Lower UK grocery prices have taken £397 million-worth of sales out of the fresh produce category this year. But do price promotions work and has it had a positive impact on the volume of fruits and vegetables Brits are eating? Apparently not, says Chris Cowan, consumer insight director at Kantar Worldpanel UK
“Despite the government wanting us to eat more fruit and veg, we’re not,” he states. “Price isn’t having a huge impact on sales whether it goes higher or lower. Price alone is not the key driver of sales!”
Kantar Worldpanel figures indicate that in almost every fruit and vegetable category at UK retail, the average price has fallen in the last year, except soft fruit and tropical fruit. The average price is down by 8%, and Cowan says this deflation is really hurting the vegetable category in particular.
Prices have fallen the most in the potato category; down by -13%; followed by root crops; down -9.8%, brassicas; -9.1%, and salads; -7.8%. “Veg has been struggling, driven by poor performance in the potato and salad categories,” explains Cowan. “A lot more volume is sold, however.”
Nonetheless, the UK is still engaged with produce and vegetables. Brits continue to make 75 trips a year to the vegetable aisle, and twice a week to the produce aisle overall, according to Kantar data.
The UK’s wholehead vegetable market fell by 5% in value terms to £5 billion in the 52 weeks to August 16, 2015. In comparison, the wholehead fruit market rose 4% in value to £5bn, while the prepared produce market grew by 7% to £1.2bn, Kantar figures show.
Winners and losers of price deflation
Out of 110 produce ‘markets’, Cowan says only 63 markets have seen their volume grow in the last year, following a price decrease. At the same time, he claims 17 markets had price cuts and volume subsequently declined, while 14 markets experienced a price increase and a volume hike, and 16 markets saw price increase and volume decline.
Some of the winners of price deflation are squash and kale, but Cowan points out they are also riding the health trend and coming from a lower starting base. Squash prices are down 6%, and volume is up 64%, while kale prices are down 1% and volume is up 50%.
Cherries have also been a star performer. Prices are down 9% and volume is up 26%. But cherries aren’t a staple in the produce shopping basket. “When cherries are on promotion it’s exciting,” notes Cowan. “Short-term promotions can work well in this case.”
The losers include pineapples (prices down 14%, volume up only 4%), broccoli (prices down 27%, volume up 14%) and lettuce (prices down 18% and volume up just 4%), all of which are struggling.
“Lettuce is now as cheap as 39p-60p across the main retailers and discounters,” explains Cowan. “There was a massive spike [in sales] at Tesco when the price was cut to 39p. Sales went from 7.1m units to 10m-13m units. But the value of those sales has gone down from £5.9m to £5.1m.”
Cowan says it’s the same scenario at Asda, only their sales are worth a little more, and Sainsbury’s too, where lettuce unit sales have gone from 3.1m units to 4.4m units, but value has dropped from £2.9m to £2.6m.
“The big four are selling less and earning less – it’s more work for less gain,” explains Cowan. “Unless you’re Aldi or Lidl, there’s very little value growth coming in, although the retailers are seeing some volume gains.”
What does drive sales?
Currently, the growth avenues within the UK grocery market are the discounters and online. Following some shifts in the share landscape, the multiples now represent 56.5% of the UK retail market, down 6%, while the discounters account for a 12.3% share, up 28%. The convenience sector represents 9.6% (-5%), while online accounts for 6.2% of the market (+13.1%).
Aldi is performing well, in particular. The German discounter has even overtaken Waitrose to become the UK’s sixth biggest supermarket. So why is Aldi doing so well?
“If you look at the spend [on produce] per trip at the big four, it’s not really changed; it’s still about £4,” says Cowan. “At Aldi, meanwhile, it’s risen from just over £2.50 to £4 between August 2011 and August 2015.
“On average, one in four baskets at UK retail feature at least six different types of produce but at Aldi it’s higher; it’s about a third.”
Cowan explains that the rise in produce sales at Aldi comes down to the discounter making it easier for Brits to shop at its stores, and also thanks to its clear and honest marketing messages, with strap lines like: ‘Aldi – like brands, only cheaper’.
“They’re talking about quality and surprising people by how good it is – they are leading with quality and price,” Cowan points out. “Repeat shoppers are driving produce sales at the discounters, which, in turn, is driving their performance.
For more on the question of retail pricing, read Tommy Leighton’s PBUK opinion piece ‘There must be more to grocery retailing than endless price promises’.