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Monday, July 7, 2014 by Christoph.Schmid|Comment 0
within category Consumer disruption,Online food retailers,ABF,TSCO,MEOG,CASP,CARR,AHLN

Overall, the threat to food retailers from online stores is limited. This is because the sanitary requirements for selling fresh and frozen food are relatively high. A recently developed concept is the online ordering system with pickup at the facility at a later stage. This concept is gaining traction in France and England where about 2% and 4% of sales volume respectively is generated this way. In a margin-driven business, while sales volume generated through online activities increases, it would probably only have a marginal impact on the overall company results as the costs associated with this service are high.

Retailers without their own-brand products will most likely be unable to develop a meaningful online presence. In the same context and in related retailing activities, low-margin products (books) and media with a limited lifetime (fresh-food, newspapers) will be unable to develop a lasting mobile presence.  

Company Ticker Sector Upside Potential Sharpe (FY01)
Associated British Food
 ABF Food Products
 -5% 4.38
Investment case: ABF owns value retailer Primark. The company has decided, for profitability reasons, not to provide online services.

  

Company Ticker Sector Upside Potential Sharpe (FY01)
Tesco
 TSCO Food Retailers & Wholesalers 0% 5.63
Investment case: Tesco operates mainly in the UK, and it has developed a large-scale, multi-channel facility (shop, online, mobile). While the overall food related e-commerce activities will just be profitable, the company might drive some of its business units into money-making territories.

 

Company Ticker Sector Upside Potential Sharpe (FY01)
METRO
 MEOG Food Retailers & Wholesalers -2% 3.62
Investment case: Metro’s multi-channel operation has been challenged recently because of the major consumer shift (from stores to online and mobile) and because of the commoditization of consumer electronicswhere the company already had low profit margins.

 

Company Ticker Sector Upside Potential Sharpe (FY01)
Casino
 CASP Food Retailers & Wholesalers -4% 4.77
Investment case: Casino, a French-based retailer, operates in France, South America and Asia. Its banner names include Géant Casino, Franprix, Monoprix, Leader Price, Géant Casino, and Cdiscount, which is only online. Casino’s multi-model approach should help ring fence current sales volumes, but given it is a low margin business the company should continue to price well below its peers. So far the company has been unable to capitalize successfully on its new online business because a) running the online ordering system with a facility pickup at a later stage is expensive and b) the implementation of an online presence in emerging markets might be too early in the consumer staples segment.

 

Company Ticker Sector Upside Potential Sharpe (FY01)
Carrefour
 CARR Food Retailers & Wholesalers 5% 4.74
Investment case: French-based Carrefour is the biggest retailer in Europe and the second-largest retailer in the world, but has been unable so far to develop a meaningful online presence.

 ​

Company Ticker Sector Upside Potential Sharpe (FY01)
Ahold
 AHLN Food Retailers & Wholesalers 1% 5.48
Investment case: Ahold N.V. is based in the Netherlands and operates more than 3,100 supermarkets, drug, and liquor stores in the Netherlands, Czech Republic and United States. Ahold's Peapod is a leading online grocer in the US and is currently rebuilding its online ordering and physical collection capabilities, which should improve navigation and the visibility of products. Yet, the Peapod’s market contains some important competitors including Amazon, nevertheless Ahold’s multi-channel presence (shop, online and mobile) should help drive customer loyalty and traffic, and therefore sales volumes.

 
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