Latest data from Kantar shows grocery price inflation dropped to its lowest level since 2022 during the four weeks to 11 June. Following a rise of 17.2% the previous month, it now sits at 16.5%, adding to hopes that this downward trend will continue throughout 2023.
Higher prices drove take-home grocery sales up by 10.8% compared to last year, but the data suggests volumes continue to fall as cash-strapped consumers make cutbacks.
Fraser McKevitt, head of retail and consumer insight at Kantar, commented: “This is the lowest rate of grocery price inflation we’ve seen in 2023, which will be a relief to shoppers and retailers. But prices rising at 16.5% isn’t something to celebrate, and it’s still the sixth highest monthly figure in the past 15 years. Price rises are now being compared to the increasing rate of grocery inflation seen last summer, which means that it should continue to fall in the coming months, a welcome result for everyone.”
However, he highlighted that the ongoing squeeze was continuing to weigh on the nation’s mind. A survey by Kantar found that of the top five financial worries that consumers have, rising grocery prices is the only one that they are more concerned about now than at the start of this year. Nearly 70% of households stated that they were either ‘extremely’ or ‘very worried’ about food and drink inflation compared to just over two-thirds when asked the same question in January. It remains the second most significant concern, narrowly behind rising energy bills.
Consumers are doing what they can to offset the impact of inflation. McKevitt said: “Savvy shoppers have been continuing to swerve the full force of price increases, with many switching to the cheapest own label lines. Total spending on these value ranges has rocketed by 41% compared to last year and retailers have been quick to respond, expanding their offerings to meet demand. This has helped the value tier to become the fastest growing part of the market every month since June 2022.”
Kantar noted that shopping habits are also being impacted by how people choose to eat and cook at home. The most prominent change seen is that people are preparing simpler dishes with fewer ingredients. The data shows that people are turning away from their oven and increasingly using microwaves, which reflects the shift to simpler cooking. There has also been a reduction in hob use and a rise in food prepared with toasters and grills.
Meanwhile, Kantar highlighted that the cost of living crisis has resulted in retailers moving away from ‘round-pound’ price points. McKevitt explained: “The proportion of products sold for £1, the single most popular price for a grocery item, has almost halved in a year from 9% to 5%. That’s a big shift. Traditionally, ‘round-pound’ prices have been attractive to shoppers, who find them easier to relate to and practical as well, with no leftover change. But, with retailers eager to offer value and cash buying less popular, £1.25 has emerged as an increasingly important price point. It now vies with £2 as the second most popular price for a grocery item.”
Aldi was again the fastest growing retailer for the 12 weeks to 11 June. Its sales rose by 24.6%, pushing it to a new record market share of 10.2%, 1.2 percentage points higher than the same period last year. Lidl’s sales growth was only slightly behind its fellow discounter, increasing sales by 23.2%, giving it 7.7% of the market.
Morrisons’ sales rose by 0.8%, with its market share falling to 8.8%. McKevitt commented: “This was the fourth time in a row that we’ve seen Morrisons grow. It’s a modest rise compared to rivals, but there are positive signs for the retailer. Its Morrisons Savers range is Britain’s fastest growing value line, nearly doubling sales compared to last year, as consumers turn to own-label.”
Sainsbury’s and Asda’s sales both grew at 10.0% over the 12 weeks, ahead of the wider grocery market and holding that market shares at 14.9% and 13.7% respectively. Tesco saw its sales increase by 8.9%, but its share edged down to 27.1%.
NAM Implications:
- Falling inflation simplify emphasises the need to focus on volume performance, the only reality.
- ‘Nearly 70% of households stated that they were either ‘extremely’ or ‘very worried’ about food and drink inflation’ says it all…
- Cheapest own-label sales growing by 41%, a key concern…
- But the real standout has to be Aldi and Lidl growing at 24% with a combined 17.9% share of the market.
