UK retail: understanding the impact of deflation on grocery

Kantar grocery prcice deflation

Grocery hit deflation for the first time in late 2014 and despite a return to market growth it’s getting worse, according to Kantar Worldpanel. However, while shoppers are reacting positively, not all players within UK retail are sharing the spoils. View the full presentation with Kantar’s latest analysis from the 12 weeks ended March 29, or read Produce Business UK’s highlights as follows…

“Deflation is happening and it was driving down grocery’s performance,” explains Kantar Worldpanel’s consumer insight director Chris Cowan. “However, since the turn of the year, it’s actually shoppers buying more ‘stuff’ in retail that’s helping to grow the market.”

Indeed, this presentation from Kantar demonstrates there have been no drastic changes in the UK’s shopping behaviour. The figures show that shoppers made an average 256 trips to supermarkets in 2015 – the same number as in 2010. Also, this year the main shop is taking place every 13 days, compared with every 13.1 days in 2010, while top-up shops are happening every 1.6 days in 2015 – exactly the same as in 2010.

“We know about all the moves between retailers, but other shopper behaviour changes that have been reported seem exaggerated – such as ‘the revolution of shopping habits’, or ‘the death of the weekly shop’,” notes Cowan.

“Shoppers may well be putting more in their baskets but [the data] suggests they are benefiting from retailer activity, or that they have more disposable income to play with from the start.”

What’s the impact on produce?

Although there’s a lot of noise around changing prices – especially in produce – Cowan says deflation has not affected people’s shopping behaviour in the produce aisle either.

“Produce is one of the drivers of this deflation, with many price cuts in markets not actually stimulating volume growth,” he explains. “Even if they do in the short term, the longer term sees a resetting of expectations.

“Shoppers are carrying on as usual,” Cowan continues. “However, linking to the rise of Aldi, we are seeing a lot of growth in shoppers now buying bigger produce baskets at Aldi than previously [as highlighted in Kantar’s analysis share with Produce Business UK last month].

According to the data, wholehead produce sales performance outside of the big four retailers has been far more positive; helped by the continuing strength of Aldi, Lidl and Waitrose.

Also, the overall spend per trip on produce has risen at Aldi and Lidl, especially at Aldi, while the total market spend has fallen. “Aldi’s success comes through encouraging shoppers to spend nearly double per trip than they did five years ago,” explains Cowan.

Who is winning?

During the course of the last five years, Aldi, Lidl and Waitrose have grown to accumulate a 19% share of the UK grocery retail market, while all of the major retailers have lost market share.

Tesco’s share has fallen to 26% in 2015 (Kantar figures), down from 28.7% in 2010, and Sainsbury’s has decreased to 15.9%, from 17.3% in 2010. During the same period, meanwhile, Aldi’s share has risen to 7.7%, up from 2.7%.

Brands are also now growing ahead of supermarkets’ own labels, and they are rising at a fast rate at all retailers (Tesco, Asda, Sainsbury’s, Morrisons and Waitrose), except The Co-Operative and Iceland.

View Kantar Worldpanel’s full presentation here

The role of produce in price deflation was the focus of the presentation given by Chris Cowan, and fellow Kantar Worldpanel consumer insight director Amir Jalaly, at the London Produce Show and Conference on June 4. 




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