Consumers await Brexit impact on prices as discounters break share record

Kath Hammond

The UK grocery market has slipped into decline for the first time in five months with supermarket sales falling by 0.2% and prices 1.4% down on the same period last year. Kantar Worldpanel gives us the low-down on its latest grocery market share figures for the 12 weeks ending June 19, 2016

Watch the video report by Fraser McKevitt here.                  

The sluggishness dogging the retail arena for the past two years is not showing any sign of abating just yet. Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, says: “The decline is a continuation of the slow supermarket sector growth dating back to summer 2014, primarily a result of cheaper everyday groceries brought about by a retailer price war.

“While these latest figures predate the EU referendum result, the immediate economic uncertainty is unlikely to cause a substantial fall in grocery volumes, as demonstrated by the 2008 financial crisis when basic food, drinks and household sales proved resilient.

“With an estimated 40% of the food we consume sourced from overseas, any long term change in exchange rates may threaten the current period of cheaper groceries. Historically, higher prices have led to consumers looking for less expensive alternatives such as own-label products, seeking out brands on promotion or visiting cheaper retailers.”

Meanwhile, the discounters are making hay as the combined share of
Lidl and Aldi has hit a record high of 10.5%, with each holding 4.4% and 6.1% of the market respectively. Some 58% of the population visited one of the two retailers over the 12-week period, with Lidl increasing sales by 13.8% and Aldi by 11.5% on a year ago.

The smaller retailers have enjoyed a good term too. “Co-op’s growth of 2.0% has cemented its recent revival, heralding a full year of increasing sales,” says McKevitt.

“Meanwhile, at Waitrose, small but rapidly increasing sales of its premium Waitrose 1 brand have helped the retailer grow by 1.3%.” This puts Waitrose’s unbroken run of growth since 2009 at the top of the table among the mainstream supermarkets with only the discounters performing better. Iceland too has shown increased sales.

The performance of the larger retailers was a continuation of recent trends. Overall sales at Tesco dropped by 1.3%, while at Morrisons sales fell by 2.4%, both reflecting the on-going impact of store disposals. At Sainsbury’s sales fell by 1.4%, while at Asda they were down by 5.9%, with each of the big four losing market share on last year.


An update on inflation                    

Grocery inflation now stands at -1.4%† for the 12-week period ending June 19, 2016. This means shoppers are now paying less for a representative basket of groceries than they did in 2015. This is the 23rd consecutive period of grocery price deflation. Falling prices reflect the impact of Aldi and Lidl and the market’s competitive response, as well as deflation in some major categories such as bacon, butter, and detergents.



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