Back to the essence has been key in 2020.

Essential mobility, essential shops, essential products ...

Retailers and manufacturers too review their activities and intervene: fewer SKUs, focus on the core, focus on growth, focus on profitability. This trend was especially visible with manufacturers such as  Mondelez, FrieslandCampina, Milcobel, Danone and Coca-Cola. Retailers had to make logistical choices during lockdowns. They were not prepared for an increase in turnover of 8 to 10%, which led to a high workload in the shops and distribution centers. Still, retailers continue to develop new concepts, offline and online, but sometimes discontinue an activity, such as Delhaize Fresh Atelier.

 

Health & wellness come to the fore

Organic is growing, and specialized organic chains in particular are doing well: Färm, Sequoia, The Barn, eFarmz ... Large retailers are losing market share in organic and they react by investing in their organic product range. They work on their authenticity by attracting smaller manufacturers. Carrefour is catching up, also with the acquisition of Bio C'Bon.

The Nutri-Score is a slightly controversial theme. Not all manufacturers are fans. Delhaize has strongly claimed that label, which may also be uncomfortable for other retailers.

Veganism is becoming a differentiator. Is is a small niche, but an interesting target group. AH and Delhaize are strongly committed to its. Unilever and Nestlé too.

Still…seeing the corona kilos….indulgence prevails 😉.

 

Convenience on your doorstep

In recent years we have seen strong growth in convenience formats and formats that combine catering and retail, but corona has had a strong impact on both formats.

The mandatory closing of the catering industry forced retailers to rethink their catering formats overnight. City shops are struggling as more people have to work from home. Delhaize gave up its Fresh Atelier. Despite being a successful formula in France, “city pick-up point” does not seem to work in Belgium.

“Convenience” got a new meaning; instead of “on-the-go”, it now comes to the front door. New business models are nibbling at the supermarket share. They counter this trend with growth in e-commerce and new delivery services. HelloFresh saw an unprecedented growth. New solutions (rather than products) saw the light: look at the rise of “ghost kitchens”, such as Rose Mary, Delhaize & Tasteyou and Casper ghost kitchens. Delivery services step up: ShipTo, Carrefour & Cora & Uber Eats ...

 

Breakthrough of e-commerce in FMCG in Belgium?

According to GFK, e-commerce penetration has grown this year from 12.3% to 14.2% with the market share rising from 1.8% to 2.1%. Compared to countries such as the Netherlands (approaching 5%), France (9%) and even more in the UK, the e-commerce market share remains modest in Belgium.  On top of that, it remains less profitable than traditional retail activities.

The problem in Belgium is capacity: retailers were not prepared for this explosive growth and new distribution centers cannot be built in a few weeks. But Ahold Delhaize has announced investments, Colruyt is building a new e-DC, Carrefour is developing a European e-commerce project for the group. So it moves, but we do not have a pure, e-commerce player, such as Picnic, here yet.

Striking is that this substantial growth rate is driven by the deliveries. Even Colruyt, initially reluctant, now has to comply. Who is cracking the e-commerce business model? Profitability is a challenge, it will have to come from scale and automation.

 

Manufacturers looking for new channels and business models

For food brands that mainly rely on home consumption, 2020 was an exceptionally good year. For many food brands however, the disappearance of food service is a tough one. Food service will reopen one day, but it will not be like it used to be, especially corporate catering, institutional catering, travel, events etc.

Opportunities in manufacturer-to-consumer models (d2c) are being explored. The step from being a manufacturer to becoming a retailer as well is however difficult and not without risk. Some take cautious steps, such as PepsiCo and Unilever. Rumor has it that Kraft Heinz is looking at delivering meal solutions to our homes. In food, new business models mainly boil down to meal boxes and deliveries. A nice example is Mondelez, who came to the rescue of the Easter Bunny by delivering 7.5 million Milka chocolate eggs to staff in hospitals, residential care center, at the Red Cross and Foodbanks.

In non-food, we see initiatives with subscriptions (razors, diapers ...) and services (laundry service instead of selling washing powder).

There are also opportunities with new physical retail partners (ex. Action), and with existing e-commerce channels widening their scope (bol.com, Amazon).  

 

Colruyt is being challenged on several fronts. 

Both during the first and the second lockdown, Colruyt lost market share. There are a few reasons:

• Colruyt is behind Delhaize and Carrefour in proximity. They are working on it, but it takes time. Their Okay network is growing. Spar has been focusing on upgrading existing stores, and is putting expansion on the agenda again.

• Colruyt  lost a lot of turnover due to the loss of professional customers, such as night shops, small catering establishments, sports clubs and associations… a customer segment that is often underestimated.

• How low is the Colruyt price guarantee? Colruyt has always determined the price level or price competition in Belgium. Now, competitors attempt to dethrone them: AH with stunts, Jumbo with EDLP just above Colruyt level, Aldi with the story of the small shopping cart, the low total ticket price ... Corona added a perception problem here. The ban on promotions at the start of the 1st lockdown, resulted in rising food prices. That was more visible at Colruyt than at other retailers, because the discounter aligns its prices with those of its competitors. Colruyt is expected to tackle this issue. However, the growth of online proves to be another major challenge for the lowest price guarantee: Colruyt cannot compete with Amazon, not even bol.com. So they narrow their guarantee down to Belgian web shops.

• There was a negative perception: long lines, narrow corridors, unsafe ...

• In the long term, the demography trends of increased urbanisation and smaller families are to the disadvantage of Colruyt Lowest Prices. This guarantee might become an unsustainable strategy.

Challenging times for Colruyt. In addition, we note that Delhaize and Carrefour have apparently found new impetus.

 

Competition continues to increase. Exciting times ahead!

The battlefield materializes particularly with the self-employed branches of the retailers.

• Carrefour has been very active with many new initiatives. Act for Food has set something in motion. Great by Bompard: for the first time all noses are in the same direction. Also, do not underestimate the role of Carrefour Belgium (e-commerce pilot project).

• At Delhaize, Xavier Piesvaux has focused on health, quality and sustainability. A story that seems to work.

• Aldi and Lidl show increased commitment to fresh. As expansion is no longer an option for Aldi, they focus on increasing purchases of their less loyal customer segment. Brands can help with this. It is also striking to see how both discounters are now committed to marketing and even have introduced category management. The times, they are changing!

• As for Dutch retailers, while there was initially some skepticism about the potential on the saturated Belgian market, it seems that AH with its 55 stores and Jumbo are here to stay. With their neat new stores, young enthusiastic teams, surprising promotions and ranges, they have raised the bar in the Belgian retail landscape. Brand research shows that they know how to charm Flemish people. Colruyt, adjusting its pricing policy to respond nationally to price cuts at AH, is significant. The fact that Test-Achats made a distinction between "Colruyt near AH" and "Colruyt not near AH" hurts. Jumbo is a newcomer, but the enthusiasm among customers is substantial. Delhaize, Carrefour, Aldi and Lidl react with heavy investments in renovations. One can't get away with outdated stores when such a new competitor opens in the area. 

• Also very striking are the complementarities between AH and Delhaize. They are no longer afraid to literally sit next to each other.

• And if we are to believe the latest reports, Monoprix will soon also play a role on the Belgian market….

Still, the expected price war has not materialized, or should we say has not yet materialized? Exciting times ahead!

 

Price competition in corona times.

2020 started with deep stunt promotions, such as the AH 1 + 2, followed by a ban on promotions during the lock-down. Afterwards, prices remained at a higher level and following Test-Achats they still are. Purchasing power is nevertheless a theme in times of crisis. Carrefour claimed to freeze prices, Colruyt increased their campaigns (“also in fresh”), AH continued to stunt and Delhaize adopted a new view on loyalty. In practice, the price war only affected Colruyt, AH and the hard discounters.

Border shopping also remains a pain point. During the lock-downs, domestic supermarkets were able to recover somewhat, but perhaps only temporarily. The price differences are real, they are the result of the cost structures. This has a negative effect on the sector and again especially on Colruyt.

 

End-of-year negotiations expected to be challenging.

With manufacturers saying: "someone will have to pay the corona invoice", and retailers saying: “we do not accept price increases” and “the cost-of-goods must remain the same”, we can expect firework.

 

Invest in strategic partnerships.

Investing in knowledge and relationships is key. 2020 saw a lot of conflicts, but those did not appear in the entire sector. They can be reduced to the approach at AgeCore, the European purchasing association of Coop (Switzerland), Edeka (Germany), Intermarché (France), Colruyt (Belgium), Conad (Italy) and Eroski (Spain). The association has been in the spotlights with its bold actions against Nestlé, AB InBev, Mars Incorporated and Coca Cola.

Now, the tone of voice appears to change: “Manufacturers do not know our priorities. Perhaps we should also communicate them more clearly.” (Colruyt). From Carrefour, AH and Delhaize, a swell as from leading manufacturers, such as Bacardi, we learn that, now more than ever, the opportunities to forge sustainable strategic partnerships are there.

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