What's the Solution in the Anticipated 2016 Financial Storm for Many of the Major Supermarkets?

Jan 11, 2016, 10:22 ET from Grocery Accelerator Ltd.

LONDON, January 11, 2016 /PRNewswire/ --

How does this threaten the future for new food and drink brands trying to enter the food & drink supermarkets? 

Dramatic changes in the grocery retail market, with up to 30% reductions across their product range in all major supermarkets combined with food deflation, is creating a financial hangover from hell for these retailers CEO's to start 2016. 

Key UK food retail leaders, waking up to 2016, must be wondering when this financial nightmare is going to end?

With future financial forecasts looking even more painful for most of the major supermarkets, this doesn't seem likely.

As food and drink grocery deflation continues to bite, -1.2% last quarter 2015, adding further impact to the major retailers. Kantar Worldpanel recently reporting retail 'like for like' sales for this period down for Asda (-3.4%), TESCO's (-3.4%), Morrisons's (-2%) and now Waitrose have posted a -1.4% reduction in sales for the 6 week, 2015, Christmas period.

Not surprisingly the 2016 New Year retail sales hangover is not going away for these retailers, despite the range slashing prescription and overhead cost cutting. These UK retailers headache for what to do next continues as the two leading food retail discounters, Lidl and Aldi, enjoys double digit growth in 2015 and are expecting nothing less in 2016, combined with strong growth for the convenience sector, forecast by IDG to continue to increase market share to 22% by 2020.

And to make this the retailer nightmare even worse, Amazon, following the UK launch of Amazon Fresh (their online service with one hour home delivery, presently available to only Amazon Prime users in London and Birmingham) is looking to expand across the UK. This is a new paradigm in online retailing and is keeping many of the national retailers awake at night.

With head office redundancies running into the thousands of staff across all the major supermarkets, with whom and what resources, can these businesses recover their previous pattern of growing sales and profitable growth?

One solution, is product innovation, claim directors of Grocery Accelerator Ltd. "cutting unnecessary retail lines that are not performing and reducing overheads is part of the solution," explains Rob Ward, Co Founder Grocery Accelerator Ltd, "but if you are not feeding your shoppers imagination, they will only think about price and ultimately look elsewhere for ideas and inspiration."

When price is used as the the primary marketing option, Grocery Accelerator believe many retailers could continue to fall into a increasing spiral of financial difficulty. IDG are predicting the major supermarkets largest stores will see a reduction in grocery market share, from 40.4% in 2015 to 34.7% in the next five years.

This is why Grocery Accelerator claim product innovation is the solution for these retailers challenges.

Genuine food and drink product innovation is booming among the thriving startup and early stage business community in the UK. However, their greatest challenge is accessing the major retailers. And the major retailers greatest challenge, in an environment where they are reducing their product range, is the commercial risk of listing a new product.

This is where Grocery Accelerator are changing this breakdown in the retail market place for the national supermarkets.

For a start, these food and drink innovation and business experts are putting their money where their mouth is, with investments in the last twelve months of £675,000 in ten innovative food and drink brands. With a further eighteen businesses to be selected during 2016, sharing a minimum of £1,000,000.

Sadly more food and drink business start-ups fail than succeed in the first two years of business. Running out of cash is often thought to be the main cause of this, but the most important factor that prevents failure is experience and trade supplier and customer contacts.  This is where Grocery Accelerator believe they can help. Their goal is to provide each of their invested businesses with a comprehensive business growth network, known as an Business Accelerator. This network includes business mentors, inspirational successful entrepreneurs, service suppliers and retail trade customers, this is how they claim to change the odds of staying in business for food and drink brands.

"We only work with the most innovative and exciting new food and drink brands," Paddy Willis, Co Founder of Grocery Accelerator Ltd. "Our invested businesses are enabled to fulfil their potential because we make sure they are cared for in every core element that determines a successful launch and continued sales for a new food and drink business.  And having an innovative product is central to this success."

Helping new brands be innovative and to supply the major retailers is a big challenge, something that Grocery Accelerator seem to thrive at. "Our first selection question for a new brand idea is how we can help them be scalable?" Simon Lacey, Co Founder Grocery Accelerator Ltd. Simon is a specialist routes to market expert, who has worked with numerous successful national brand launches across the high street. "Working with national and independent retailers, we make sure that there is mass appeal while also an exciting, genuinely new product."

Grocery Accelerator are now looking to invest a further £360,000 in six innovative food and drink brands that soon could be available in the national retailers.

Further to this investment, coaching and networking programme, is a guaranteed option to be listed with Ocado.

Partnering with Ocado, Grocery Accelerator will coach six brands, selected from their next investment competition and these will be fast-tracked onto the Ocado online trading platform.

IDG predict market share set to continue to grow for online Grocery food shopping to 8.6% by 2020 from 5% in 2015, that's 72% growth in market share over the next five years. Making it a necessity for brands to sell online.

"Ocado are fast becoming one of the leading national UK retailer for product innovation," Simon Lacey explains, "their trading platform enables new products to be positioned in an unlimited number of (virtual) locations within their store, maximising the chance for their consumers to discover a new product idea."

If Grocery Accelerator is right, saying that product innovation is the cure the major traditional retailers are looking for their present financial headaches, it appears comprehensively rethinking what products are selected to be in-store and how they are retailed, is the solution the major retailers need. Having a selection of products that are innovative which then create an exciting retail experience, combined with the discipline of cost control and range reductions, seems to make sense to fix their financial problems.

Grocery Accelerator Ltd claim is that they are the place for both retailer and new brand business where they receive the help they need to make innovation the key to this a financial success for both businesses.

So could product innovation could be is the prescription to cure the 2016 retailer hangover? Grocery Accelerator Ltd think it is.

Key facts:

- Food and drink grocery Inflation last quarter 2015 -1.2%

- Sales decline for TESCO's, ASDA, Morrison's, Waitrose last quarter 2015

- Online retail growth for food and drink to 8.6% of total market by 2020, 72% growth from 2015

- Discounter retailers anticipated to achieved 11.6% Grocery market share in the UK by 2020


Reference source:

- http://www.igd.com/Research/Shopper-Insight/The-growth-potential-of-online-grocery/


- http://www.cityam.com/226161/amazon-fresh-launches-london-chilled-food-delivery


- http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/12084091/Waitrose-sales-suffer-Christmas-dip-while-John-Lewis-jumps.html


Further information contact: Rob Ward, Co Founder and Director Grocery Accelerator Ltd, rob@GroceryAccelerator.co.uk, Tel: +44(0)20-7294-7692, http://www.GroceryAccelerator.co.uk

SOURCE Grocery Accelerator Ltd.