Strong Period For Discounters Amid Rising Grocery Price Inflation; Signs Of Improvement At Asda

Latest figures from Kantar show take-home grocery sales grew by 4.4% over the four weeks to 18th May, with more shoppers heading to the discounters and buying own label goods as inflation in the sector reached its highest level since February 2024.

Grocery price inflation now stands at 4.1%, compared to 3.8% the previous month, amid rising cost pressures for retailers and manufacturers linked to increased Employer National Insurance contributions and National Living Wage.

“This latest jump in grocery price inflation takes us into new territory for 2025,” said Fraser McKevitt, head of retail and consumer insight at Kantar.

“Households have been adapting their buying habits to manage budgets for some time, but we typically see changes in behaviour once inflation tips beyond the 3% to 4% point, as people notice the impact on their wallets more. Own label lines are ones to watch, with premium own label, in particular, being the fastest growing part of the market since September 2023.”

Squeezed consumers are also continuing to seek out promotions, with McKevitt commenting: “The growth of spending on deals has carried on this month, increasing by 5.1% versus May last year. Trimming prices remains the most popular way for retailers to draw in customers, with 80% of promotional spending this period down to straightforward price cuts.”

Looking at the performance of individual retailers, Ocado marked a full year as the UK’s fastest-growing grocer, with its sales climbing 14.9% over the 12 weeks to 18 May.

It was also a good period for the discounters, which achieved their strongest combined growth since January 2024 at 8.4%. Lidl reached a new share high of 8.1% after seeing its sales grow 10.9%. Compared with the same period last year, it attracted 419,000 extra shoppers through its doors – the most of any retailer. Aldi’s hold of the market reached a record high at 11.1%, with sales up by 6.7% – its fastest growth rate since the start of last year.

Tesco’s sales rose by 5.9%, driving its market share up 0.4 percentage points to 28.0%. Sales at Sainsbury’s accelerated by 4.7%, giving it a 15.1% share. Sales at Morrisons nudged up 1.1%, but its share slipped to 8.4%.

Meanwhile, Asda saw its best performance since May 2024 as it continued with its Rollback campaign. Its sales still slipped 3.2%, but this was an improvement on the 5%-plus declines recorded over much of the last year.

Despite grappling with a major cyber attack on its systems, spending on groceries at M&S rose by 12.3%.

NamNews Implications:

• The discounter opportunity leaps out (or should!).
• i.e. See yesterday’s Lidl-Schwarz piece in NamNews
• NB. In 2023, Aldi achieved a global turnover of €112bn and Schwarz (owner of Lidl) saw its sales hit €175bn last year…
• …compared to Tesco’s global sales of €78bn.
• i.e. The discounters have the option of subsidising share growth at local level…
• Meanwhile, with inflation at 4.1% (and consumer-in-street perception of ‘real’ ‘pound-in-pocket’ inflation even greater)…
• …there are short-term moves into own label and discounters for value by cash-strapped consumers….
• …where they find the compromises they were led to expect by brands and mults advertising was not as great in practice…
• …may become set in place and increasingly expensive to reverse.
• Especially as packaging taxes have yet to emerge and impact inflation levels, inevitably…