Buoyed by a long spell of fine weather, sales in the Irish retail sector grew by 2.8% in 2018.
Retail categories such as grocery, DIY and hardware, and fuel benefited strongly from the sustained spell of warm weather during June. From a grocery perspective, there was particularly strong demand for seasonal products such as soft drinks, beer and wine, ice cream, BBQ food and fresh food categories, with the spike in demand pushing retailer supply chains to the limit during summer.
Once-off events such as the football World Cup and the royal wedding in the UK provided a welcome boost to trade for retailers, with sales of soft drinks, alcohol, and magazines benefiting most.
This trend reflects a broader move towards event-led retail in recent years as retailers seek to leverage such events to help promote consumer spend.
All BWG retail brands showed growth in 2018 and either maintained or marginally grew their market share. According to Nielsen Scantrack statistics, the convenience market grew by 3.7% year-on-year and the supermarket channel grew similarly by 3.7%.
Londis was the strongest performer among the BWG Group brands, with sales growth of 5.9%. SPAR, as our largest brand, increased sales by 4.1%. EUROSPAR outperformed the supermarket channel by achieving 4.3% sales growth. There is no empirical track of wholesale or cash and carry channel sales but based on volume and value sales growth over the last 12 months, combined with supplier feedback, we are confident that Value Centre has grown its market share in the wholesale channel, as has BWG Foodservice.
Store performance overview
EUROSPAR operates in the supermarket sector of the Irish grocery trade, which remains highly competitive in nature. EUROSPAR delivered wholesale sales growth of 1.79% – consistent with that achieved over the past number of years –despite strong sterling weakness-induced deflationary headwinds. EUROSPAR store numbers also continue to grow, with four new EUROSPARs opened. We continue our focus on executing the EUROSPAR strategy by developing the brand’s ‘Famous for Fresh’ credentials. These manifest in the delivery of quality, in-store prepared, ready-to-eat and ready-to-cook fresh foods, and accompanying in-store consumption facilities.
Sustainable retailer profitability is also top of mind for EUROSPAR management, who aim to deliver sales and profitability improvements to its retailer base.
SPAR sales were strong with overall wholesale growth of 3.04%. Performance was challenged by the loss of seven SPAR Stores from the Pelco group in January. After a challenging start to the year on new business recruitment, 19 new SPAR stores started trading in 2018.
MACE wholesale sales grew by 4.4% this year with new format stores performing well ahead of expectations. Although store number growth is a key challenge, 12 new stores opened. In terms of category performance, Fresh foods, particularly coffee to go, and alcohol, saw very strong growth.
Notwithstanding the fact that new store growth remains a challenge, the XL retail brand continues to grow strongly at 44.5% year-on-year through increased loyalty and a focus on fresh food categories.
Londis delivered growth ahead of the current market trends with wholesale sales increasing by 4.9%. Key weather events played a part in this performance and challenged our supply chain. Our continued focus on fresh food categories, combined with retailer profitability workshops, is having a positive effect on profitability and business mix. The signing of six new stores affirms our ability to attract new retailers to our brand.
The retention of stores remains paramount: the loss of four stores has been financially driven rather than the result of competitive interference. There is, however, a significant increase in retailer enticements from our competitors. With the expected initiation of retirement conversations with several retailers in the coming year, we are confident in finding suitable successors from within the overall BWG estate.
BWG Foodservice continues to show strong double-digit growth, particularly in chilled, fresh and frozen food categories. This growth has been driven by new customer ‘wins’ and expansion of ranges to existing customers. The BWG Foodservice business remains one of the fastest growing parts of the BWG Foods business.
Value Centre Cash and Carry had an exceptional sales year and continues to outperform the competitor set by increasing its market share.
Distribution centre overview
The development and deployment of the Shoplink platform was a major success factor for the year. Shoplink is a bespoke, best-in-class solution to increase simplicity in stores and to drive retailer efficiency when ordering stock from BWG Foods. It enables 24/7 order placement, allows customers to review the full range of BWG products and deals, as well as selecting the best promotions. As a B2B platform, it enables complete integration between BWG and in-store EPOS systems for live sales updates and complete order histories.
Shoplink is deployed to the entire BWG Group retail symbol estate, which opens options for supply chain transformation, route optimisation and demand shaping. Shoplink is being deployed in the Value Centre Cash & Carry division. There has been a significant migration of customers to the platform, resulting in higher value sales across a wider product range, delivering a higher margin.
The Shoplink platform was awarded Best B2B Technology 2017 at the prestigious ‘Eir Spiders’ Awards. In the ‘Tech Excellence Awards’ it was recognised as the winner in the category Private Sector Project 2018.
Improvements in our distribution centre capabilities this year included the deployment of digital shelf edge displays in the chilled warehouse environment. This has dramatically reduced the daily grid creation process from one hour to one minute. The technology is currently being deployed for other areas of the operation where dynamic signage or labelling requirements can benefit from improved accuracy and timeliness.
The retail foodservice and the quality of the fresh food offers in stores are crucial for successful and profitable retail operations. We established a new retail support team who are responsible for identifying and tracking new food trends and providing a retail response to satisfy the changing needs of our customers.
Our Retailer Benefit Programme has grown year-on-year in terms of the financial pool generated by supplier support for the core ranges. This is now a very important part of the overall retail profitability model. Now in its fourth year of operation, several changes are planned, including a full review of the core ranges, and the opportunity for retailers to adapt the programme to better match the profile of their store sales. This change will be available for 2019 and aims to recruit additional retailer support for the programme.
Within Appleby Westward, The Retailer Club was introduced to drive additional sales through selected lines. For the retailer, this provided the opportunity to earn additional discounts based on purchase volumes and to benefit from additional margins on SPAR branded lines.
We also created an affinity deal for retailers on credit card charges. With almost 800 members since launching this initiative three years ago, average store savings on fees are significant.
The programme of company-managed ATM rollouts has proven to be a great financial success for the BWG Group and its retail customers. This is the first venture by SPAR Ireland into financial services. 53 new ATM facilities were installed this year and a further eight are planned.
Innovation in 2018
BWG Foods launched a consumer loyalty app for SPAR. The app allows the delivery of tailored, highly personalised offers to key customers. We also continued to trial innovative solutions in ordering apps for the deli and lunchtime sector, which is delivering significant insights about consumer behaviour and ordering patters.
BWG Group’s loyalty and rewards programmes continue evolving for the retail brands SPAR, EUROSPAR and Londis. At EUROSPAR a new initiative was launched targeting lapsed SuperEasy Rewards members and attracting them back to EUROSPAR stores with bespoke offers and tactical promotions.
There is continued rollout of Londis Smart Rewards across the Londis estate, with 25 Londis stores having the programme in place. Londis Smart Rewards has more than 20 000 fully registered members.
A new bakery range was launched under the O’Dwyers brand. It offers a range of everyday bread and cakes, while the more premium Kake & Co brand will deliver high quality and seasonal products. A total of over 40 new stock-keeping units were launched within the new bakery range.
The BWG Wines & Spirits business features a range of exclusive wines that are sourced on behalf of its retailers: these are key to offering a very strong consumer value proposition and delivering a good retail margin. The continued popularity of these wines, based on great quality at very competitive retail pricing, has been essential in driving the growth of the BWG alcohol business by over 5.5% in 2018.
In Appleby Westward a new SPAR brand wine range was launched. Following several winetasting events with retailers and distribution incentives, these products were successfully launched in stores.
The Irish market is heavily weighted towards pre-packed fresh produce lines. Fresh Choice is the house brand for fresh produce in BWG Foods. It allows us to consolidate our volumes under one brand and gives us better buying power when agreeing tenders and promotions. Fresh Choice is a significant part of our total fresh produce turnover and is used for pre-packed lines only. All Fresh Choice lines are packed at source by our produce category partners to guarantee freshness and quality.
All subcategories within our produce business have pre-packed Fresh Choice lines, including fresh cut fruit, nuts and seeds, prepared bag salads and produce-based meal solutions. We have been successful in winning several national foods awards for lines in our prepared grab-and-go ranges.
The Glenmor brand for fresh meat and poultry had a successful year of sales growth, including significant uptake of the barbeque range. This is despite a challenging and competitive market. The focus with all suppliers is on maintaining sales growth through development of new product options and smaller case sizes for retailers.
|2017 Focus area||Examples of progress and challenges in 2018|
|Monitoring and mitigating the risk of Brexit||There is an ongoing dialogue with government and trade bodies to understand and appreciate the changing dynamics of the ongoing negotiations. There is also extensive consultation and dialogue with suppliers on contingency strategies to ensure that stock is available for retail and wholesale groups in the rest of Ireland post Brexit in March 2019. We are assuming that there will be no sales from the Value Centre Cash and Carry wholesale business to the UK/Sterling area because of new legislation, borders, and tariffs in 2019.|
|We will continue investigating potential acquisition opportunities||The acquisition of 4 Aces is complete, and the full integration process is underway. The acquisition of Corrib Foods was completed in September 2018. Corrib Foods is a foodservice business which will be complimentary to the existing BWG businesses. Corrib Foods will continue to operate as a stand-alone business for the next twelve months.|
|Continuing to support retailers to achieve like-for-like top-line growth and success in the retail business||BWG Foods has a significant co-investment commitment with retailers and will make further capex co-investment in the next year.|
|Continuing growth of the BWG Foodservice business through new contract wins||BWG Foodservice is one of the fastest-growing parts of the BWG business. Double digit sales growth has been driven by new customers and an expanded product offer. The acquisition of Corrib Foods business will consolidate this growth and will add to our foodservice credentials. The acquisition will provide greater scale in key areas of foodservice and provide access to new commodity sourcing for BWG.|
|Looking forward, BWG Group’s capital investment will focus on an expansion of the chilled product distribution facility at Kilcarbery||Significant capital investment across the BWG distribution and information technology (IT) functions included the upgrade and renewal of the physical IT structure and transport fleet. This was prioritised over the expansion of the chilled product facility – the original project is in planning for the coming year.|