Welcome to our 'weekly news in brief', covering the latest from UK retailers and manufacturers.
RETAIL NEWS
Stockpiling propped up retail sales this month, but volumes set to slide
Overall retail sales were flat in the year to March, but this masked a sharp divergence between sectors, according to results from the latest CBI Distributive Trends Survey. In the survey conducted between 26 February and 13 March, grocers said they saw exceptionally strong growth in sales volumes in the year to March, as did specialist food and drink firms. However, most other sectors reported sharp falls in sales volumes, including clothing, furniture and other goods such as flowers, jewellery, and cards. The results of the survey suggest that while households are stockpiling groceries in response to the spread of the coronavirus and the introduction of social distancing, they are putting off purchases of non-essential items. In line with this, non-store retailers reported a fall in sales volumes, while internet sales growth slowed to a below-average pace.
Looking ahead, retail sales volumes are expected to fall sharply in the year to April, with retailers more pessimistic than at any time since April 2009. This reflects a continued fall in volumes across most sectors, with grocers expecting sales to be stable over the year. Orders placed upon suppliers fell for the eleventh consecutive month, despite a strong rise in orders placed by grocers. Orders are expected to fall across most sectors in the year to April (including grocers), with expectations the weakest since April 2009. Sales were seen as poor for the time of year, but to a lesser extent than last month. Next month, sales are expected to be poor for the time of year – to the greatest extent since February 2009.
Ben Jones, CBI Principal Economist, commented: “These are extraordinary times for the retail sector. Grocers are seeing a temporary increase in demand because of coronavirus. But many other retailers are seriously suffering as households put off non-essential purchases and social distancing keeps people away from the High Street. “The Government and Bank of England have already taken welcome, substantial steps to support business during this unprecedented period. What’s needed now is clarity over the support available to firms and fast action to ensure measures announced last week are accessible to businesses of all sizes.”
Meanwhile, official retail sales data from before the coronavirus outbreak fully struck the UK shows the sector had already been struggling amid the poor weather. The Office for National Statistics (ONS) said sales volumes in February were flat on a year-on-year basis and had fallen 0.3% compared to the previous month. On a three month basis, volumes slipped 0.6%. “Retail sales continued to decline in the latest three months due to weak sales across most store types, with February’s bad weather and flooding impacting on footfall,” said ONS head of retail sales Rhian Murphy. “A small number of retailers also said that the impact of the coronavirus had affected sales of goods shipped from China.”
Richard Lim, CEO, Retail Economics highlighted that department stores were particularly affected, seeing the largest declines, while food retailers saw modest growth. He added: “Non-food retailers will be looking back at February’s figures with glee compared with the unprecedented pressure they are currently enduring because of the impact of the coronavirus. With all non-essential physical retail now shut, most of the industry is in survival mode as companies pivot towards cash, desperately cut costs and prepare to weather the storm. “Over the next few months, the retail survivors will be those that are positioned to weather the storm the longest. Companies that have the deepest pockets, slick online operations and are aligned to needs, rather than wants, are best positioned. Those that are saddled with high levels of debt and weaker balance sheets will fall first. And this is likely to happen quickly. According to figures from the Centre for Retail Research, more than 20,000 stores could be lost by the end of the year, a huge leap on the 4,547 that closed in 2019.
Source: NamNews 26h March 2020
M&S and Deliveroo team up for grocery delivery service
Marks & Spencer will start selling a range of products on Deliveroo for the first time in a bid to meet demand from shoppers social distancing as a result of coronavirus. Marks & Spencer will sell a range of food essentials via the Deliveroo app for the first time, including items such as milk, bread and juices, as well as meal options including pizza and oven-ready dishes. The retailer will fulfil orders free of charge from 120 M&S franchise stores at relevant BP service stations across the UK. In addition to this tie-up, Deliveroo has also launched a new range called ‘Essentials by Deliveroo’ comprising household essentials including cereal, pasta, rice and tinned canned goods. The range is being rolled out across major UK cities including London, Leeds, Manchester and Nottingham over the next two weeks. Deliveroo has also extended its partnership with the Co-op to 400 stores, offering nationwide coverage. Deliveroo co-founder and chief executive Will Shu said: “At Deliveroo, we want to do everything possible to help people get the food they want and need during this worrying period. We hope we can play a role in supporting people who have to isolate to get the food they need, whether that’s household items or restaurant food.”
Source: Retail Week 24th March 2020
UK government teams up with supermarkets to support vulnerable customers
Supermarkets will be provided with access to government databases to help prioritise deliveries to elderly and vulnerable customers. In a call between grocery bosses and environment secretary George Eustice earlier this week, options to ramp up the number of online deliveries available to ensure orders by vulnerable shoppers were fulfilled promptly was discussed. Alongside gaining access to government data to help prioritise food deliveries to people told to stay home under the government’s coronavirus guidelines, supermarket bosses also discussed ways to extend their delivery networks such as collaborating with local taxi companies and takeaway delivery firms. Online delivery slots for grocery orders from major UK grocers are booked up for weeks at a time amid intense pressure from shoppers, who have been advised by the government not to leave their homes for any purchases except essentials and to prioritise online deliveries where they can. This is the latest move by the UK government and grocers to prioritise deliveries for the UK’s most vulnerable shoppers amid the coronavirus outbreak. Yesterday, Tesco boss Dave Lewis urged younger shoppers to come to stores to buy essentials, leaving online delivery slots for those unable to leave their homes. Lewis said Tesco was “at full capacity for the next few weeks and we ask those who are able to safely come to stores to do so, instead of shopping online, so that we can start to free up more slots for the more vulnerable”. Sainsbury’s has also been using information from its Nectar loyalty scheme to try to prioritise older shoppers online and has been proactively contacting 270,000 people. According to The Guardian, the government is also teaming up with foodservice providers Brakes and Bidfood to compile an emergency food parcel scheme that could provide essentials to up to 300,000 of the 1.5 million people identified as most in need of assistance. The scheme could launch as early as next week and will connect the foodservice providers with local volunteers and charities.
Source: Retail Week 26th March 2020
Supermarkets bring in new measures to keep shoppers and staff safe
Supermarkets are racing to install measures to keep shoppers and staff at least 2 metres apart after the government called for an immediate increase in safety efforts to contain the coronavirus outbreak. On Tuesday, Sainsbury’s, Asda, Marks & Spencer and Waitrose confirmed they would begin limiting the number of shoppers in stores at any one time. Most retailers said they would have marked areas outside each store where customers will be instructed to queue two metres apart. Waitrose said restrictions would be specific to each store and it was introducing marshals to manage queues outside shops. New rules announced on Monday night stipulate that retailers remaining open during the lockdown, such as supermarkets, must ensure there is a 2-metre distance between customers and staff and that shoppers enter in small groups so that spaces do not become crowded. The government has also ordered retailers to manage queues outside their stores. Waitrose, the Co-op and Sainsbury’s are taking further measures to protect staff, including closing checkouts where two assistants sit back to back. Waitrose, Lidl and Asda are also joining Sainsbury’s, Morrisons and a number of other retailers in installing Perspex screens to protect check out staff. Asda said from Wednesday it was going to be asking shoppers to only touch items that they wanted to purchase and offering hand sanitiser at the entrance and exit of stores. Marks & Spencer said it was cleaning trolleys, baskets, screens and all touchpoints every hour and deep cleaning them every night so that customers could “shop with confidence”. It is also installing what it called “sneeze guards” at tills as an extra precaution.
Source: The Guardian 24th March 2020
MANUFACTURING NEWS
Unilever rolls out £100m campaign to stop the spread of coronavirus
Unilever has teamed up with the UK government on a £100m global campaign to tackle the spread of coronavirus. The FMCG giant and the Department for International Development have donated £50m each towards the campaign, which is aimed at encouraging a billion people worldwide to wash their hands and disinfect surfaces. As part of the programme more than 20 million hygiene products will be distributed to the developing world, including in areas where there is little or no sanitation. The initiative is being led by Unilever hygiene brands Domestos bleach and Lifebuoy soap. The campaign will run across TV, radio, print, social and digital media to help change behaviour in countries across Africa and Asia, including Kenya, Ghana and Bangladesh. Messages will be tailored to communities in these countries to ensure they are effective. The campaign will also be supported by a hygiene behaviour change programme. “Lifebuoy and Domestos have a proven track record of running hygiene awareness and education programmes successfully, and we hope that the work we will be able to drive jointly with UK aid will help save lives that could otherwise be impacted by coronavirus,” says Unilever CEO, Alan Jope. “As the world’s biggest soap company, we have a responsibility to help make soap and hygiene products more readily available, and to use our expertise to teach people to wash their hands effectively, whichever brand they choose to use.” In addition to this announcement, on Tuesday Unilever committed to contribute €100m (£91.4m) to help in the fight against the pandemic through donations of soap, sanitiser, bleach and food. The FMCG company also pledged €500m (£457m) of cash flow relief to support its extended supply chain, including early payments for its most vulnerable small and medium-sized suppliers and extending credit to selected small-scale retail customers whose businesses rely on Unilever.
Source: Marketing Week 27th March 2020
Baby food brand launches online store to help families access food
In an effort to ease the current pressure on supermarket retailers and help people to stay indoors amid the coronavirus pandemic, organic baby food brand Piccolo has opened a temporary online store offering free delivery. Parents will be able to purchase one month’s supply of Piccolo’s baby meal pouches, pastas and cooking sauces, as well as its range of organic formula milks. Piccolo is donating five meals to a foodbank for every bundle of food or milk ordered from the website. It will do so in partnership with City Harvest, which supports more than 60 community organisations that play an integral role in improving the lives of London’s most vulnerable children. Piccolo’s founder and former CEO of Slow Food UK Cat Gazzoli said: “As a mum myself who has just welcomed a second child into the world, I can connect with the worry some parents are feeling at the moment as they try to get hold of the things they need to look after their families. I hope by offering access to our products directly this will go a small way to help, and we are absolutely committed to helping City Harvest reach more families in need with nutritious food in the capital.”
Source: NamNews 26th March 2020
AB InBev redirects budgets from sports marketing to coronavirus aid
AB InBev is redirecting the $5m (£4.2m) it would normally allocate to sports and entertainment marketing to the American Red Cross as it looks to help in the fight against the Covid-19 outbreak. The brewer, which owns brands including Budweiser, Corona and Stella Artois, is also working with sports partners to identify arenas and stadiums that could be used as temporary locations for blood donation. Plus, it is making its tour centres available to the Red Cross and donating media time for the aid organisation’s public service announcements. As part of the initiative, AB InBev has released a new ad, called ‘One Team’ that shows an empty baseball stadium and then healthcare workers, researchers and volunteers battling the outbreak. It ends with a shout-out to the “home team” – people who are staying in to stop the spread of the virus. “Covid-19 has changed how we all live our lives, but it hasn’t changed AB InBev’s priorities and our commitments as an employer, a business partner and a corporate citizen,” says the CEO of its US business, Michel Doukeris. “While we can’t solve this crisis on our own, we are proud to do what we can to serve and support our communities in need and the heroes on the front lines, using our capabilities, our relationships, and our reach to do our part. We invite other companies to use their unique capabilities to join us in this effort, however they can, so that together we can make a difference.”
Source: Marketing Week 26th March 2020
Princes to ditch plastic packaging on all tuna multipacks
Princes has announced plans to move all of its tuna multipacks to cardboard sleeve packaging, as part of a drive to attract new customers and encourage reappraisal of the brand. The time frame put forward by the company will see the switch to cardboard completed within 18-24 months, with the first products due to hit shelves within weeks. According to Princes, the initiative will see 96 tonnes of plastic removed from its tuna products annually, as plastic wrap is replaced by FSC-certified cardboard. The project reportedly forms part of wider efforts by Princes Group to enhance its sustainability credentials, including a commitment to ensuring that 100% of its remaining packaging is widely recyclable by 2025. Mat Lowery, commercial director fish at Princes Group, said: “Packaging innovation has become a cornerstone of how we bring our company vision to life – proudly helping families to eat well without costing the earth. “We have always championed the 100% recyclability of the can of course, but this latest initiative will make it even easier for our consumers to recycle more and feel better about what they buy. “This is a huge undertaking for the business, but one we believe is right for our customers and for the environment. We have a clear roadmap for how this will be introduced across our tuna multipack range. We will also continue to innovate across our broader range of products.” According to Princes, product development also forms part of its wider re-brand. Most recently, the company launched two new fish-based product ranges, Infused Tuna Fillets and Mackerel Sizzle.
Source: FoodBev Media 23rd March 2020
WIDER MARKET NEWS
Bank of England warns of long-term damage to economy
The Bank of England has warned there are mounting risks of widespread job losses and companies going out of business across Britain as the economic costs of the coronavirus outbreak become more apparent. Leaving interest rates on hold at the lowest levels in its 325-year history, the Bank said long-term damage to employment and growth was likely as the government steps up its efforts to contain the disease. Threadneedle Street has already cut interest rates twice this month to 0.1% and pumped more than £200bn into the economy through its quantitative easing programme, in an effort to ease borrowing costs for households and businesses and to calm panicked investors. In a reflection of the scale of the crisis, the central bank’s rate-setting monetary policy committee declared after its scheduled meeting on Wednesday that it “stands ready to respond further as necessary to guard against an unwarranted tightening in financial conditions, and support the economy”. However, with interest rates near zero, analysts said the Bank would need to further expand its £650bn quantitative easing programme, whereby the central bank buys government bonds from commercial banks and investors to inject money into the economy. Governments around the world have stepped up their efforts to contain the coronavirus outbreak by severely restricting social and economic activity, and analysts now believe a steep global recession is a near certainty, with the only doubts over how long the crisis will last. Early warning indicators have shown the worst collapse in business activity on record and rising unemployment levels. The Bank cautioned that it was too early to tell how severe the damage to the economy could be and how well the government’s measures to cushion the blow would work. However, the MPC warned: “Given the severity of that disruption, there is a risk of longer-term damage to the economy, especially if there are business failures on a large scale or significant increases in unemployment.” It added: “The scale and duration of the shock to economic activity, while highly uncertain, will be large and sharp but should ultimately prove temporary, particularly if job losses and business failures can be minimised.” In an early sign of the job losses across the country, official figures show more than 500,000 people have applied for universal credit benefits within the last nine days. Economists at the consultancy Capital Economics have also warned that UK GDP could plunge by around 15% in the second quarter amid the nationwide lockdown.
Source: The Guardian 26th March 2020
UK inflation pace slows as motor fuel prices fall
Cheaper motor fuel slowed the pace of UK inflation in February, according to official statistics for the period before coronavirus had a noticeable impact on the economy. Consumer price inflation slowed to 1.7% in February from 1.8% the previous month, according to data from the Office for National Statistics. The slight decrease continued a trend of low inflation, which has remained below the Bank of England’s 2% target since August. Economists expect inflation to fall significantly further as a result of the coronavirus crisis, pushed by a fall in oil prices and weaker economic activity. Howard Archer, chief economic adviser at EY Item Club, said February’s small decrease was “a small step in the right direction for consumer purchasing power”, which was “to be welcomed”. The slowing rates of inflation for last month were driven by petrol prices, which fell 2.4 pence a litre between January and February, while the price of diesel fell 3.2 pence. If the more volatile elements, such as food and energy, are stripped out, core inflation was up 0.1 percentage points to 1.7% in February. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, a consultancy, said the crash in oil prices would be the primary downward pressure on inflation, and the closure of non-essential shops, restaurants and leisure activities would likely freeze prices for as long as the shutdown continued. “Looking ahead, CPI inflation looks set to decline sharply over the coming months and to fall comfortably below 1% in the summer,” he said. Sterling’s depreciation could boost inflation, he added, but its impact would not be felt until the end of the year. Before coronavirus spread globally, forcing governments to enforce widespread lockdowns that will dramatically slow their economies, the outlook for inflation was dependent on economic confidence following Brexit and the UK general election.
Source: Financial Times 25th March 2020
Limit for contactless spending to rise to £45 at beginning of April
The contactless limit for in-store spending is to increase from £30 to £45 from 1 April as retailers cut the need for physical contact in shops amid the coronavirus epidemic. But retailers warned that it may take some time for the new limit to come into force everywhere. The British Retail Consortium’s head of payments policy, Andrew Cregan, said: “The last contactless limit increase to £30 took two years to implement but, given the extraordinary circumstances we face today, this new £45 limit will be rolled out from next week. “Some shops will take longer to make the necessary changes, given the strain they’re under. In the meantime, most customers can continue to make contactless payments for higher amounts using their smartphone.” Mobile phone users can already make contactless payments above £30, if the retailer accepts, by holding their phone over the reader and entering their normal card pin on their phone. There is no universal limit on the amount a customer can spend when using Apple Pay, but some retailers put their own ceiling in place. The BRC said the increase to £45 would reduce the need for physical contact with pin entry devices at points of sale. Other countries have also announced increases to minimise the handling of cash. In Ireland, the contactless limit will rise from €30 (£27.50) to €50, but as in the UK, the change will not be implemented in full until the start of April. The coronavirus crisis has also resulted in a delay to the rollout of a key anti-fraud measure. The banks were planning to introduce “confirmation of payee” on 1 April, but it will now take place on 30 June. Confirmation of payee will involve banks matching names as well as account numbers and sort codes.
Source: The Guardian 24th March 2020
