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Football Bonus, HFSS, Morrisons & A Tough Autumn
Join Andrew Grant and Darren A. Smith in the Football Bonus episode of the Grocery Guru. They discuss England being in the Euro 2020 final which gives a football bonus & stress on the supply chain, driver shortage, labour shortages for frowers, rapid groceries – Wheezy, HFSS, Morrison’s bids and a tough Autumn Ahead for the grocers and their suppliers.
You Can Read the Full Football Bonus Transcript Below:
Darren A. Smith:
Hello, and welcome to the Grocery Guru. This is episode 36, and we are here with that guru, Andrew Grant. How you doing?
Andrew Grant:
Morning Darren. Yes. Pretty good. Thank you.
Darren A. Smith:
Lots going on at the moment. I know we’ve got a few things we want to share with our audience, but we can’t not mention the football.
Andrew Grant:
What’s that? Sorry, Das, I missed it.
Darren A. Smith:
It’s a sort of football-like brown thing we might win.
Andrew Grant:
Oh, yes. There’s a small match on Sunday evening, I believe.
Darren A. Smith:
There very much is. And I know you’re a big football fan.
Andrew Grant:
Yeah, no, exactly. I mean, it’s one of those weekends, obviously putting aside the sort of, the passion for the national team, but as an [inaudible 00:00:48], we all remember these weekends. They don’t come around very often, but a Royal wedding, a Brit winning Wimbledon, England football team getting through to the semifinals and now the finals; it’s not in your budget. You weren’t expecting it. You’ve spent this whole week ordering in gazillions of whatever it might be; crates of beer, burger buns, barbecue briquettes, whatever. And it’s all froth on the top of your budget, I mean, happy days.
Darren A. Smith:
It’s like getting a football bonus, isn’t it? You didn’t know it was coming and there it is. Lovely.
Andrew Grant:
Yeah. And then obviously the trick is by this time next year, make sure you’ve moved categories because you’re going to have the mother of all spikes to try and overcome.
Darren A. Smith:
Can’t you still just blame COVID? Can this not go on for years?
Andrew Grant:
Yeah, but it doesn’t get taken out of your budget, unfortunately. I’m not sure finance directors know that there’s things such as football and COVID, it’s just next year’s budget is.
Darren A. Smith:
So we’ve got lots of people planning for this bonus weekend. It gives them extra on top of their budget. Fabulous. All right. That makes sense. And what about taking that forward? What does that look like?
Andrew Grant:
Well, it’s an interesting time, isn’t it? Because we spoke, I think a few episodes ago, about the challenges the grocers are going to have this year. Obviously they got a massive pandemic boost when everybody… when all the other shops were shut. And they’re now obviously in the… they’re now lapping that fantastic performance. And I saw some stuff from NielsenIQ this week, which said that actually sales in supermarkets fell 2.4% in the four weeks to the 19th of June, which actually probably isn’t bad. If you think, they got something like 10% bonus, only to be 2.4% now a year later, is pretty good.
Darren A. Smith:
Well, that’s much better than I would have thought. The average was 10% up in sales, so now we’re saying only 8% up, minus two. Okay. [inaudible 00:03:10].
Andrew Grant:
We had Sainsbury’s quarterly update performance. They increased their profit expectations, I think; doing pretty well, growing market share. And interestingly, the takeout I took from it, was their online business, their online grocery business, as opposed to Argos, is now steadying out. The growth rate is steadying out, but at 20% of their overall business.
Darren A. Smith:
Oh, one in five. Okay.
Andrew Grant:
So if you remember a year ago, we said it had doubled to 20%. So it doubled in a year, sort of five years worth of growth in a year, but it now looks as if the new normal is sort of one in five customers shopping online.
Darren A. Smith:
Right. Okay. Okay. All right. Interesting. All right. And when we look forward to the Ultimate’s coming up, what’s your predictions for what the UK grocery world’s going to look like?
Andrew Grant:
Well, I think, as I say, if you’re a bar and grocery, enjoy this weekend, because there’s a whole storm of stuff coming down the pipeline at the grocery sector, yet alone business. We saw this week, Haribo can’t deliver those nice little sweets because they’ve got no drivers.
Darren A. Smith:
Yes.
Andrew Grant:
So I think, the HGV situation is quite serious. I read a whole load of stuff about farmers in East Anglia having to plow in their summer crops because there’s nobody to pick the lettuces or pick the asparagus or leaks or whatever it might be. So there’s some real… and back [inaudible 00:04:55], again, desperately trying to hire workers for their convenience factories. So some real challenges around labor and supply.
Darren A. Smith:
So we’ve got driving shortages, labor shortages. Okay. Yep. Sorry, go on.
Andrew Grant:
Lots of food inflation, lots of commodity food-input price inflation, which I know the retailers are desperately trying to bat-off at the moment. And as I said, still those challenging like-for-likes from last year. And then put on top of that, bid-frenzy fever [inaudible 00:05:36] bid-frenzy fever, with… It looks like a bidding war for Morrisons, but will that spill over into a bid for Sainsbury’s? Because when you look at it, going back to what we originally said, the grocery market has done really well through the pandemic. It’s come through the other side, almost unscathed, as the rest of the economy opens up, and yet the share prices, and I know this, are where they were 25 years ago. So not surprised these clever Americans are looking at UK grocers and going, “Hey guys, we’ll have some of this.”
Darren A. Smith:
Yeah. And also not forgetting during COVID whilst the supermarkets did well with increases of sales around the 10% mark, they also spent a fortune on COVID costs. I think about four episodes ago, we said Sainsbury’s COVID cost was 468 million.
Andrew Grant:
And obviously that’s… it’s going to be nothing like that this year, so that’s straight back onto the bottom line. I mean, okay, they had a huge rates’ relief, which they paid back, which would have dented their profits, but with every like-for-like downside, there is an upside, and they won’t have all of those COVID costs this year.
Darren A. Smith:
True. And then I’m just thinking of two other things that are coming down the line. We’ve got people like Weezy, the London-based delivery shopping window of 10 minutes? Those guys are coming in, we talked about those a couple of episodes ago. I think Justin King was one of their investors.
Andrew Grant:
Yeah. Yeah. So super fast home delivery. Rapid grocer, I think it’s becoming known as. I think we said at the time, Darren, it’s a bubble.
Darren A. Smith:
It feels like a .com. It really does, because the 10-minute window, “Yeah, great, I got it the first time, that was exciting,” but do I really want it all the time? I don’t think so. But what do we know? We’re not just thinking-
Andrew Grant:
Well, if it gets to 10:30 on Sunday night and it’s penalties and you’ve run out of beer, I can see the benefit of a 10-minute delivery window.
Darren A. Smith:
I certainly can. In fact, I might want to in five minutes, but I hear what you’re saying. And then the other thing that’s coming down the line possibly April next year, we’ve talked about HFSS, which is the biggest change, you said to me, in enforced diets since the Second World War? Did I get that wrong?
Andrew Grant:
Yep. Yeah, effectively. HFSS, high fat, sugar and salt foods, the government has… Depends on your point of view, but the government has waged war on advertising these products in schools, et cetera. It’s now going a whole step further as far as the grocers are concerned, in that they will not be able to volume-promote or display these products. And for me, because this legislation is due in April next year, I do need to check when April is… Sorry, not when April is, when Easter is next year, but as the proposed legislation stands, you could see headlines like, “Boris kills the Easter bunny,” which with no Easter egg displays allowed, which would be mind blowing.
Darren A. Smith:
So the two principles are, you can’t volume price promote anymore and you cannot secondary site. Is that right?
Andrew Grant:
Yeah. Broadly. So no bog-offs, no two-for’s, three-for’s, just straight price promotion and no secondary siting. No foyer displays, till displays, et cetera. And you think, Easter is the one that really springs to my mind because think of the pallet displays of Easter eggs that the grocers put out there.
Darren A. Smith:
Well, I’m thinking, I’m sure we walked into ASDA last year at Easter, and there were two, three pallets of these Easter eggs, from the 10 pound ones to the pound ones. You couldn’t move past the lobby for them. Sorry, come April next year, it won’t be possible.
Andrew Grant:
Well, it all depends, the legislation is still to go through parliament. I’m sure the big retailers and the big three confectionary giants will lobby hard against it. And can you see a government not letting us have our Easter eggs? I don’t know, we’ll see.
Darren A. Smith:
We’ll see. All right. Andrew, final takeaway? Before we let you get on with your house buying, which I think you’re doing at the moment.
Andrew Grant:
Yeah, no, the final takeaway is get that Domino’s order in early this weekend because I think they’ll struggle for half time.
Darren A. Smith:
Oh, and your prediction for score Sunday? What do you think?
Andrew Grant:
Oh my God.
Darren A. Smith:
I put you on the spot, haven’t I?
Andrew Grant:
I think it’s penalties and England.
Darren A. Smith:
Okay. You said the P word.
Andrew Grant:
I think it’s a very tense nil/nil, and then nine penalties and we just scrape it.
Darren A. Smith:
All right.
Andrew Grant:
And what about you? What about you?
Darren A. Smith:
You said the word. Well, I’m going to go and be a real patriot. I’m going to go one/nil.
Andrew Grant:
Okay.
Darren A. Smith:
I’ll go further than that. I think it’s Raheem in minute 43 just before halftime.
Andrew Grant:
So Sir Raheem on Monday morning.
Darren A. Smith:
Yes.
Andrew Grant:
I’ll go with that.
Darren A. Smith:
All right. You have a good weekend. Thank you, Andrew.
Andrew Grant:
Chow. Bye.
Darren A. Smith:
Bye-bye.
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