Find Your Growth
FIND YOUR SHARE OF RETAIL GROWTH IN THE NEXT FIVE YEARS
Retail growth today and tomorrow will come from very different ways than it has in the past. In the next five years, Nielsen’s analysts have uncovered opportunities up for grabs through innovation, private label, channel growth, millennials, ethnic Australians and fresh foods.
What’s your five year growth plan? Don’t miss out on your fair share!
Standing Out In Innovation
True innovation drives growth. But it’s hard to find. Especially when Australian grocery shelves have almost 1,000 new items on them each and every month.
It’s no secret that new product failure rates – especially in the grocery sector – are incredibly high. In fact, our research shows that in the past two years only 42 new product out of 10,770 innovation launches in the Australian grocery sector have turned out to be ‘breakthrough innovation’.
To fit the bill for ‘breakthrough innovation’, the product must be distinctive, relevant and have endurance. Successful innovation can often be the key to delivering real incremental dollar growth to a mature category or manufacturer who is trying to compete in a low growth environment – it’s critical to get right and, it’s astounding how many get it wrong.
Breakthrough innovation takes practice, a focus on the fundamentals, and creativity. It takes attention to detail and a passion for turning great ideas into products that consumers want. Innovation is a science, not luck or magic.
We have never had the benefit of better innovation knowledge or better innovation tools than we do today, and we need to put them all to work—right now.
Find out more about the science behind successful innovation or download our free Breakthrough Innovation Report.
Private Label: A Growing Contender
How much is enough private label? Over the last 10 years private label has grown dramatically in value sales – from 12% in 2006 to 21% today of grocery retail sales (excluding fresh foods, tobacco and alcohol).
Over the next five years Nielsen projects that it will make up over 26% in value share. This analysis takes into account the existing trend rate, plus the growth of Aldi in South Australia and Western Australia. This figure is also deeply conservative compared to European markets where private label product often accounts for up to 40% of retail value sales.
Over the last 10 years 50% of all retail value sales growth in Australia went to private label. In the next five years, Nielsen predicts it will be closer to 63% of all retail growth. Key reasons for this is that consumers perceptions of private label is that it is no longer considered a budget option and it is increasingly trusted. Here are some examples of this:
- $3 in every $4 spent on private label is spent in mainstream pricing, the pricing heartland for branded products.
- Private label is increasingly trusted – 3 in every 5 consumers say that private label quality is just as good as branded. In 2011 only 1 in every 3 consumers believed this.
Choosing The Right Channels
Utilising the right channels to reach your consumers matters. Nielsen has been monitoring alternate and emerging channels that provide manufacturers with alternate growth opportunities. While Coles and Woolworths bricks mortar stores will remain core – Discounters and online will account for over $7 billion of market growth in the next five years.
In the last year discounters like Aldi, Costco and Chemist Warehouse grew at three times the pace of total market. Nielsen projects that if Aldi continues with their current growth rates, coupled with Aldi’s store openings in South Australia and Western Australia, Aldi could reach 17% market share by 2021.
What is driving this success? Research conducted by Nielsen looked at consumer preferences of those that had already shopped at Aldi. The big drivers are unsurprisingly the same factors that have been so successful in the Eastern States – value for money, lowest price and special buys which provide the weekly excitment in store as they span a range of food and general merchandise themes.
Online is a remarkably fast growing shopping option as well. Nielsen projects that online will secure a further $2 billion of market growth in the next five years. It is no surprise when you consider that Australians are hugely connected and quick to embrace technology. What are the implications? It is highly likely that the rapid growth in “click and collect” retail offers will resonate. In Europe, with lower digital penetration rates, 28% of consumer in the U.K. have used click and collect. For retailers there are clear opportunities here.
The Millennial Growth Prize
The baby boomers are todays big retail story. But five years from today it is the millennials that will be driving the fastest share of retail growth – they will account for 57% of the retail growth. In doing so they will control $1 in $8 in retail grocery spending up from just $1 in $14 today.
About a third of baby boomers say that will pay a little extra for products with stronger health attributes. This pales however to the millennials – a generation where over half say they will pay extra for these qualities. In fact three in five of them say they will pay more for products that have “sustainably sourced” credentials.
Ethnic Australians Growth Prize
In 2016, ABS reported that 28% of Australians resident population were born overseas. This group with all its diversity has discrete shopping needs. Over the next five years ethnic Australians will increase their spending from $14.6 billion to $19.4 billion. This is driven by both increases in the size of the group, as well as, an estimated increase in spend.
Fresh Foods Growth Frenzy
Australians are buying more fresh food, and they are paying more for it. In the last year, fresh foods outpaced the growth of non-fresh foods. Nielsen analysis projects fresh food sales continuing to outpace non-fresh over the next 5 years.
Winning fresh produce into baskets has a multiplier effect for retailers. Those householders that buy fresh in stores tend to spend 3 times as much and with 3 times as many items in a single shopping trip. That makes the performance of the fresh section important to all manufacturers.
With the average grocery basket value worth $45, a basket with fresh meat (beef, pork, lamb or poultry) or fresh seafood jumps up to around $80. This makes fresh meat an important area of focus for our retailers. The opportunity for retailers and grocery manufacturers is to work together and provide shoppers with the product solutions to turn these proteins or meats into meals, allowing retailers to differentiate their fresh offering, as well ensuring manufacturers are included in this important basket.