Data: Is the grocery pandemic uplift over?

As expected, growth has already begun to slow compared with the stratospheric spikes experienced this time last year. And comparisons are only going to become stiffer as the year progresses and the UK economy hopefully begins to reopen. 

All grocers reported sales growth year on year during the 12 weeks to March 21, according to the latest market share figures from Kantar.

Tesco solidified its position as the UK’s biggest grocer during the period, finishing with 27.1% of overall market share, while Morrisons enjoyed the biggest proportion of sales growth of the big four, up 8.7% for the period.

For the 12 weeks to March 21, growth in grocery sales slowed to 7.4%. Across the shorter four-week period, grocery sales dropped 3% compared with March 2020, when consumers panic-bought as the UK was plunged into the first national lockdown. 

Indeed, shoppers made 117 million fewer trips to the supermarket in March 2021 than in the same month last year.  

While Kantar noted that grocery sales were still 15.6% higher than pre-pandemic levels in 2019, the data highlights the issue the food retail sector will face this year in continuing to eke out growth against record comparables. 

Kantar’s head of retail and consumer insight Fraser McKevitt says: “Spring’s arrival signals the start of a really interesting period for the grocery market.

“The anniversary of the first national lockdown means we begin to compare grocery sales against the record-breaking levels seen in the early days of the pandemic and growth has perhaps not surprisingly dipped over the past four weeks as a result.”

In signs that the extraordinary growth in online grocery shopping may not continue, Kantar noted that digital food sales fell among shoppers aged 65 and over, with 143,000 fewer people in that age group ordering groceries online.

Ecommerce sales were almost double the level of March 2020, but online penetration slipped to 14.5% compared with the highs of 16% recorded in December and January.  

Retail Week has collated the Kantar figures since the outbreak of the pandemic, which highlights how the likes of Asda and Aldi have lost market share during the last 12 months at the expense of online and convenience specialists such as Ocado and the Co-op. However, maintaining those market share gains beyond the pandemic is likely to be a tough task.  

Where to now? 

The grocers have long been prepared for the fact that sales growth would slow this year compared with last, but Kantar’s McKevitt says there are areas the sector should target in a bid to continue their upward sales trajectory, such as wooing customers back into stores to drive better margins.

Initiatives such as Tesco’s Clubcard Plus subscription, which offers customers 10% off two in-store shops every month, could prove useful tools. 

“There is a lot of pent-up demand for socialising and celebrating, even in smaller groups. We’ve seen sales of sparkling wine in the last four weeks being up 36% year on year”

Fraser McKevitt, Kantar 

McKevitt suggests that Easter 2021 will prove much stronger than last year, when the shift from in-store to online shopping and a lack of family gatherings sparked a slump in sales of Easter eggs and other celebratory items like beer, wine and spirits.

Retailers will need to take full advantage of such occasions.  

“There is a lot of pent-up demand for socialising and celebrating, even in smaller groups than normal,” he says.

“We’ve seen, for example, sales of sparkling wine in the last four weeks being up 36% year on year.” 

Asda chief financial officer Rob McWilliam agrees. He says the retailer expects ”sales of outdoor items, such as patio furniture, garden accessories and barbecues to continue to remain strong as the evenings get lighter and customers make the most of lockdown easing to host friends and families outdoors, following months of isolation for many”.

He also says Asda expects sales of its George fashion label to pick back up ”as social events return to people’s diaries” – something the likes of Tesco and Sainsbury’s, in particular, could also seek to take advantage of to drive clothing sales. 

Shore Capital analyst Clive Black adds that, as lockdown restrictions ease, grocers operating petrol station forecourts will benefit from an uptick in fuel sales as customers can again begin moving about the country more freely. 

Although such areas might not offset the slowdown in food sales, Black ultimately believes grocers won’t be too concerned by their weaker year-on-year performance in 2021.

Instead, he says they will be buoyed by the huge increases in sales they have enjoyed across the longer two-year timeframe.  

“Cost comparisons are also very favourable,” Black adds. “This time last year grocers were taking on tens of thousands of new temporary workers and refitting stores for social distancing and so on.

“Mix comparisons are very favourable compared to last year because they were selling pasta and loo paper like it was going out of fashion in March 2020. That behaviour has normalised.”

As the UK lockdown begins to unwind and other channels of external food spend such as restaurants and pubs begin to reopen, grocery sales face increasingly tough comparables.

However, as people begin to travel more, return to offices and shop more frequently in stores once again, there are still opportunities for the grocers to grow. 

Attracting people back into stores, increasing focus on calendar occasions and driving non-food sales in categories where there is pent-up demand, such as clothing and general merchandise, could help the grocers maintain growth as we emerge from the pandemic.