‘Christmas shows the grocers’ relentless focus on price is hurting the discounters’

While the privately owned supermarkets and a handful of other food retailers have yet to update the market, there can be no doubt that grocery enjoyed a surfeit of joy this festive period.

Kantar data showed that Britons, desperate for some semblance of good cheer after what was another difficult year, splurged a record £13.7bn on turkeys, pigs-in-blankets and wine this Christmas.

Some readers may roll their eyes and ask: So what? People need to eat, and never more so at Christmas.

“Despite the protestations of Aldi and Lidl that the former big four supermarkets can’t match them on low prices, that narrative is shifting in the minds of consumers”

And after another slog of a year where the cost-of-living crisis might have made a PlayStation 5 or a cashmere jumper out of financial reach for many people, a slap-up meal with all the trimmings is just about affordable for most.

But these results show that, despite the protestations and insistences of Aldi and Lidl that the former big four supermarkets can’t match them on low prices, that narrative is shifting in the minds of consumers.

Sainsbury’s boss Simon Roberts says that, this Christmas gone, the grocer grew “[food] volumes ahead of the market… ahead of the other full choice supermarkets and also ahead of Aldi for the first time”.

That’s a big statement. But it shows that Sainsbury’s relentless messaging around its Aldi Price Match, combined with some of the other levers it has to pull that discounters don’t – Nectar Prices, a fuller assortment, online delivery and convenience stores, to name a few – is levelling the playing field, even as inflation remains stubbornly high.

Tesco, armed with the same heavy arsenal, did even better at Christmas, being the only food retailer to actually up its profit guidance off the back of festive trading.

Boss Ken Murphy says the supermarket giant “continues to win with customers from premium retailers” such as Marks & Spencer, Waitrose and Ocado.

However, while Murphy hasn’t declared victory in the eternal price wars just yet, he believes Tesco is starting to win its battles with the discounters as well.

“Over the last 12 months, and certainly over the last seven months, we’re strongly seeing the kind of switching gains to the discounters continue to diminish and moderate, and the switching gains [to us] from the value retailers growing,” he says.

To complicate things further for the discounters, since the start of the new year, both Sainsbury’s and Tesco have come out swinging with further investment in price and promotional pushes.

Asda, too, announced it was the first supermarket to unveil Aldi and Lidl Price Match – putting both the bigger and smaller German cousins firmly in their sights.

For their part, Aldi and Lidl have always insisted that, even with their price-match schemes, the supermarkets can’t ever hope to truly beat them on price.

A source close to Lidl also hit out at Asda’s assertions that it was the first supermarket to target it with a price-match scheme.

“Morrisons tried and failed with this in 2014,” they said. Fighting words, certainly, but do they bely a gathering nervousness at the value end of the market?

Looking ahead, there is cautious optimism among the supermarkets that the cost-of-living crisis is coming to an end.

While he was reticent to declare the nightmare of the last two or so years completely over, Murphy says he gets the sense that “things are balancing out for consumers”.

If inflation does fall back to normal levels and employment remains at a record high this year, consumers will at least feel like they’ve got a bit more money in their pockets.

“It’s unlikely that Murphy or Roberts will lose any sleep over the idea that Aldi and Lidl are taking lumps out of each other as much as anyone else”

It’s also clear that the discounters aren’t just winning share from the old big four players anymore. Lidl happily trumpeted the fact it had won £12.2m in spend away from Aldi this Christmas.

It’s unlikely that Murphy or Roberts will lose any sleep over the idea that Aldi and Lidl are taking lumps out of each other as much as anyone else.

With all that being said, both Aldi and Lidl are still performing incredibly well. They can rightly say they remain the cheapest in the market and, perhaps unlike in 2008, customers are not having to sacrifice quality when it comes to the lower-cost option.

The latest market share data shows that Aldi in fourth still has daylight between it and Morrisons, while Lidl continues to grow market share in sixth.

We’ve all also learned to our cost, over the past few years, that it’s the hope that things might get better that will catch you out. 

The ongoing situation in the Middle East and the knock-on effect it is already having on international shipping and energy costs may yet plunge us back into a third year of cost-of-living pressures.

Quite whether the US-UK’s gunboat diplomacy against the Yemeni Houthis will improve the situation, or only serve to make matters worse, remains to be seen. But it does feel as though we’ve all seen this movie before.

This Christmas has shown that in 2024, come war, plague or penury, the only certainty is that the discounters won’t have it all their own way with cash concious consumers.