3rd PASTA WORLD CONGRESS
Changing Competitive Dynamics In Food Retailing
Lamberto Biscarini
Barcelona - October 24, 2005
THE BOSTON CONSULTING GROUP
TODAY PASTA IS AN INTERNATIONAL BUSINESS
Main pasta countries according to Unipi
Russia
Germany
Germany
France
Italy
Spain
US
Turkey
Venezuela
Peru
Brazil
Argentina
Source: UNIPI, Countries statistics offices
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
TRADE INTERFACE IS BECOMING CRITICAL
IN MOST PASTA COUNTRIES
Top 5 retailers cumulated market share, 2004
72%
France
Germany
65%
Spain
65%
retail markets
 62%(2)
29%
United States
Mature
38%
Italy
Argentina
25%
Turkey
21%
Brazil
21%
Peru
Developing
retail markets
19%
15%
Venezuela
 30% (Moscow, St. Petersburg)
10%
Russia
0%
10%
20%
30%
40%
50%
(1) In the Moscow and St Petersburg area, the only 2 with tangible modern retail presence
(2) Top 100 US Metropolitan Statistical areas (60% of population)
Source: M+M Planet Retail, BCG analysis
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
60%
70%
80%
TOP 3 GLOBAL RETAILERS
BUILDING SOLID POSITIONS BY COUNTRY
# Ranking in each market (only if in top 3)
France
1
Germany
1(1)
Spain
United states
1
1
Italy
3
Argentina
1
Turkey
2
Brazil
3
2
Peru
Venezuela
Russia
(1) Including C&C business
Source: M+M Planet Retail, BCG analysis
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
2
THE BOSTON CONSULTING GROUP
4 MAIN TRENDS EMERGING
IN MATURE RETAIL MARKETS
1
Discounters' growth, behind a trading-down shift in consumer
behaviour
2
Price-focused horizontal competition among retailers
3
Repositioning of Private Labels towards lower price levels, shifting
from margin generators to price leadership vehicles
•
4
Additional pressure on Branded players
Shrinking of # of suppliers, particularly in mid size surfaces
•
Max 1-2 players in each category
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
1
DISCOUNTERS GAINING CONSUMER LOYALTY...
Example France
% 25
16.3
16.1
20,3
20.7
18.3
20,4
20,2
19,9 19,5
20
18
17,1
16,5
15
Average ticket €
11,9
10,2
10
9,2
9
Frequency rate
Loyalty index
Value SoM Groceries Chilled
5
0
2000
2001
2002
Source: Consoscan, TNS
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
2003
... REFLECTING A CHANGE
IN CONSUMER PERCEPTION
1
Example: Spain
Avg. supermarket
1
Price
2
Convenience
3
Innovation
4
Affinity
5
Trust
6
Product range
7
Service
8
Advertising
Advantage on price, convenience, and
affinity
No major disadvantage on trust,
product range, and service
-1
-0,5
0
0,5
1
Consumers evaluation
"I don't shop Lidl because I can't afford to shop in a supermarket, it's just that if I can save money on shopping I will"
Consumer interview, Madrid, July 2005
Source: 6 000 consumers interviews across Europe, 2005
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
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2
HORIZONTAL COMPETITION
MAINLY BASED ON PRICE
Real food prices in Western Europe, 1999-2004, index
Real food 110
price
108
(index)
CAGR CAGR
99–04 02–04
106
104
France
0.6% (0.9%)
102
Italy
0.4%
100
UK
0.0% (0.4%)
0.0%
98
Sweden
(0.4%) (1.4%)
96
Germany
(0.6%) (1.6%)
94
Netherlands
(1.2%) (2.9%)
92
90
1999
2000
2001
2002
Note: Real food price index is defined as consumer price index for food / consumer price index
Source: Eurostat; Planet Retail; Press; BCG analyses
THE BOSTON CONSULTING GROUP
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
2003
2004
3
CHANGING ROLE OF PRIVATE LABEL
Few examples
# SKUs
Premium
240-500
Mainstream
2.100-6.500
Value/
first prices
350-400
Margin over
branded products
+3%
+3% - (-5%)
Role to retailer
• Image of innovator, exclusivity,
solution provider (e.g. diet, allergy)
• Increasingly used as loss leaders in
traffic building categories
• Low price image
(-5%) - (-15%)
Source: Websites; BCG Experience
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
• Defense from Discounters
4
RATIONALIZATION OF SUPPLIER PORTFOLIO
Example, Spain store checks, major dry pasta brands
Pasta brands
Brand
Gallo
Barilla
Ardilla
El Pavo
PL/ 1st prices
Hyper





Hyper





Super


Super


Discount
-

Discount


Format
"Brands have to tell me why I should have them all in my portfolio"
Pasta buyer, leading retailer in Spain
Source: Store checks, Oct '05
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
EVEN FASTER TRENDS IN DEVELOPING MARKETS
1. Retail consolidation - Turkey
2005
Market shares
2002
Market shares
4.2%
Acquisition of Tansas
7.4%
3.1%
4.8%
2.3%
3.5%
2.2%
3.1%
2.1%
2.6%
13.9%
Share of top 5
+7.5 p.p. in less than 3 years
21.4%
"We aim to become either leader or # 2 in each Country we decide to invest in"
Carrefour Investors report, October 2005
Source: M+M Planet Retail, BCG analysis
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
EVEN FASTER TRENDS IN DEVELOPING MARKETS
2. Price competition – Turkey (grocery sample products)
Delta %
120
110
+0.8%
(2.2%)
100
+1.5%
(3.4%)
90
(2.4%)
80
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun04
04
04
04
04
04
04
04
04
04
04
04
05
05
05
05
05
05
Source: October 2005, BCG analyses
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
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Carrefour
Metro
Migros
Bim
Yimpas
Jul- Aug- Sep05
05
05
EVEN FASTER TRENDS IN DEVELOPING MARKETS
3. Discounter penetration - Turkey
# Stores
Market Share (%)
~ 1 200
3.5% (3° player)
~ 290
2.4%
~ 200
1.1%
Over 1 800 Discount stores today in Turkey
Source: Datamonitor, M+M Planet Retail, retailers data, BCG analysis
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
EVEN FASTER TRENDS IN DEVELOPING MARKETS
4. PL role and supplier portfolio – Quotes from Trade interviews
"We will get to more than 20% PL share quite soon, and brands know it... at
our last on-line tender [for PL production] we got an incredible battle"
Food Buying Director, Russia
"PL penetration will grow rapidly... we are investing resources and would
like to see at least 20% of sales"
Food Buying Director, Brazil
"Portfolio rationalization is not yet a hot topic in Pasta, as it is still growing
very fast for us. But it will soon happen "
Pasta Buyer, Russia
Source: Interviews, October 2005
© BCG 2005 - All rights reserved [25011-99-3rdPastaCongress-Oct05-TB-LBi-ep-Mil]
THE BOSTON CONSULTING GROUP
KEY CHALLENGES FOR PASTA SUPPLIERS
Clear business strategy
• Strong leading brands ?
• Private label manufacturing?
• No long term space left in between
Local market know-how and product customization capabilities
• Food retail expectations still local
Partnership with retail country leaders
• Coherently with all channels you want to access (Ho.re.ca.?)
Cost leadership
• To face fiercer Trade Margin requests
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THE BOSTON CONSULTING GROUP