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Sobeys has revealed that its new grocery home delivery service, launched in partnership with Ocado, will be Voilà by Sobeys in Ontario and Voilà par IGA in Quebec.

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Morrisons has become the first of the Big Four to report Q1 numbers for the 2019/20 financial year and agreed new arrangements with Ocado that give it greater freedom to develop its online offer. Group LFL sales rose by 2.3% in the 13 weeks to May 5th (excluding fuel), its 14th consecutive quarter of growth. It also means Morrisons has now achieved four consecutive years of LFL growth on growth. Total sales moved ahead by 2.4% excluding fuel (2.9% inc. fuel).

Strong Easter key to retail growth

Retail performance remained solid despite the uncertain economic and political outlook. LFLs grew 0.2% for the period but were particularly strong over Easter, up 1.7% vs last year and 3.4% over two years. Key to performance were its in-store bakery business, fresh produce, 'The Best' premium range and 'Naturally Wonky'. New ranges such as Fresh Ideas, Counted and V Taste also proved popular with customers. Looking ahead, Morrisons expects Q2 to be tough as it annualises against the hot summer of 2018 and World Cup comparative.

Solid progress in wholesale

Wholesale's contribution to LFL growth was 2.1%, a decline from 3.2% in Q4, reflecting the conclusion of the rollout of its supply deal to most McColl's stores. During the period, wholesale benefited from the first conversions of McColl's stores to the Morrisons Daily format, and conversions of MPK forecourt shops to both the Morrisons Daily and Safeway Daily format. 10 stores will have opened by the end of May and initial trading is said to have been very positive. Wholesale will receive a further boost later in the year when Morrisons begins to supply around 300 former McColl's former Co-op stores.

New flexibility to grow online

Following the recent fire at Ocado's Andover customer fulfilment centre (CFC), Morrisons has agreed to temporarily relinquish capacity at Ocado's Erith CFC. It will return in January 2021 and during the intervening period will focus on accelerating store pick operations (which now take place at 20 stores). It will also not have to pay for the CFC's start up and running contributions during this time. When Morrisons returns to Erith, the CFC is expected to operate at a higher capacity so it will be able to grow sales faster. Crucially, the new arrangements allow for more flexibility, with Ocado no longer being Morrisons exclusive digital partner. This will also allow Morrisons to develop its relationship with Amazon, potentially becoming a direct seller at Amazon, rather than just a wholesaler to Amazon's platforms. Morrisons is also keen to participate in the 'next meal' delivery market, potentially through a partnership with an operator such as Deliveroo or Just Eat.

 

More insight on Morrisons for Retail Analysis subscribers:

 

Ocado has announced it has acquired a minority stake in robotics start-up Karakuri, that will enable the online retailer to use robotics for the preparation of ready-to-eat meals.

Revolutionising the preparation of ready-to-eat meals

Karakuri’s new machine can automate the assembly of ready-to-eat meals, using configurable, modular design that can be installed in-store or in dark kitchens. The machine can assemble up to 48 food items to create a range of food-to-go products.

Ocado Group’s ventures arm led a £7m seed round with an equity investment of £4.75m for 18% of Karakuri and a seat on the company’s board.

Expanding the value proposition

According to Ocado, the investment in Karakuri gives the opportunity to expand its value proposition in grocery, particularly through its rapid delivery service, Ocado Zoom. The technology will also be added to the Ocado Smart Platform, providing Ocado Solutions partners with ‘innovative answers to the challenges of building a strong and profitable food delivery business’.

Tim Steiner, Ocado’s chief executive, commented: “Ocado is constantly striving to identify the best and most innovative solutions to provide consumers with the greatest possible value, choice and convenience. Our investment in Karakuri, potentially a game-changer in the preparation of food-to-go, gives us the opportunity to bring the best of innovation to the benefit of our own customers as well as those of our partners”.

Want to know more?

For more information on Ocado’s current performance and key strategic objectives, read our Strategic outlook for Ocado report here.

We review and compare Ocado’s rapid delivery service Ocado Zoom here.

In our Robots in retail report, we showcase 15 examples from around the world of how robots are being deployed in-stores.

Growth slowed to 1.4% in the 12 weeks to 24th March, according to Kantar. This makes it the slowest growth rate since March 2018. Inflation edged up from 1.4% to 1.5% causing implied volumes to dip into negative territory. We look at the results in more detail.

Seasonal changes impact growth

Despite the uncertainty surrounding Brexit challenges have mainly come for retailers from changes to the timing of seasonal events. Retailers have been impacted by Easter being much later in 2019, falling on the 19th April, compared to the 1st April in 2018. Mothers Day also fell outside this period on 31st March, compared to 11th March in 2018. This impacts the Big Four in particular, who rely more heavily on these events to boost to trading.

Asda becomes the second largest retailer

Asda has overtaken Sainsbury's and become the retailer with the second largest market share, at 15.4%, compared to Sainsbury's at 15.3%. Asda sales continue to grow, albeit at a marginal rate of 0.1%. However this is positive, especially when compared to Sainsbury's whose sales were down -1.8% year-on-year.

However, these results do not show the full picture. Sainsbury's is still ahead of Asda in terms of total sales. The sales measured by Kantar only cover food and grocery, but not Argos and Habitat.

Helping to drive Asda's recovery is the retailer's success in reaching more quality seeking shoppers, with investments in fresh produce and its own brand offer broadening its appeal to more affluent demographics. To see how Asda is transforming the in-store experience, check back soon on our Asda hub to see our store visit report to newly remodelled Asda Patchway.

Divergent promotional trends at Waitrose and Tesco

Waitrose saw its strongest growth since August 2018, at 1.3%. This was driven by the retailer reducing its promotional activity and focusing more on full price sales.

Waitrose's scaling back of promotions contrasts with Tesco whose deal penetration reached 40.1% in Kantar's data.  Overall however promotions in the grocery market are at the lowest they have been in a decade.

Tesco full year results will be reported on our Tesco hub on April 10th.

Fastest growth from discounters

The discounters seem to be unaffected by the seasonal date changes and growth remains strong. Particularly for Aldi which was the fastest growing retailer at 10.6%, reaching a record market share of 8%.

This period saw Aldi launch a new banner, Aldi 'Local'. The retailer has said this is not a move into the convenience sector. As expansion in city centres and particularly London, is often difficult for discounters, innovation in small formats gives them more opportunity to grow presence in these areas and target shoppers on different missions.

Lidl also continues to grow, as the second fastest retailer, at 5.8%. This was a 0.4pp increase on the 12 weeks up to February 24th.

This means the two discounters’ overall market share is now 13.6%.

Co-op and Ocado launch new online services

Growth at Co-op, at 3.9% and Ocado at 5.5% remains strong, despite disruption caused by the recent fire at its Andover CFC. We have recently seen both retailers look to move into online 'top-up' shopping.

Co-op has launched its first online delivery service. It is initially available to shoppers within a 2.5 mile radius of a Co-op store on the Kings Road in Chelsea, with plans to be rolled out to a further eight stores in London, and if successful, the rest of the UK.

Ocado has launched a new one hour delivery service called Ocado Zoom which is available in selected postcodes in West London.

Other retailers

  • Morrisons growth has stagnated, with sales down -0.1%. This is the first time it has had negative results since December 2016. The retailer has been attracting more shoppers however, has seen a decline in basket size and Kantar's numbers do not include Morrisons fast growing sales through wholesale partners, including McColl's and Amazon. Read our new strategic outlook for Morrisons to find out more about its recent annual results plans for 2019.
  • Iceland saw sales growth of 0.6%, maintaining its market share of 2.1%.

Retailer

12 weeks to
25th March 2018

12 weeks to
24th March 2019

Sales growth
(Y-O-Y%)

Tesco 27.6 27.4 0.5%
Sainsbury's 15.8 15.3 -1.8%
Asda 15.6 15.4 0.1%
Morrisons 10.4 10.3 -0.1%
Aldi 7.3 8.0 10.6%
Co-op 6.0 6.1 3.9%
Lidl 5.3 5.6 5.8%
Waitrose 5.0 5.0 1.3%
Iceland 2.1 2.1 0.6%
Ocado 1.2 1.3 5.5%
Other Multiples 1.8 1.8 2.7%
Symbols & Independents 1.7 1.7 0.6%

 

 

 

IGD Tesco Business Update 2019

8 May, London

Dave Lewis and his leadership team invite you to a crucial supplier event to help you stay close to Tesco’s strategic vision in its centenary year.

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Presentations

03/05/2019

An essential summary of trading priorities, latest developments, and other key commercial insights for Ocado.

18/04/2019
Our selection of key insights from across Retail Analysis and ShopperVista from the last three months. This report includes the latest macroeconomic and shopper sentiment data, retailer results and market shares. We also highlight the latest channel and market trends, and new store formats.
08/04/2019

We review Ocado's current performance, its growth forecasts for the next five years, plus progress against key strategic objectives.

Included in this report:

  • Ocado's five year sales forecast
  • Ocado's strategy
  • Ocado's international agreements
  • Ocado Smart Platform innovations
  • Ocado's fulfilment and delivery operations
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