Tesco Sees Consumers Sticking With Cost-Of-Living Crisis Habits

After posting robust half-year results yesterday, Tesco highlighted that consumers were sticking with behaviours that emerged at the start of the cost-of-living crisis in 2022, such as eating more at home.

“When we had the first cost of living crisis three years ago, there was quite an adjustment in shopping habits at that stage, and those habits have stuck,” said the group’s Chief Executive, Ken Murphy.

Tesco noted that it was continuing to see a strengthening of the ‘dining in’ trend, with consumers opting for premium supermarket products over a trip to a restaurant, partly to save money.

Murphy said this was evidenced by year-on-year sales growth of 16% for its premium own-brand Finest in the first half, marking a third consecutive year of double-digit sales growth.

“It might be kind of a Covid hangover, it might be part of the Netflix phenomenon of dine in, watch a movie, have a bottle of wine, and (Finest’s) a great proposition at great value, it could be a money-saving exercise,” he said.

“It’s hard to put your finger on what the single reason for the trend is, but it is definitely a trend.”

Murphy also pointed to a recent trend of people buying more fresh food to cook more from scratch. Tesco’s food like-for-like sales in its domestic market rose by 5.7% during the six-month period to 23rd August, with a “strong volume performance” from fresh food, driven by “ongoing range development, focused on product quality and innovation”.

Meanwhile, Murphy noted that consumers were also concerned about the upcoming government budget, which is expected to include tax increases, as well as the economic outlook for the UK. He urged the Chancellor Rachel Reeves to deliver a “pro-growth and pro-jobs” budget on 26th November.
“In the last budget, the industry and the sector incurred substantial additional operating costs, we’re doing our best to deal with them, but enough is enough,” he added.

NamNews Implications:

• For anyone who’s been ‘abroad’ for the past couple of years, this means:
• Switching from brands to premium own label…
• …and finding the ‘compromise’ less than expected
• (Witness the difficulties experienced by brands in winning them back).
• Seeking true like-for-like price comparison (time for unit pricing to live up to its promise).
• Willingness to shop around for value (in part to Aldi & Lidl advantage…)
• ‘Sticking with cost-of-living crisis habits’ means sticking with cost-of-living crisis habits.