Retail Week sits down with Kantar’s head of retail and consumer insight Fraser McKevitt to look at the implications for the grocery sector from the latest market share data
Headline figures
- Following the sixth-wettest spring on record and stubborn, albeit falling, inflation, take-home grocery sales growth for the four weeks to June 9, 2024, was the slowest increase since June 2022.
- Products that traditionally would dominate summer spending were disrupted by the wet weather, with suncare products down 25%, while warming soups were up almost 24% year-on-year.
- In more welcome news, inflation fell for a sixteenth consecutive month – with 36% of UK shoppers now describing their financial position as ‘comfortable’, the highest proportion since 2021.
- The kickoff of the Euros, the beginning of the summer of sport, will also be welcomed by grocers. As a result, supermarkets are looking to entice customers to spend, with promotions on beer and lager jumping 40% in the last four weeks.
- Ocado was the fastest-growing supermarket for the fourth month in a row. Tesco achieved its highest market share since February 2022, while big-four competitor Asda and the Co-op were the only two supermarkets to see market share fall in the period. Lidl continued its recent trend of growing ahead of Aldi.
Wet, wet, wet
Kantar head of retail and consumer insight Fraser McKevitt says while the damp start to summer has “clearly had an impact” on take-home grocery spend, “it’s very hard to pin down exactly how much that quantifies for”.
While sales of summer staples like suncare products and prepared salads dipped during the period, with warmer weather forecast, McKevitt expects customer behaviour to begin returning to normal seasonal behaviour.
“When the sun comes out, particularly at the weekend, customers will start looking to hold barbeques or have people over. That’s when you tend to see an element of incremental purchasing.
“With the weather, customers tend to have incredibly short-term memories. We’re all going on about the cold start to summer now but with a few warm weeks, we’ll all have forgotten about it,” he says.
Inflation easing
Inflation fell for the sixteenth month in a row during the period, with the rate now standing at 2.1%.
While McKevitt insists the “cost-of-living crisis isn’t over – far from it”, the data does show pressures on customers’ finances are beginning to ease.
“Things are definitely better than they have been in the last few months on inflation and, perhaps more importantly, about how people feel about their financial situation.”
While the inflation picture is easing, McKevitt says retailers will need to continue supporting less affluent customers, as times are still tough for many.
“Things are getting better, but it’s a slow and steady thing. Retailers won’t want to forget that 22% of people are still under financial pressure. That’s still a lot of people who are struggling and retailers will be thinking about those people a lot as well.”
Minimal growth
During the period, total grocery market sales only grew by 1%. McKevitt says this is due to there not being much headroom left for growth in the sector.
He says: “It isn’t a market where there’s huge headroom for volume growth because there’s only a fixed amount that people need to eat and drink. That’s why grocery is so competitive. It’s a bun fight for everyone.”
Despite the improving economic picture, McKevitt adds that the lethargic growth still shows that price remains “the major dynamic” when it comes to driving customer behaviour.
On the ball
McKevitt says the sluggish market growth is the reason that sporting events such as Euro 2024, which kicked off last week, are so important for retailers.
“These incremental events, be they Christmas, the Euros or the Olympics, are so valuable to retailers because it’s a golden opportunity to get customers to buy more volumes or trade up,” he says.
During Euro 2021, Kantar said customer spending at pubs jumped 60%. That last tournament was held at a time when the UK was still battling with Covid-19 and restrictions were in place. Will the absence of those restrictions, three years later, improve the picture for pubs, at the possible expense of grocers?
“People also think about inflationary pressures when it comes to eating out versus at home,” McKevitt says. “If a pint at your local has gone up 10% that’s an awful lot to be paying when you could drink the same beer for £2 a bottle at home.”
Whatever happens, McKevitt says retailers will be hoping for both England and Scotland to go far in the tournament as the bigger the games “the more people are willing to invest for a big night out or in”.
Ocado outlier
Ocado was the fastest-growing UK grocer for the fourth month in a row – increasing sales by 10.7% over the 12 weeks to June 9, ahead of the total ecommerce market that grew 4%.
McKevitt says Ocado remains an “outlier” and believes a lot of its recent growth has been down to “coupon activity”, or offering new customers promotional deals.
Another outlier has been Asda. While the former big four grocers and both discounters grew sales and market share in the period, Asda sales dropped 4%. Are there bigger problems afoot at Asda House?
“Even though inflation is coming down, the market only grew at 1%,” McKevitt says. “At 1%, there isn’t room for everybody to grow. It’s just a reflection of how incredibly competitive everybody is at the moment.
“All retailers are talking about product quality and, of course, about price. The data shows that some grocers’ messaging on those topics is landing better than others”.
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