

United States

U.S. retail chain Target, which operates Target banner general merchandise discount stores and Super Target banner combination food, grocery and general merchandise discount merchandise stores, yesterday celebrated a major new store opening achievement. On Thursday, July 31, the retailer opened 43 stores throughout the United States.

The 43 store grand openings yesterday took Target's total US store count to date to 1,648, with a presence across 47 states nationwide.

California, Texas and Florida enjoyed the highest number of store openings on the day, with nine, six and four stores opening respectively. Many of the 43 stores opening yesterday were the retailer's Super Target banner combination food, grocery and general merchandise discount format stores. Averaging well over 100,000 square feet, the Super target stores are similar to Wal-Mart's Supercenter stores.

Target is making a major push to open more Super Target stores in the U.S., especially in states like California where it currently has only a handful of the mega-discount grocery and general merchandise stores. It wants to compete more in the food and grocery segment, including in the natural, organic and specialty foods categories.

Super Target stores carry extensive selections of natural and organic fresh foods and grocery products, along with lots of specialty, gourmet and ethnic food and grocery items across all categories. This includes the retailers store brands, which feature natural, organic and premium products across all perishable and dry grocery categories.