Over the four weeks to 17^th March, grocery price inflation eased to 4.5%, its lowest level since February 2022, according to the latest Kantar data. However, despite this continued slowdown, many households are still feeling the squeeze.

Take-home grocery sales rose by 4.6% over the four weeks, with an early Easter boosting sales of seasonal treats in the first three months of 2024, by £88 million, compared with the same period last year.

Meanwhile, sales of branded goods pushed ahead of own label this month, while premium own-label lines saw growth of 16.1%, the quickest rate in almost three years.

As head of retail and consumer insight at Kantar, Fraser McKevitt explains, consumers are still on the hunt for value.

“Among those feeling most pressured, 78% are actively buying cheaper groceries, while 68% are using promotions to help manage budgets,” said Fraser McKevitt.

“Retailers appear to be responding in kind, with the emphasis on discounts and price match schemes continuing this period. £605 million more was spent on deals this month than in March last year.”

With Easter on the horizon, Fraser added that a quarter of people have been picking up four or more items when buying chocolate eggs.

“This rises to 29% for shoppers aged over 65, suggesting that many grandparents are planning to indulge their families this weekend,” he said.

Meanwhile, in the supermarket share, year-on-year sales at Tesco and Sainsbury’s climbed by 5.8% and 6.7% respectively, their shares of the market nudged up by 0.4 percentage points each to 27.3% and 15.2%.

Lidl grew by 8.8% to capture a 7.8% share of the market, helped by a 24% rise in sales of baked goods and a 11% jump in fruit, vegetables and salads.

“Premium own-label lines have been a big beneficiary of consumers trading down, growing by a whopping 16.1% this month – the quickest rate we’ve seen in nearly three years,” added Fraser McKevitt.

“However, sales of branded goods pushed just ahead of own label overall, increasing sales by 6.1% and 4.7% respectively in the latest four weeks.”

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UK CEO of the retailer, Jason Tarry said the move was something in the planning “for some time”, however it follows comments from organisation Which? that claimed it was making it difficult for consumers to compare deals.

Last year the consumer group reported Tesco to the regulator, the Competition and Markets Authority (CMA), after it said the supermarket did not explain the unit price of deals clearly enough to shoppers. Tesco challenged the claims, saying it complied with all current rules.

In a blog post, Jason Tarry said that with 8000 Clubcard offers weekly, Tesco wants its customers to see how offers stack up, prompting them to make the change.

“We announced last year that we would introduce unit pricing for simple promotions to show their value by weight or volume – something that will make it even easier for customers to understand how competitive our Clubcard Prices offers are,” said Mr Tarry.

“If you are in store you will now start to see that the way we display our Clubcard Prices will not only show the total price, but also the unit price of the product (by volume or weight), to allow a direct comparison of the price per unit between the Clubcard Prices offer and the price of alternative products.

“This is something that we have been planning to do for some time, and I am really pleased that we are ready to make the change. Over the coming weeks these changes will appear in all our stores, as our colleagues update millions of price labels on the shelf edge. We will also be adding these unit prices to our Clubcard Prices deals online.”

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Initially for a 10-year period, the exclusive strategic partnership will see its existing banking operations in credit cards, loans and savings will be sold to the bank, removing £7.7bn of capital-investment assets and £6.7bn of financial liabilities from the Tesco balance sheet.

Under the terms of the agreement, the supermarket retailer will receive £600m of proceeds, with an annual income for the use of the Tesco brand. It will also retail all other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards. Tesco describes these as capital-light, profitable businesses which have a strong connection to its core retail offer.

Around 2800 Tesco Bank colleagues will transfer to Barclays as part of the deal.

Tesco Group Chief Executive, Ken Murphy said the “strategic transaction”  would unlock greater value for customers.

SMOOTH TRANSITION

“By working with one of the UKs leading banks, we can bring customers new and innovative propositions, which will continue to benefit from Tesco Clubcard’s unique insight and digital capabilities,” said Ken Murphy.

“The transaction will also significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business.

“I’m hugely grateful to our colleagues for their dedication and excellent service to our customers, and I’m confident that this new partnership approach will build on that success.”

Barclays Group Chief Executive, CS Venkatakrishnan added: “This partnership with Tesco is a further demonstration of the investment we continue to make in our UK consumer business.

“We are looking forward to working closely with the team at Tesco over the coming months to enable a smooth transition and, subject to completion of the transaction, we look forward to welcoming Tesco Bank colleagues and customers to Barclays.”

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Items bought on offer accounted for 27% of all grocery spending in January versus 32% last month.

Meanwhile, take-home grocery sales grew in value by 2.9% over the four weeks, according to the latest report from Kantar.

Plant-based and no/low alcohol sales saw a boost, as would be expected in January, but Kantar noted the trend is towards healthy habits all-year round, not just in January.

Spending on alcohol fell by more than half compared with December, as almost 6% of beer packs sold this month were no or low-alcohol options, marking a jump from 4% at the end of last year.

As head of retail and consumer insight at Kantar, Fraser McKevitt explained, health always comes to the fore as a priority for consumers in January.

“What’s interesting this month is that we’re not seeing as big a spike in health-related categories as we have done in previous years. That’s because people are now buying more of the typical January ‘health kick’ items throughout the year,” said Fraser.

OPPORTUNITIES FOR SAVINGS

Fraser added that sights are firmly back on inflation again.

“There’s been lots of speculation about the impact the Red Sea shipping crisis might have on the cost of goods, but the story in the grocery aisles this January is more about the battle between the supermarkets to offer best value, rather than geopolitics.

“Retailers have taken their foot off the promotions gas slightly as we’ve come into the new year, and that’s meant inflation hasn’t fallen as quickly.”

He added that there are still plenty of opportunities for consumers to make savings.

“The overall trend in offers is up versus this time last year, and nearly £500 million more was spent on offers this January than in the same month in 2023,” said Fraser.

“Looking ahead to February, it will be interesting to see how this plays out on Valentine’s Day, and if couples will opt for more low-key celebrations.

“This was certainly the case in 2023, when we saw a massive £43 million spent on supermarket meal deals costing £10 or more in the week before the special day.”

GROWTH FOR LIDL

Lidl is the fastest-growing grocer in Britain for a fifth month in a row, and the only retailer to see double-digit growth in the latest 12 weeks.

According to Kantar, spending at the discounter was up by 11.9%, bringing its share of the market to 7.5%.

Both Sainsbury’s and Tesco gained market share over the latest 12 weeks to 21^st January 2024 compared with a year ago. Sainsbury’s increased sales by 8.1% to take 15.7% of the market, 0.3 percentage points higher than last year, while the UK’s largest retailer Tesco grew by 6.3% and now has a share of 27.6%, up from 27.5%.

Meanwhile, Co-op accounts for 5.3% of the market, growing sales by 1.8% and Iceland saw growth of 2.3%, giving the frozen food specialist a 2.4% share.

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According to the latest Kantar figures, a record £1.37 billion passed through the tills last month, with the average household spending at an all-time high of £477 across the month, an increase of £28 on 2022.

Total take-home grocery sales grew in value by 7.0% while the number of items bought rose by 2%.

Grocery price inflation fell to 6.7% in December, marking the fastest month on month drop that Kantar has recorded.

As predicted, Friday 22^nd December was the most popular shopping day, when just over 25 million trips were made and consumers spent £803 million in physical stores – 85% more than the average Friday in 2023.

BUDGET PRESSURES REMAIN

Despite the fall in grocery price inflation, head of retail and consumer insight at Kantar, Fraser McKevitt said consumers are still feeling the pinch.

“The rate of inflation is coming down at the fastest pace we have ever recorded, but consumers are still facing pretty hefty pressures on their budgets,” he said.

“Retailers were clearly working hard during the festive period to offer best value and win over shoppers, and promotions were central to their strategy. Nearly one third of all spend in the four weeks to Christmas Eve was made on items with some kind of offer, the highest level since December 2020 and £823m more than last year.”

Appetite for the traditional Christmas dinner was as strong as ever, with volumes of parsnips, sprouts and potatoes up 12%, 9% and 8% respectively, and chilled gravy up by 11%. Festive meals including pigs in blankets, sausages, hams and turkeys were also up by 6% collectively.

“We’re creatures of habit when it comes to Christmas and our data shows that the classic festive plate remains much the same,” added Fraser McKevitt.

“However, mince pies and Christmas puddings did buck the trend. They were less popular this year, with volumes falling by 4% and 7% respectively, but that isn’t to say we’ve lost our sweet tooth. Fresh cream was up by 5% across the month, so dessert was still very much on the menu.”

‘Retailers were clearly working hard during the festive period to offer best value and win over shoppers’

Meanwhile, discount retailers Lidl and Aldi saw their highest ever market shares for the Christmas period, with Lidl’s sales increasing by 13.8% and Aldi’s growing 0.2 percentage points.

Tesco, Sainsbury’s, Asda, Morrisons and Waitrose accounted for a combined market share of 70% during the 12 weeks to 24^th December.

Fraser McKevitt said this year was no exception for traditional retailers doing well in the run up to Christmas.

“Supermarkets saw especially strong performances for their own-label lines, with sales of premium ranges like Sainsbury’s Taste the Difference and Tesco Finest surging by 11.9% compared with last year, to £790 million. Branded sales rose by 6.0% during the same period,” said Fraser McKevitt.

Frozen specialist Iceland’s sales increased by 2.9%, with its market share at 2.4% and Asda accelerated sales growth to 3.4% to take 13.6% of the market.

Online purchases grew slightly ahead of the market during the four weeks to 24^th December versus last year, up by 7.5%.

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