UK retail price war drives grocery deflation to record low

VIDEO: Kantar Worldpanel interprets the UK's latest grocery retail market share figures

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel

As UK grocery inflation sees its 18th successive fall, Kantar Worldpanel details the market’s winners and losers through an analysis of the most recent grocery retail market share figures

Two reports out this week suggest the retail sector is missing out on the UK's general economic recovery.

The film above, shared with Produce Business UK by Kantar Worldpanel and published on Tuesday [10 March], tells us that deflation has reached a new low of -1.6% as price competition between the supermarkets continues to impact the market.

Meanwhile, a separate report from the British Retail Consortium and accountants KPMG concludes that the recovery is “bypassing the retail sector”.

Click here to read PBUK editor-in-chief Jim Prevor’s most recent comment piece on ‘Why ‘price investment’ is a flawed retail policy’.

The latest grocery share figures from Kantar Worldpanel, for the 12 weeks ending March 1, do not make happy reading for the supermarket sector.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, says: “A combination of lower general inflation and the grocery price war has saved shoppers £400 million in the past 12 weeks… All of the major supermarkets are cutting prices to win shoppers, especially within everyday staples such as eggs, vegetables and milk. Retailers are focusing their efforts on simple price cuts rather than complicated ‘multi-buy’ deals.

Perhaps the most interesting news amongst the gloom is what could be the beginning of a Tesco resurgence. “Among the big four supermarkets Tesco has been the standout retailer,” says McKevitt. “It has posted its strongest performance in 18 months with sales up 1.1% compared with a difficult 2014. Increasing sales have helped Tesco arrest its falling market share, which is down just 0.1 percentage point compared with last year.

“This resurgence has impacted Asda which competes for many of the same shoppers as Tesco. Asda’s sales are down by 2.1%, taking its market share to 17%. Morrisons and Sainsbury’s both grew behind the market average with sales falling by 0.4% and 0.5% respectively.”

Aldi has continued to grow well ahead of the market with sales up 19.3% compared with a year ago. This represents Aldi’s slowest rate of growth since June 2011, but it was enough to take the discount retailer to a new record market share of 5%. Fellow German supermarket Lidl also performed well, with growth of 13.6% increasing share to 3.5%.

Sales at upmarket chain Waitrose increased by 4.9% in the latest period. The premium grocer is selling more products on promotion than it has done historically, in an effort to be more price competitive. Waitrose’s market share has remained at its highest level with 5.2%, up 0.2 percentage points.

The BRC/KPMG report shows like-for-like retail sales falling 0.1% between December and February, with food sales dropping 1.6% and non-food goods rosing 1.2% in the period.

David McCorquodale, head of retail at KPMG, says: “Activity on the high street has settled into a monotonous equilibrium, with falling like-for-like food sales persistently wiping out any meaningful like-for-like growth the non-food sector manages to achieve. February's figures are also against very weak comparables, when bad weather caused sales to stall last year.

“Whilst the 0.5% growth in quarterly food sales is the highest since January 2014, it seems that overall the wider economic recovery is bypassing the retail sector.

“With interest rates and inflation remaining low, it's surprising more consumers aren't treating themselves to a new pair of shoes, or curtains for the home. One suspects that restaurateurs, not retailers, are benefiting from the extra cash in consumers' pockets resulting from fuel price savings.”

 
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