Discounters Hit Record Market Share While Consumers Await Impact Of Brexit On Grocery Prices

The latest grocery share figures from Kantar Worldpanel for the 12 weeks ending 19 June 2016 show the market slipping into decline for the first time since January, with supermarket sales falling by 0.2% as like-for-like grocery prices declined by 1.4% on last year.

Despite recent signs of improved performance at some of the big four supermarkets, the discounters continued their strong growth with the combined share of Lidl and Aldi hitting a record high of 10.5%. Almost three fifths of Britons (58%) visited one of the two retailers in the past 12 weeks, with Lidl increasing sales by 13.8% and Aldi by 11.5% on a year ago.

Meanwhile, overall sales at Tesco dropped by 1.3%, while at Morrisons sales fell by 2.4%, both reflecting the ongoing impact of store disposals. It was another disappointing period for Sainsbury’s with its sales falling by 1.4%, while at Asda they were down by 5.9%, with each of the big four losing market share on last year.

The smaller grocery chains continued to outperform their larger rivals with the Co-op seeing growth of 2.0%, cementing its recent revival and heralding a full year of increasing sales. Meanwhile, at Waitrose, Kantar Worldpanel said small but rapidly increasing sales of the chain’s new premium Waitrose 1 brand helped the retailer grow by 1.3%. Waitrose has now had an unbroken period of growth dating back to 2009 – the best run of any retailer outside of the discounters.

Commenting on overall market conditions, Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “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.”

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NAM Implications:
  • Given the inevitability of ingredient-related price rises, with little scope for suppliers or retailers to absorb increased costs, this means opportunities for private label/surrogate labels and at the expense of non-promoted brands…
  • Branded suppliers need to find ways of working with the discounters…
  • Failing that, priced-based promotion appears to be the only option…
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