Kantar: UK shoppers are not turning away from the big four

Kantar Worldpanel the grocery environment

Kantar Worldpanel claims some reports on the current UK grocery environment are exaggerated

Although the discounters and online retailers are attracting increasing numbers of grocery shoppers, Chris Cowan, consumer insight director at Kantar Worldpanel UK, says the claim that these shoppers are deserting the big four is not so clear cut. View his full presentation here or read the synopsis below

Key points in the presentation:

Shoppers are not leaving from the big four…
…But they are spending more during trips to other retailers
They are still making the same number of trips in grocery – not shopping more often
Reports of the death of the weekly shop have been greatly exaggerated
The main shop trip size is getting smaller…
…While the top-up trip size is getting a bit bigger

The fast moving consumer goods (FMCG) market in the UK is in decline, driven mainly by deflation as the big four supermarkets (
Tesco, Asda, Morrisons and Sainsbury’s) and even the discounters lower their prices. However, retail analyst Kantar Worldpanel UK (KWP) is quick to point out that shoppers are not turning their backs on the big four altogether, rather they are cutting back on how often they shop there and reducing how much they spend during each visit.

“Shoppers are still making the same number of trips in grocery and not shopping more often,” says Chris Cowan, KWP’s consumer insight director. “But the main shop trip size is getting a bit smaller, while top-up trip size is getting a bit bigger and we anticipate that the growth of online [shopping] will help to continue this trend.”

Cowan says reports of turbulent retail times are accurate – the UK grocery market is now in decline (at -0.2%) for first time since KWP records began in 1994, although in February 2015 it bounced temporarily back into growth (+1.1%) as shoppers took advantage of low fuel prices and the continued retail price wars.

But reports suggesting shoppers are flocking away from the big four retailers are misleading, according to KWP. “Most of us still shop in the big four,” Cowan states. Indeed, KWP data shows percentage penetration at the big four in 2014 was largely unchanged from 2010, with all having zero or minor amounts of shopper loss.

To put this into some context for the fresh produce industry, this is positive news, since the big four still account for 57.9% of the produce market, according to KWP, followed by convenience with 10.1%, Aldi and Lidl with 9.7% combined and online with 5.8%.

However, shoppers are becoming less loyal to the big four and spending more during their shopping trips to other retailers, especially Aldi and Lidl. KWP says the spend per trip at Aldi has risen to over £21 per trip, while Lidl’s has grown to just under £15.50/trip. At the same time, the spend at the big four remained fairly flat at £24.22/trip on average, excluding online and convenience.

But while shoppers are moving between retailers, KWP points out that other reported shopper behaviour changes seem exaggerated. “There has not been a revolution in shopping habits,” Cowan states. “[An] evolution maybe, but people are shopping just as little/much as before.”

In 2009, KWP estimates shoppers made 256 trips to supermarkets, exactly the same figure as in 2014. Similarly, KWP suggests the death of the weekly shop is also untrue. “The main shop is still almost fortnightly on average [every 13 days], not weekly, and top-up shops are [still] every 1.6 days [in 2014, compared with 2009],” Cowan says.

Although there is some truth in the ‘little & often’ reports, Cowan explains that it’s “not really more often, but a bit ‘littler’ and a bit bigger”. “Small trips are getting bigger with more top-up shopping taking place in supermarkets, at discounters and online,” he notes.

“At the same time, the big trips are getting smaller as the main shop decreases which is putting pressure on supermarkets as the online appeal widens and people do more of their main shops at discounters, which account for 11% of the main shop.”

Why are online and the discounters growing?

KWP says online and the discounters are the two channels seeing spend grow into 2015, against 2014, while the total market (including the big four and convenience) is still struggling. If they continue to outperform the market, KWP believes it’s feasible to estimate that Aldi and Lidl’s market share will end up between 12% and 13% by the end of 2019, up from 8.3% at the end of 2014.

So, what’s been central to the growth success of online and discount retail? KWP claims the key drivers are particular to each channel. Online is attracting more shoppers to shop more often and buy their favourite or premium products. Meanwhile, the discounters are opening up of more stores and offering simple, clear pricing.

According to KWP data, the average frequency of purchase online has risen from around 4.3 million households in the 52 weeks ended 9 January 2011 to 6 million households in the 52 weeks ending 14 September 2014.

Additionally, shoppers are buying more premium products online which KWP says is unsurprising given the direct correlation between household income and the percentage of grocery spend on online.

In the discount arena, Aldi and Lidl combined have added over 150 additional stores in four years. In 2013, KWP estimates Lidl operated 637 outlets in the UK, up from 580 stores in 2010, while Aldi’s network rose to 515 shops, up from 420 during the same period.

What about price?

KWP claims price is a strong consideration when shoppers buy in the UK. According to its outlet share index for the 52 weeks ended August 17, 2014, the shoppers that most agreed with this statement shop at FarmfoodsIceland, the independents, Aldi, Asda, bargain stores, Lidl, Tesco and Morrisons, with the Co-operative and Sainsbury’s just behind and Marks & Spencer (M&S) and Waitrose lower down the scale.

However, Aldi and Lidl promote the least in the market – which, says Cowan, ensures clarity on pricing – since their percentage of volume sold on deal falls below 25%, compared with M&S at over 40% and Tesco just below 40%.

So, while price is an important consideration, KWP says it’s not the main one – especially when looking at the big four. “Of the top responses for the big four, 1 in 12 relate to price; 1 in 3 relate to convenience and 1 in 4 relate to family and health,” Cowan notes.

KWP suggests retailers therefore must ensure they have targeted their messaging correctly.

View the full presentation from Kantar WorldPanel UK here


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