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Food and Non-food Discounters - UK - September 2016

OVERVIEW
What you need to know
Areas covered in this Report
What is a discounter?
EXECUTIVE SUMMARY
The market
Market size and forecast
Figure 1: All discounters’ sector size (£m excluding VAT), 2011-21
Low inflation holds down prices
Figure 2: Inflation rates compared to a year earlier, 2011-July 2016
Companies, brands and innovation
Food discounters dominate
Figure 3: Market shares of the leading discounters, 2015
Advertising spend increases 31% in 2015
Figure 4: Recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, 2011-15
Lidl and Aldi most trusted discounters
Figure 5: Attitudes towards and usage of selected brands, July 2016
New non-food discounter
The consumer
Poundland the most visited discounter
Figure 6: Frequency of shopping at discounters, June 2016
Fresh food the main purchase from food discounters
Figure 7: What they buy from food discounters, June 2016
Food popular at the non-food discounters
Figure 8: What they buy from non-food discounters, June 2016
Aldi customers more likely to be doing a main shop
Figure 9: How they shop at food discounters, June 2016
Impulsiveness is central to shopping at non-food discounters
Figure 10: How they shop at non-food discounters, June 2016
Discount shopping for pleasure
Figure 11: Attitudes towards shopping at discounters, June 2016
What we think
ISSUES AND INSIGHTS
Discount stores have shifted the perception of value
The facts
The implications
Food discounters tackle ethical perceptions
The facts
The implications
Will Steinhoff come to dominate non-food discounting?
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Discount market growth slows
Aldi and Lidl alone again
Non-food discounting a dynamic sector
Brexit boost for discounters?
All food retailer’s sales flat
Inflation holds down prices
MARKET DRIVERS
Consumer confidence
Figure 12: Consumers’ view on their current and future financial situation, January 2013-July 2016
Food retailers’ sales
Figure 13: All food retailers’ sales, 2010-20
Inflation
Figure 14: Inflation rates compared to a year earlier, 2011-July 2016
Growth in convenience retail
Figure 15: Convenience store sector sales and forecast (including VAT), 2010-20
Consumers lose faith in promotions
Figure 16: Attitudes towards grocers’ pricing, August 2015
MARKET SIZE AND FORECAST
Market size
Figure 17: Food and non-food discounters’ market size, 2011/12-2015/16
The food discounters
Figure 18: Food discounters’ market size, 2011-2015/16
The non-food discounters
Figure 19: Non-food discounters’ market size, 2011/12-2015/16
Figure 20: The leading non-food discounters’ revenue, 2011-15
The forecast
Figure 21: All discounters’ sector size (£m excluding VAT), 2011-21
Figure 22: Sales and forecast: All discounters, 2011-21
Segmental analysis – Food discounters
Figure 23: Food discounters’ sector size (£m excluding VAT), 2011-21
Figure 24: Sales and forecast: Food discounters, 2011-21
Segmental analysis – Non-food discounters
Figure 25: Non-food discounters’ sector size (£m excluding VAT), 2011-21
Figure 26: Sales and forecast: Non-food discounters, 2011-21
The impact of the EU referendum vote
Food discounters excelled following the recession
Figure 27: Alternative market scenarios for the post-Brexit food-discount market, at current prices, 2016-21
Figure 28: Detailed post-Brexit scenarios for the food-discount sector, at current prices, 2016-21
Uncertainty could lead to renewed focus on price
A faster impact than before
Forecast methodology
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Food discounters dominate
Wilko drops down the rankings
New UK clothing, homewares and groceries discounter
Advertising spend increases 31% in 2015
Lidl and Aldi most trusted discounters
Poundworld and Poundstretcher brands struggle
KEY PLAYERS
Figure 29: Leading discounters’ sales, 2010/11-2015/16
Figure 30: Leading discounters’ operating profits, 2010/11-2015/16
Figure 31: Leading discounters’ operating margins, 2010/11-2015/16
Figure 32: Leading discounters’ outlet numbers, 2010/11-2015/16
Figure 33: Leading discounters’ sales per outlet, 2010/11-2015/16
INNOVATION AND LAUNCH ACTIVITY
New UK clothing, homewares and groceries discounter
Aldi pop-up wine shop
Discount food shop which sells everyday essentials for just 10p
EasyJet founder opens no-frills, discount food store
Liquidation retail store
Well-known bargain basement retailer back from the dead
Aldi to challenge Ikea with budget furniture range
Cash and carry brand to roll-out value-led fascia
ADVERTISING AND MARKETING ACTIVITY
Total advertising spend by the sector’s leading retailers up 31.2% in 2015
Figure 34: Recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, 2011-15
Lidl and Aldi accounted for 93.5% of total sector ad spend in 2015
Figure 35: Recorded above-the-line, online display and direct mail total advertising expenditure by leading UK discounters, 2011-15
Advertising spend peaks around Easter and in the run-up to Christmas
Figure 36: Recorded above-the-line, online display and direct mail total advertising expenditure by leading discounters, by month, 2015
TV grabs the lion’s share of adspend
Figure 37: Recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, by media type, 2011-15
A note on adspend
SPACE ALLOCATION SUMMARY
Food discounters – Summary
Figure 38: Food discounters: Summary shelf frontage space allocation estimates, August 2016
Food discounters – Detailed space allocation
Figure 39: Food discounters: Detailed shelf frontage space allocation estimates, August 2016
Multi-price non-food discounters – Summary
Figure 40: Multi-price non-food discounters: Summary shelf frontage space allocation estimates, August 2016
Multi-price non-food discounters – Detailed space allocation
Figure 41: Multi-price non-food discounters: Detailed shelf frontage space allocation estimates, August 2016
Fixed-price non-food discounters – Summary
Figure 42: Fixed-price non-food discounters: Summary shelf frontage space allocation estimates, August 2016
Fixed-price non-food discounters – Detailed space allocation
Figure 43: Fixed-price non-food discounters: Detailed shelf frontage space allocation estimates, August 2016
RETAIL PRODUCT MIX
Figure 44: Leading discounters: estimated sales by product, 2015
Figure 45: Leading discounters estimated sales mix, 2015
Figure 46: Leading discounters, estimated sales per square metre, 2015
MARKET SHARE
Market share of the discount sector
Figure 47: Market shares of the discount sector, 2013-15
Market share of food-discounters
Figure 48: Market shares of the food discount sector, 2013-15
Figure 49: Markets shares in the food discount sector, 2006-15
Market share of non-food discounters
Figure 50: Market shares of the non-food discount sector, 2013-15
BRAND RESEARCH 
Brand map
Figure 51: Attitudes towards and usage of selected brands, July 2016
Key brand metrics
Figure 52: Key metrics for selected brands, July 2016
Aldi and Lidl enjoy a reputation for innovation
Figure 53: Attitudes, by brand, July 2016
Poundworld and Poundstretcher struggle to generate appeal
Figure 54: Brand personality – Macro image, July 2016
Food discounters are changing perceptions
Figure 55: Brand personality – Micro image, July 2016
Brand analysis
Aldi still out in front when it comes to perception
Figure 56: User profile of Aldi, July 2016
Lidl seen as more exciting and ethical than Aldi
Figure 57: User profile of Lidl, July 2016
B&M offers a different kind of experience
Figure 58: User profile of B&M bargains, July 2016
Poundland trades on its availability and accessibility
Figure 59: User profile of Poundland, July 2016
Poundworld customers are unimpressed
Figure 60: User profile of Poundworld, July 2016
Poundstretcher has little to offer
Figure 61: User profile of Poundstretcher, July 2016
ALDI STORES LTD (UK & IRELAND)
What we think
Transformation
Step change?
Where next?
Background
Company performance
Figure 62: Aldi Stores Ltd (UK & Ireland): Group financial performance, 2010/11-2014/15
Figure 63: Aldi Stores Ltd: Outlet data, 2010/11-2014/15
Retail offering
LIDL (UK)
What we think
Background
Company performance
Figure 64: Lidl (UK): Estimated group financial performance, 2010/11-2014/15
Figure 65: Lidl (UK): Outlet data, 2010/11-2014/15
Retail offering
B&M RETAIL LTD
What we think
Background
Company performance
Figure 66: B&M Retail Ltd: Group financial performance, 2010/11-2015/16
Figure 67: B&M Retail Ltd: Outlet data, 2010/11-2015/16
Retail offering
TJ MORRIS LTD (HOME BARGAINS)
What we think
Background
Company performance
Figure 68: TJ Morris Ltd: Group financial performance, 2011/12-2015/16
Figure 69: TJ Morris Ltd: Outlet data, 2011/12-2015/16
Retail offering
POUNDLAND LTD
What we think
Background
Company performance
Figure 70: Poundland Ltd: Group financial performance, 2011/12-2015/16
Figure 71: Poundland Ltd: Outlet data, 2011/12-2015/16
Retail offering
POUNDSTRETCHER
What we think
Background
Company performance
Figure 72: Poundstretcher: Group financial performance, 2010/11-2014/15
Figure 73: Poundstretcher: Outlet data, 2010/11-2014/15
Retail offering
POUNDWORLD RETAIL LTD
What we think
A better performance
Turning point
Where next?
Background
Company performance
Figure 74: Poundworld Retail Ltd: Group financial performance, 2011/12-2015/16
Figure 75: Poundworld Retail Ltd: Outlet data, 2011/12-2015/16
Retail offering
WILKO RETAIL LTD (FORMERLY WILKINSON HARDWARE STORES LTD)
What we think
Background
Company performance
Figure 76: Wilko Retails Ltd: Group financial performance, 2011/12-2015/16
Figure 77: Wilko Retails Ltd: Outlet data, 2011/12-2015/16
Retail offering
THE CONSUMER – WHAT YOU NEED TO KNOW
83% have shopped at a discounter
60% of Asda main grocery shoppers visit Aldi
Aldi attracts a higher level of spending
Poundland attracts a lower average spend
Food and drink most popular purchase
Planned impulsivity
Discounters match up on quality
WHERE THEY SHOP
Poundland most visited discounter
Figure 78: Frequency of shopping at discounters, June 2016
Frequency of shopping
Figure 79: How often those who shopped with each retailer in the past 3 months visited, June 2016
Asda shares the largest proportion of its customers
Figure 80: Food discounter visited in the last three months, by supermarket where they spend the most on groceries, June 2016
Figure 81: Consumer attitudes towards retailers offering good value versus Asda quarterly LFL revenue, Q3 2012-Q2 2016
Repertoire analysis
Figure 82: Repertoire analysis of shopping at discount retailers, June 2016
WHAT THEY SPEND
Food discounter spent the most with
Figure 83: Where they spend the most money (food discounters), June 2016
Non-food discounter spent the most with
Figure 84: Where they spend the most (non-food discounters), June 2016
Average spend
Figure 85: What they spend on an average shopping trip, June 2016
25-34-year-olds are the highest spenders at Aldi and Lidl
Figure 86: Average spend at the food discounters, by age and gender, June 2016
WHAT THEY BUY
What they buy from food discounters
Figure 87: What they buy from food discounters, June 2016
Figure 88: What they buy from food discounters, by retailer, June 2016
What they buy from non-food discounters
Figure 89: What they buy from non-food discounters, June 2016
Figure 90: What they buy from non-food discounters, by age and socio-economic group, June 2016
Figure 91: What they buy from non-food discounters, by retailer spent the most with, June 2016
HOW THEY SHOP AT DISCOUNTERS
Figure 92: How they shop at food discounters, June 2016
Lidl customers more likely to be used for pre-planned top-up shopping
Figure 93: How they shop at food discounters, by food discounter spent the most with, June 2016
Special events attract younger and more affluent customers
Figure 94: How they shop at food discounters, by average age and affluence, June 2016
Premium ranges and events most popular with Londoners
Figure 95: How they shop at food discounters, by region, June 2016
How they shop at non-food discounters
Figure 96: How they shop at non-food discounters, June 2016
Figure 97: How they shop at non-food discounters, by retailer used, June 2016
Brands and the discounters
Figure 98: How they shop at non-food discounters, by number of discounters used, June 2016
The young like to shop and compare online
Figure 99: How they shop at non-food discounters, by age and affluence, June 2016
ATTITUDES TOWARDS SHOPPING AT DISCOUNTERS
Figure 100: Attitudes towards shopping at discounters, June 2016
Are they really that much cheaper?
Figure 101: Attitudes towards shopping at discounters, by age and gender, June 2016
Speed and convenience
Figure 102: Attitudes towards shopping at discounters, by age and gender, June 2016
Discount shopper attitudes towards quality
Figure 103: Attitudes towards shopping at discounters, by age and gender, June 2016
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Data sources
Consumer research methodology
VAT
Financial definitions
Abbreviations
APPENDIX – MARKET SIZE AND FORECAST
Forecast methodology

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