Perspectives From Europe

I recently traveled to Paris as the journalist representing the U.S.  for SIAL's World Tour exhibition. SIAL's World Tour partners with international journalists, who analyze the consumer trends in the world’s 28 major markets on the five continents and present the consumer trends that drive consumption in the various markets and retail trends resulting from recent chain store initiatives.

After presenting our trends, Jean-Jacques Vandenheede of Nielsen, joined us to give Nielsen’s perspective of consumer and retail trends in Europe. According to Vandenheede, the return of optimism for the consumer is low.

Nielsen started looking at consumer confidence in 2005, and reports that it remains average worldwide. Over the last ten years in Western Europe, consumer confidence has decreased from  94 in 2005 to 81 in 2015. In the U.S., consumers have returned to the confidence they had in 2005, after reporting low confidence during the recession.   

Nielsen’s 2015 Global Consumer Confidence, Concerns & Spending Total Europe report found that 26 percent of consumers are concerned about the economy. Job security (21 percent), health (19 percent), balance (19 percent), food prices (12 percent) and terrorism (12 percent) followed the economy in consumers’ concerns.

“How does that state of mind translate to purchase reality?” Vandenheede asked. In boosting consumer confidence, he noted that each country will have its own revolution. Some countries are doing better than others, in terms unit value change, volume change and nominal value growth. Turkey, Hungary, Netherlands, U.K. and Sweden had the highest value index developments in 2015, while Turkey, Poland, Norway, Spain and Slovakia had the highest volume index developments in 2015. 

Vandenheede also discussed the European retail scene. In a nutshell, he reported that the format game is not working anymore—despite all the testing/piloting efforts, nothing is having a structural impact. “The shopper says, ‘I like all the stores,’” Vandenheede said. “From a financial perspective shoppers say [the store format] depends on their purpose and on the specific shopping trip.” 

In the European retail scene, Vandenheede reported that the decline of the hypermarket is a myth. “Nonfoods is under stress,” he said. “However, there is no rejection of big stores.” In 2014, 37 percent of stores in Europe were hypermarkets.

Looking at Aldi in the last two years, 49-plus stores have been developed in the U.K., 31-plus entered Spain, 17-plus entered Hungary and Poland, and 15-plus stores were developed in Ireland. Lidl made great strides in Poland over the last two years adding 126-plus stores, 37-plus stores in the U.K., 22-plus stores in Netherlands, 16-plus stores in Switzerland and 15-plus stores in Greece. 

Modern convenience has grown at the expense of traditional convenience, he added. “There is a battle between traditional retail and convenience,” he said.  

Discounters are not the winning juggernaut, Vandenheede noted. In 2014, discounters only accounted for 20.6 percent of the market share. “There has been a growth of promotions everywhere,” he said. “Consumers can’t refuse promos, and with so many promos it’s a self-fulfilling prophecy. We become promo junkies, and no one has found a way out of this.” 

Vandenheede also said that the local agenda defines the market, and global retailing has failed. “Grocery is about connecting with the consumer, local habits and realities,” he said. “This is where grocery has failed. The weight of the local consumer is stronger than global—consumers need to find something in novelty.”

Perhaps, then a focus on locally grown and sourced products is a U.S. retailer’s best bet. And, like so many industries, what happens in Europe usually makes its way across the pond, so the trends in consumer confidence and retail formats in Europe are worth keeping an eye on.