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Western Europe: outlook for 2017

The five key trends shaping the grocery market in Western Europe

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Keshia Walvin, Senior Retail Analyst at grocery research organisation IGD, outlines the five key trends she expects to shape the Western European grocery market and influence retailer strategy over the next 12 months.

Focus on small stores

In 2017, we expect to see a greater focus from retailers on their proximity or smaller store formats. There are likely to be new entrants to this channel, while existing players will refresh the range of services they offer.

With shoppers increasingly looking for more convenient grocery options, retailers will take a more flexible approach to their small store strategies, flexing their ranges and offers by location to meet a range of different shopper missions.

One good example would be Rewe, which has been increasing its convenience store presence by rolling out the Rewe to Go concept in Germany. It has also entered a partnership with Aral, a fuel operator, with plans to open up to 1,000 forecourt stores in the next few years.

It’s worth pointing out that retailers will be investing across all the channels in which they operate in 2017 – so despite us calling out a small store focus for 2017, we expect retailers to also continue evolving their largest stores to maintain relevancy for today’s shoppers.

Meeting shoppers’ value expectations

While price remains an important factor, shoppers are increasingly looking for retailers to provide ranges offering good value, which goes beyond simply offering the lowest price.

Some retailers have reacted to this by increasing their emphasis on premium ranges, perhaps by trying to make them comparable to restaurant quality food, but at more affordable prices.

Retailers are also looking to attract shoppers by offering great value on key categories. Dinner for tonight offers, or ‘meal solutions’, are one area where good-value packages are growing in popularity, with their convenience appealing to time-pressed shoppers. Offering good value prices on essential fresh items, such as fruit and vegetables, is another tactic we are seeing across Western Europe.

For example, REMA 1000 introduced a flexible pick and mix promotion to enable shoppers to customise and easily cook a range of meals – such as pasta, pizza, Asian and vegetarian – for tonight for four people for under NOK100 (US$11.80).

Private label

Across Western Europe, private label ranges have seen less investment from retailers in recent years, but we are expecting this to change in 2017.

In 2016 we saw health and wellness products drive the private label agenda, and whilst these will continue to be important in 2017, other areas are also starting to gain attention.

Consumer demands are driving significant growth in organic (BIO), vegetarianism, veganism and specialist diet products. Retailers across the region have been starting to respond to these demands and we expect to see further development in these areas during 2017.

For example, Carrefour France will expand its dedicated BIO fascia in 2017. BIO stores offer around 3,700 organic products, of which 1,300 to 1,500 are private label. As with other format developments from Carrefour, the fascia could expand outside France during the year.

Technology-enabled shopping

To make the shopping experience more convenient and enjoyable for shoppers, retailers are innovating with technology to aid the shopping trip and enable a quicker and smoother process.

Across Western Europe, a range of apps have been launched, with a particular focus on payment and reducing the need to queue. Technology is also being used to increase shoppers’ access to product information, with a focus on sharing reviews and customer ratings.

By using technology in new and innovative ways, retailers are evolving their ability to communicate with shoppers and engage them to increase loyalty.

One great example of this is Dansk Supermarked’s Netto, which has worked with wine website, Vivino, for an app to enable shoppers to scan products for ratings, reviews and price comparisons. The service is mirrored in store with iPads, after Netto identified a lack of product familiarity as inhibiting shoppers’ confidence in buying from the category.

Food-to-go and food-for-later

With shoppers looking for convenient, good value meal options, grocery stores across Western Europe are upping their game in this channel.

Food-to-go has been evolving and retailers are starting to offer a wider range of option to meet growing shopper demand. From sushi and salads to smoothies and iced coffee, it is becoming easier to get a varied and exciting meal on-the-go, whether for breakfast, lunch or dinner.

Many retailers are also offering meal deals, encouraging customers to purchase more than one item.

Tesco has relaunched its Tesco Finest food-to-go range with an emphasis on interesting combinations and more unusual breads. This makes the mission less about convenience alone, and more about providing a great meal experience.

With shoppers looking for stores to meet a wider range of missions and needs, retailers in Western Europe are having to evolve, with these five key trends playing a key role in how the market is developing. It will be interesting to see how these trends continue to evolve and what new influences we may see emerging on the market.

Keshia Walvin, International Senior Retail Analyst, IGD

Keshia is responsible for research in Germany, Austria and Switzerland, as well as covering leading retailers in the US. Her core responsibilities include conducting research trips to key markets, visiting stores and engaging with retailers and manufacturers.

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