Following relatively buoyant growth of 1.1% reported four weeks ago (boosted by an early Easter), the UK grocery retail market has slowed, with sales up just 0.1% against this time last year and the slump mirrored across every major supermarket. Below, Kantar Worldpanel explains the results of latest 12-week period ended April 24, 2016, published today (Wednesday, May 4)
Watch the video commentary here.
All the major UK grocery supermarkets have posted a decline in their sales, notes Kantar Worldpanel, with the situation not being helped by falling prices, as grocery inflation remains at -1.5% and the price war shows no signs of going away.
“Consumers are enjoying a golden period of cheaper groceries, with like-for-like prices falling every month since September 2014,” reveals Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.
“Nearly two years of falling prices means the average household is spending £78.10 a week at the supermarket, so consumers have saved more than £400 annually than if prices had risen at the same rate as the last decade.”
At the same time, McKevitt points out that yet lower prices are not the result of more groceries being bought on promotion.
“In fact, promotional levels fell in the last year – in the past 12 weeks 38.5% of spend was on promoted goods, a decline from the 39.8% last April,” he says. “Retailers are aiming for simplicity in their pricing and only a quarter of promotional spend is now through multi-buy deals – a 24% drop on last year.
“This change has been evident across every grocer but most notably at Sainsbury’s, where only 7% of deals are now multi-buys. Straight price-cut deals tend to offer greater discounts, so shoppers will see these as a welcome benefit across the market.”
Kantar Worldpanel says volume growth has not been robust either, with the modest increase (on a per household basis) recorded in 2015 and 2016 to date, having disappeared.
Purchasing levels are now flat, according to McKevitt, which means only the increase in the number of British households is sustaining the overall market volume growth of 1%.
“Individual households have stopped increasing the amount of groceries they buy and while it is tempting to correlate lower volumes with the uncertainty surrounding the European Union referendum there is no evidence that supermarket purchasing has any significant link with consumer confidence,” he explains.
With the market flat, McKevitt says the battle is all about retailers’ share. The winners on that front are Lidl, Aldi, the Co-operative and Waitrose.
Lidl & Aldi
Lidl is leading the way, although Aldi is not far behind. Both have maintained their combined record share high of 10.4% which they first reached last month, and Kantar Worldpanel says it’s looking likely they’ll reach 14% by 2020.
Lidl was the fastest-growing retailer over the latest 12-week period, with sales up by 15.4% to £1.12m, as shopper numbers increased by 648,000.
At Aldi, sales were up by 12.5% to £1.53m. The discounter added an additional 732,000 shoppers in the last 12 weeks – more than any other retailer.
The Co-operative Food
Against the difficult market backdrop, the Co-operative’s renaissance continues; growing its sales by 3.3% year-on-year to £1.57m.
The Co-op’s market share has risen to 6.2% as refurbished stores and an improvement in range has meant shoppers are visiting more frequently and spending more per trip.
Waitrose also gained market share this period, up by 0.1% to 5.2% on the back of 1.5% sales growth to £1.32m.
Big Four struggle
It was a different picture for the biggest retailers, however, with the latest 12-week period marking the first time that each of the Big Four supermarket operators has simultaneously witnessed a drop in sales since April 2015.
Sainsbury’s was still the best-performing retailer, although its sales fell back by 0.4% [to £4.1m] – the first time it has dipped into decline since July last year. It still retained its 16.5% share of the market.
“While not growing market share, Sainsbury’s will be happy enough to retain its position as the best performing Big Four supermarket for the 10th consecutive month, with market share stable,” McKevitt explains.
Sales were also down at Tesco, by 1.3% to £7.12m, which McKevitt claims is reflective, in part, by its store disposal programme.
Likewise, Morrisons is still feeling the impact of having less store space than last year – this period sales were down by 2.6% to £2.69m.
And Asda’s “disappointing run” continues, says McKevitt. Asda now commands a 16% share of the market, down from 16.9% thanks to a sales fall of 5.1% to £4.07m.
Kantar Worldpanel puts grocery inflation at -1.5% for the 12-week period ended April, 24 2016 – the 21st consecutive period of grocery price deflation.
This means shoppers are now paying less for a representative basket of groceries than they did in 2015.
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 fresh and processed pork, butter, and crisps.