Grocery Inflation Inches Lower

Despite recent suggestions that cost pressures are easing, latest Kantar data confirms that grocery price inflation remains exceptionally high.

However, it did fall for the second month in a row, inching down from 17.3% to 17.2% for the four weeks to 14 May. Take-home grocery sales rose by 10.8% on the same period as last year, with the discounters continuing to outperform the traditional Big Four supermarkets.

Fraser McKevitt, head of retail and consumer insight at Kantar: “The drop in grocery price inflation, which is down by 0.1 percentage points on last month’s figure, is without doubt welcome news for shoppers but it is still incredibly high – 17.2% is the third fastest rate of grocery inflation we’ve seen since 2008, an extra £833 to annual grocery bills”.

Savvy shoppers are choosing more own-label goods, growing by 15.2% this month, compared to 8.3% for branded. But the brand premium gap is narrowing in most stores via loyalty discounts.

McKevitt continued: “In the fierce contest for market share, eyes have been on the dairy aisle in particular, where the average cost of four pints of milk has come down by 8 pence since last month. Prices are still much higher than they were 12 months ago, at £1.60 currently versus £1.30 last year, but retailers know just how important it is to offer even small savings on staple products like milk to get customers through the door.”

Waitrose benefited from a substantial uplift in the week of the coronation, with sales up 4.8% over the 12 wks, its highest growth since April 2021.

Aldi was the fastest-growing this month, with sales increasing 24.0%. Lidl’s sales rose 23.2%, and together accounted for 17.8% of the market.

Asda won back market share to 13.9% after sales grew 10.6%. Sales were boosted by its Just Essentials range, with nearly two in five Asda baskets containing at least one of these value items this May.

Morrisons recorded a third consecutive period of sales growth, although the increase was more muted versus others at just 0.6%. The grocer relaunched its ‘More Reasons to Shop’ strapline yesterday as part of its efforts to win back shoppers.

Sales increased by 8.9% at Tesco, with growth across its convenience stores, large format supermarket and online channels. Sainsbury’s sales rose by 10.5%, and it held market share steady at 14.8%.

NamNews Implications:

• Inflation of 17.2% is still off-putting for brands…
•  …but encouraging for own-label and the discounters.
• i.e. Aldi & Lidl combined share of 17.8%…
• …and growing at 24%.
• And own-label growing a 2x the rate of brands.
• These stats raise two essential questions for branded suppliers:
• How to safely optimise own-label potential?
• How to find ways of optimising Aldi & Lidl traffic?
• These two options are becoming too big to ignore.
• On any count…

#MarketShare #Discounters #OwnLabel

Co-op Becomes Latest Retailer To Offer Cheaper Prices For Members Of Loyalty Scheme

Just days after Sainsbury’s launched a scheme mimicking Tesco’s successful Clubcard Prices discounts, the Co-op has announced that it is introducing lower prices exclusively for members of its loyalty programme.

The move is part of the society’s plan to invest more than £240m, across the next five years, into its membership proposition in a bid to attract a million new members.

The lower prices across its 2,400 food stores will only be available to Co-op members, with the retailer claiming shoppers could save up to £300 a year.

Detailing the areas where shoppers stand to benefit the most, Co-op said members could save an average of £8 on its freezer filler deals, £1.45 on own-brand pizzas, £1.90 on ready meals and £5 on some wines deals.

The Co-op membership scheme will also continue to enable shoppers to earn 2p in every pound spent on its own-brand products that is returned to the member’s digital wallet, and raise funds for community causes.

Additionally, Co-op announced today that it was investing a further £15m this May to reduce the cost of more than 60 key lines in stores to help customers during the cost-of-living crisis. Products included in this price round of price cuts include lines such as fresh chicken breasts, bread and milk. The average reduction is claimed to be 13% for those moving down, with the maximum reduction at 33%

Kenyatte Nelson, Chief Membership & Customer Officer at Co-op, said: “For us to champion a better way of doing business, we are aiming to grow our membership base by one million over the next five years and will accompany this ambition with a compelling member-benefits programme, which will span our entire Co-op.

“Our initial member investment will be targeted within our food business and directly supports our pure convenience strategy. Currently, around 16 million shoppers visit our stores each week or trade online with us. Our ambition is that many will convert to being Co-op members when they see the clear value this can bring to both themselves and their wider communities.”

The group stated that new member-food benefits would be followed in time by additional investment from the Co-op’s other business areas in funeral care, insurance and legal services.

The new member prices in its food stores were launched today.

NAM Implications:

• Tesco has demonstrated that it works.
• And what about all that resulting shopping behaviour arising
• (think Retail Media).
• Begging the question of how soon Aldi will introduce loyalty cards for the same reason.
• i.e. when a retailer has squeezed all the juice from margin and stockturn…
• …RM revenue can become the only other option

Weaker Consumer Spending, Especially BIG TICKET, Impacting Costco

Costco’s sales growth continued to weaken during its second quarter, with the warehouse club operator missing analysts’ estimates as consumers made cutbacks amid persistently high inflation.

Having seen double-digit increases during the pandemic, Costco’s total comparable sales over the 12 weeks to 12 February rose 6.8%, excluding the impacts of changes in petrol prices and foreign exchange.

Comparable sales in its 584 outlets in the US rose 5.8%. The 107 stores in Canada saw a 9.6% rise, whilst its 157 overseas warehouses (including 29 in the UK) saw sales increase by 9.5%. However, the group’s e-commerce unit recorded an 8.7% decline as consumers reined in their spending and returned to shopping in physical stores.

The slowdown was highlighted in the latest figures for February, with total growth of only 5.0% after a much weaker performance in the US (+3.5%).

“We’ve seen some weakness in what I’ll call big-ticket discretionary items,” said finance chief Richard Galanti, adding electronics, jewellery and housewares, among others, were the worst performers in February and in the reported quarter.

Several US retailers have in recent weeks commented on how Americans have been changing their shopping patterns and seeking out more bargains and discounts as they deal with high inflation.

Retail bellwether Walmart warned last week consumers were increasingly shifting towards more food and consumable products, and away from general merchandise.

Galanti added: “Most major departments in general were down, with fresh foods being down a little more than others.”

NamNews Implications:

• A global switch from consumer durables being experienced by most retailers.
• Meaning consumers are postponing purchase…
• …and ‘making do’ instead of replacing big-ticket items.
• Those with long memories will recall 'Planned Obsolescence'...
• The key issue is how long the consumer will forgo purchasing.
• And IMO, anyone anticipating significant change within the next decade…
• …should seek evidence to support their assumptions.

#BigTicket #PlannedObsolesence #Demand

Brands to Own Label Switchers - A Permanent Change?

A new study suggests that just over 70% of British consumers plan to keep buying supermarket own-label products even if inflation starts to ease, whilst simple discounts remain the most popular type of promotion.

According to the food & beverage trends report by research platform Attest, 7 in 10 consumers have no intention of reverting back to big brands after making the switch during the cost of living crisis in a bid to save money.

Of those that have, nearly 26% said they would ‘definitely’ stick with own-label lines, even if price wasn’t an issue, while a further 44.6% ‘probably’ would. Only 12.9% stated they wouldn’t stick with them, although Boomers showed the greatest intent to abandon own-label.

The survey also revealed that 58% of shoppers are visiting multiple supermarkets in person to hunt for the best prices. It found inflation caused some consumers to leave Morrisons, Tesco and Waitrose (high prices, lack of deals).

Out of six promotion types, discounting the price of a product is what shoppers want the most, closely followed by BOGOF deals. Offering a percentage of extra product free was ranked third, alongside a ‘pre-inflation price freeze’.

The research also details that discounts don’t need to be huge to incentivise shoppers. When asked for the minimum discount that is persuasive, the top answer was a 20% discount (for 38% of people). A further 22% would buy with a 30% discount, while 20% would be convinced by a discount of 10% or less.

Attest CEO, Jeremy King, said: “Faced with new pressures, British shoppers have evolved in behaviour, and have acquired a real taste for supermarkets’ own-label brands. This shift is driven by rapid price rises for all grocery and household products and may be permanent for several important sub-segments. Well-known brands that can’t compete on price are the losers here and face significant challenges.

“The big-name brands need to provide consumers with new, compelling reasons not to switch to own-label rivals, or in some cases motivate them to come back to big brands.

“This puts supermarket chains under serious pressure to either offer the best deals that beat other retailers and attract consumers, or to extend their own-label product lines to offer ever-increasing appeal to inflation-weary consumers.”

NamNews Implications:

• A key issue has to be the tolerable amount of a brand premium.
• i.e. how much extra a consumer is prepared to pay for the ‘certainty’ of a brand…
• (despite the advent of shrinkflation in some cases)
• All adding up to the effect of trust in the relationship.
• Meanwhile, consumers realising by direct experience that ‘brands are not much better’?
• …may take some persuading when things revert to ‘normal’…

#OwnLabel #Switch #Brand

Aldi Buses In Customers From Rival Stores

Aldi has marked being crowned “Britain’s Cheapest Supermarket” for the second year running by laying on free bus rides to one of its stores from rival retailers in the area.

The stunt by the discounter featured bus stops placed outside Tesco, Sainsbury’s and Asda stores in Aylesbury, Bucks, with a Routemaster double-decker bus picking up shoppers and delivering them to the nearby Aldi.

Aldi quoted one Tesco shopper saying: “How funny! This has really made my day.”

Julie Ashfield, the retailer’s Managing Director of Buying, commented: “We’re so proud to have been named the UK’s cheapest supermarket for the second year running, we wanted to share the good news with customers and what better way than by giving shoppers a free ride to come and experience the lowest prices for themselves!”

Analysis released earlier this month by consumer watchdog Which? showed Aldi had narrowly beaten its main rival Lidl to be named the cheapest UK supermarket over the last 12 months. Aldi was the cheapest supermarket for seven consecutive months from June to December, while Lidl was the cheapest from January to May.

The results for the final month of the year in December showed a basket of 48 groceries on average was £81.63 at Aldi – £11.79 cheaper than Tesco and £14.08 cheaper than Sainsbury’s.

NamNews Implications:

• An innovative use of Retail Media?
  {i.e. 'Grabbing' potential ready-to-buy potential customers 'in-the-aisle' and offering them a Route to a better deal, conveniently?

#RetailMedia

Aldi Scrapping Online Delivery Service To Focus On Stores And Value

 

Click to enlarge

Aldi is axing its home delivery service for its non-food ‘Specialbuys’, as well as wine and spirits, to focus on opening new stores and keeping prices low.

The move will leave click & collect of groceries, which Aldi launched in 2020 across over 200 stores, as its only online operation when the other services come to an end this year.

The discounter launched home delivery of wines and spirits in 2015, which grew to offer shoppers many of its non-food Specialbuys exclusively online.

An Aldi spokesperson commented: “We keep our prices low by being the most efficient retailer in Britain, and we have therefore taken the decision to stop selling wine and spirits online for home delivery from later this month.

“We will also stop selling our Specialbuys online for home delivery later this year.”
Aldi currently has over 950 stores in the UK and hopes to reach 1,000 during 2023.

NamNews Implications

• For me, this IGD stand-out slide of 2022, says it all about home delivery.
• Aldi are obviously applying the same logic…
• (also worth keeping in mind that even Amazon could only break even on online retail, at best)
• Aldi dropping online delivery is a monumental step for retail...

Aldi Beats Lidl To Be Crowned Cheapest Supermarket Of 2022

Analysis by consumer watchdog Which? shows Aldi has narrowly beaten its main rival Lidl to be named the cheapest UK supermarket over the last 12 months.

Throughout 2022, Which? tracked hundreds of thousands of grocery prices across the eight major supermarkets (Aldi, Asda, Lidl, Morrisons, Ocado, Sainsbury’s, Tesco, Waitrose) to find out how much each shop was charging for everyday items such as bread, milk and eggs.

Overall, Aldi was the cheapest supermarket for seven consecutive months from June to December, while Lidl was the cheapest from January to May.

The results for the final month of the year in December showed a basket of 48 groceries on average was £81.63 at Aldi, just beating Lidl, where the basket was £83.24. Meanwhile, Waitrose was more than £30 pricier than Aldi, at £112.62 and was consistently the most expensive supermarket across the 12 months.

Alongside the price comparison of a basket of groceries at all eight supermarkets, Which? also compared a larger trolley packed with a greater selection of branded items that are not always available at the discounters – meaning they aren’t included in this bigger comparison.

Asda was the cheapest of the traditional supermarkets in December – as it has been every month for the last three years. Based on a larger trolley of 149 products, Asda’s total came in at £355.62, followed by Sainsbury’s (£368.97), Tesco (£375.97), Morrisons (£377.81) and Ocado (£386.68). At Waitrose, the total came to £406.95, £51.33 more than Asda.

Which? is currently campaigning for all supermarkets to do more to help customers during the cost of living crisis and has recently published a 10-point plan of steps across three key areas to help ensure affordable food is available to everyone who needs it.

“With food and drink prices putting huge pressure on household budgets, it’s no surprise to see many people turning to discounters like Aldi and Lidl when our research shows they could save up to £31 on a typical shop,” said Reena Sewraz, Which? Retail Editor.

“Which? believes all supermarkets have the ability to make a real difference to hard-hit households by ensuring everyone has easy access to basic, affordable food lines at a store near them, particularly in areas where people are most in need.”

NamNews Implications

• While experts closer to grocery might split hairs re the methodology...
• ...in the mind of the shopper, their perception of something like a 27% price difference between Aldi and Waitrose...
• …has to make a shopping difference.
• And will be reflected in grocery market shares.
• Suppliers had better tune into shopper perception
•  (Even in Aldi...)
• Or suffer the consequences?

#BasketPrices #Cheapest

Inflation Drives Record Christmas In Grocery Sector; Aldi Remains Fastest Growing Supermarket

Latest Kantar data shows take-home grocery sales rose 9.4% to a record £12.8bn in 4 weeks to 25 December, via inflation vs volume. Over 12 weeks, up 7.6%, with discounters continuing to outperform the mults. Whilst value sales were up £1.1bn in December vs Christmas 2021, volumes down 1%.

“This story played out across the traditional Christmas categories,” said Fraser McKevitt, head of retail and consumer insight at Kantar. “For example, value sales of mince pies soared by 19%, but volume purchases barely increased at all.”

Annual grocery price inflation 14.4% in December, down from 14.6% in November: “This is the second month in a row that grocery price inflation has fallen, raising hopes that the worst has now passed".

High inflation impacting how and what people buy.

Kantar: consumers buying supermarkets’ O/L with sales up 13.3%, vs 4.7% increase in branded lines.

McKevitt said: “The British supermarket sector is more competitive than ever and the grocers are keen to retain customers by offering their own festive alternatives, emphasising premium own-label.

Sales grew 10.2% to hit a £700m first time. Tesco’s Finest remains largest premium own-label, with Aldi and Lidl the biggest contributors to the premium own label sector’s overall growth in 2022.”

December, the mults' busiest month since the start of the pandemic - shop visits up 5.2% YOY.

Online grocery value sales up 4% YOY. Online’s total share vs Christmas 2021, down 0.6 percentage points to 11.6%.

Tesco, Sainsbury’s, Asda and Morrisons grabbed two-thirds of all spending.

Asda up 6.4%, Sainsbury’s and Tesco up 6.2% and 6.0% respectively, Morrisons down 2.9%

Aldi was the fastest-growing up 27.0%, market share up from 7.7% in 2021 to 9.1%. Lidl’s up 23.9%, market share up 0.9 percentage points to 7.2%.

Iceland’s sales grew by 10.2%, frozen poultry rising by 15% and frozen prepared foods by 18%. This pushed Iceland’s market share to 2.5%. Sales at Waitrose continued to weaken, down 0.7%, with its market share slipping from 5.1% to 4.7%.

NamNews Implications

• ‘volumes were actually down by 1% year-on-year’ says it all for realists.
• Added to which, many consumers were having a last hurrah... …before knuckling down to the realities of January’s demands on their purses.
• Meanwhile “…value sales of mince pies soared by 19%, but volume purchases barely increased at all.”
• i.e. the impact of inflation needs drumming into those in the business too easily mislead by top-line figures.
• The moves to own-label and the discounters are again confirmed.
• (with Aldi & Lidl continuing to grow share at the expense of the mults and Waitrose)
• And will not easily be reversed...
• In other words, it is hopefully obvious that suppliers planning to stay outside the discounter channel...
• ...are at risk.

#MarketShares #OwnLabel #Discounters