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UK grocery sales in decline for first time in 20 years UK grocery sales in decline for first time in 20 years
(about 7 hours later)
UK grocery sales have gone into decline for the first time in at least 20 years as a raging price war and the falling cost of food commodities hit Britain’s supermarkets.UK grocery sales have gone into decline for the first time in at least 20 years as a raging price war and the falling cost of food commodities hit Britain’s supermarkets.
In good news for shoppers, the average price of a basket of everyday essentials such as milk, bread and vegetables now costs 0.4% less than it did a year ago, according to the latest figures from market research firm Kantar Worldpanel.In good news for shoppers, the average price of a basket of everyday essentials such as milk, bread and vegetables now costs 0.4% less than it did a year ago, according to the latest figures from market research firm Kantar Worldpanel.
But the figures highlight a painful few months for the UK’s biggest retailers with all of the “big four” supermarkets seeing sales fall back in the 12 weeks to 9 November. Tesco continues to be the worst performer with sales dropping by 3.7%, but Morrisons’ performance deteriorated at the fastest rate, with the slump in sales accelerating to 3.3%, from 1.3% a month ago. But the figures highlight lean times for the UK’s biggest retailers with all of the “big four” supermarkets seeing sales fall back in the 12 weeks to 9 November as the overall grocery market contracted by 0.2% compared with a year ago. Kantar Worldpanel said it was the first time it had recorded a decline in UK grocery sales by value since it began collecting data in 1994. Back then Sainsbury’s was still the market leader but was to be overtaken by Tesco the following year.
Sainsbury’s trading figures also worsened, with sales down 2.5%. Asda’s sales also went into decline, for the first time in 20 years if you exclude March this year when the timing of Easter affected the figures. Still, the Walmart-owned group was the only one of the big four to hold market share. Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel said: “The major supermarkets have all had a difficult period, hit by both the flow of shoppers toward the discounters and reduced revenues as they competitively cut prices.”
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel said: “The declining grocery market will be of concern to retailers as they gear up for the key Christmas trading season.” Tesco was the worst performer with sales dropping by 3.7%, but Morrisons’ performance deteriorated at the fastest rate, with the slump in sales accelerating to 3.3%, from 1.3% a month ago. Sainsbury’s trading also worsened, with sales down 2.5% while Asda was down in line with the market, enabling the Walmart-owned group to hold its market share.
As the amount of goods shoppers are buying is barely rising while prices continue to fall, McKevitt added: “I think it’s likely this pattern will continue until Christmas and into the first half of 2015.” The “big four” are spending billions of pounds cutting prices in an effort to stem the rate of shopper defections to German discounters Aldi and Lidl.
In a pattern that has continued throughout this year, the German discounters Aldi and Lidl continued to grow strongly, as did the up-market grocer Waitrose. “The declining grocery market will be of concern to retailers as they gear up for the key Christmas trading season,” continued McKevitt. As the amount of goods shoppers are buying is barely rising while prices continue to fall, he said: “I think it’s likely this pattern will continue until Christmas and into the first half of 2015.”
But only Waitrose picked up the pace of growth, to 5.6%, shoring up its spot at the UK’s sixth largest supermarket. Aldi’s growth slowed to 25.5% from 29.1% last month - its slowest pace of growth since 2012 – while Lidl’s growth slowed to 16.8% from 17.7% last month. In keeping with a trend that has continued throughout this year, the German discounters Aldi and Lidl continued to grow strongly, as did the up-market grocer Waitrose.
Last week Asda reported its biggest sales decline in eight years with like-for-like sales down 1.6% in the three months to 30 September. Chief executive Andy Clarke blamed the intensifying price war and a blizzard of discount vouchers for the deterioration. But only Waitrose picked up the pace of growth, to 5.6%, shoring up its spot as the UK’s sixth largest supermarket. Aldi’s growth slowed to 25.5% from 29.1% last month - its slowest pace since 2012 – while Lidl’s growth slowed to 16.8% from 17.7% last month.
Profits at Tesco, Sainsbury’s and Morrisons have also gone into reverse as shoppers rein in their spending, food commodity prices drop in the wake of strong harvests and competition intensifies as a result of the growth of Aldi and Lidl. Further pressure is coming from structural changes in the market such as the growth of online and convenience store retailing. Last week Asda reported its biggest underlying sales decline in eight years with like-for-like sales down 1.6% in the three months to 30 September. Chief executive Andy Clarke blamed the intensifying price war and a blizzard of discount vouchers for the deterioration.
Goldman Sachs analyst Rob Joyce has warned that supermarkets needed to take drastic action by shutting one in five of their stores if the financial health of the mainstream grocery chains is to recover from the damage being wreaked by altered shopping habits and the rise of the discounters. Profits at Tesco, Sainsbury’s and Morrisons have also gone into reverse as shoppers rein in their spending, food commodity prices drop in the wake of strong harvests and competition intensifies as a result of the growth of Aldi and Lidl.
He was gloomy about the ability of the major players to bounce back if the fight was based on price cuts alone. “We believe that any major price investments by Morrisons, Sainsbury’s or Tesco can be exceeded by the discounters,” he wrote. Further pressure is coming from structural changes in the market such as the growth of online and high street convenience stores in addition to the rise of the discounters, as shopping habits learned during the recession see chains such as Poundland and B&M continue to steal sales from Britain’s mainstream supermarkets.
Liverpool based B&M, which listed on the stock exchange in June, told analysts on Tuesday it was in talks with at least six major retailers - thought to include Homebase - to buy underperforming stores. The retailer, chaired by former Tesco boss Sir Terry Leahy, said it planned to open at least 50 stores in the current financial year as it reported a 34% increase in operating profit to £65.8m – a figure that excludes flotation and other restructuring costs – in the six months to 27 September. Like-for-like sales rose 4.8%.
Shore Capital analyst Clive Black said his expectations for the quoted supermarkets over the key Christmas trading period were low. “The market looks to remain weak, compounded now by falling food prices and rising gross margin pressure ... the biggest challenges the discounters face, to our minds, will be overcrowded car parks and agitation in the shopping aisles rather than competitor attrition.”
Market share in the 12 weeks to 9 November:Market share in the 12 weeks to 9 November:
• Tesco: 28.7%• Tesco: 28.7%
• Asda: 17.2%• Asda: 17.2%
• Sainsbury’s: 16.4%• Sainsbury’s: 16.4%
• Morrisons: 11.1%• Morrisons: 11.1%
• The Co-operative: 6.2%• The Co-operative: 6.2%
• Waitrose: 5.1%• Waitrose: 5.1%
• Aldi: 4.9%• Aldi: 4.9%
• Lidl: 3.5%• Lidl: 3.5%