Data from NIQ shows Total Till sales growth at supermarkets in the UK slowed to 5.3% (from 6.6%) in the four weeks to 24 February, partly as a result of food inflation falling to 5%.
However, grocery retailers capitalised on events like Valentine’s Day, Pancake Day and the Chinese New Year to attract shoppers through promotional offerings. NIQ noted that that this strategy likely played a part in boosting shopper spend on promotions. In the four-week period, 24% of all FMCG sales were bought on promotion, rising to 35% for branded items (up from 31% a year ago). Sales of supermarket own-label goods also increased to 16% compared to 13% last year.
The data also reveals that online channel growth (+7.9%) remained ahead of in-store (+3.8%) with online’s market share up to 11.2% compared to 10.8% this time last year. However, despite February being the wettest on record in the UK, the figures show shoppers increased their in-store visits (+0.9%) compared to last year.
NIQ noted that it had identified four key category trends since the start of 2024. The first is shoppers buying convenient meal options, which is reflected in strong growth in the last four weeks for prepared fresh meat products (+13%), frozen chips (+13%), and cooking sauces (+7%). The second key trend is cheaper meal ingredients; rice & grains (+13%), canned veg (+10%) and frozen poultry (+8%). The third is a shift towards healthier snacking with growths in dried veg & pulses (+23%) and freshly prepared fruit (+7%). And the fourth key trend was events, with Pancake Day driving a rise in sales for baking ingredients.
In terms of retailer performance over the 12 weeks to 24 February, Ocado (+12.2%) was the fastest-growing retailer, followed by M&S (+11.9%). Meanwhile, sales momentum at Lidl (+10.4%) and Aldi (+6.0%) continued to slow.
Sainsbury’s (+8.0%) and Tesco (6.8%) both experienced an increase in market share, while slow growth was again seen at Morrisons (+3.6%) and Asda (+2.0%).
Mike Watkins, NIQ’s UK Head of Retailer and Business Insight, commented: “Whilst industry volumes remain positive, many brands are now chasing growth having lost category share during the high period of inflation and are keen to communicate their own value among consumers. We expect the levels of promotion to continue to creep up over the next few months. Brands are also going to be important to sustain the recovery in FMCG spend and with Euro 2024 and Paris Olympics on the horizon, branded promotions will be the drivers of increased discretionary spend post Easter.”
He added: “The resilience of online grocery shopping during the highest period of inflation in decades, when household penetration fell a little, is due to the changed lifestyles of consumers. When food inflation was in double digits, shoppers did cut back on large ‘trolley’ shops and online was also impacted. Whilst this growth is now against a weak comparative (-2.5%), it is also a normalisation of shopping behaviour for the one in four households who continue to shop this channel every four weeks and suggests that omnichannel shopping in food retail is here to stay.”
NAM Implications:
- With 35% of branded items bought on promotion…
- …supplier margins will have suffered more than last year (31% on promo).
- Meanwhile, online growing at more than double in-store…
- (and probably at lower margin) spells long-term issues for brands.
- And Tesco & Sainsbury’s growth at the expense of Asda & Morrisons…
- …spells medium/longer-term issues for the two PE-owned companies.
- Time to readjust your retail customer priorities?
