Tesco sees growth – but grocery inflation is set to rise

Tesco is back in ‘healthy growth’ but there are signs that the overall price of groceries is  set to rise before the end of the year, Kantar Worldpanel has warned.

The UK’s largest supermarket has returned to “healthy” growth according to the latest figures from Kantar Worldpanel out this morning, seeing the first rise in its market share for five years. Sales at Tesco grew 1.3%, in the 12 weeks to 9 October, the first rise since March 2015 and its strongest performance since Sept 2015, Kantar Worldpanel’s head of retail and consumer insight Fraser McKevitt noted. Foods including ready meals and produce were among the fastest growing areas, along with its standard own label lines.

“Tesco recovery is underway, but it is very much volume led, with volume ahead of value,” he said. “Tesco has attracted a further 228,000 shoppers through its doors to help the grocer grow to a 28.2% share of the market – its first year-on-year market share gain since 2011. Sales growth has been strongest among family shoppers, while improved trading from its larger supermarket and Extra stores has supported this month’s gains.”

McKevitt said that although the price of groceries had fallen again this month, the 27^th consecutive fall, the threat of rising prices remained on a lot of minds at the moment. Grocery deflation slowed to 0.8% down from 1.5% in the last quarter, and the “direction of travel was clear”.

“The two year era of falling prices is almost certainly coming to an end – but not quite yet,” he said. “We are moving towards rising prices, and our best estimate is that this will be by the end of the year,” he warned.

Retail sales

Among the other retailers, Waitrose, Iceland and The Coop saw increases in market share.

Iceland’s 6.9% sales gain came off the back of branded products, rather than its frozen lines signaling a subtle move upmarket, contrasting with the focus on own-label at The Coop, whose 3.1% rise was backed by its revamped membership card, which rewards consumers for buying its own brand.

The Coop has now seen 17 consecutive 12 weeks of growth, McKevitt pointed out, taking it to 6.5% market share. “Consumers are continuing to buy from Co-op stores more frequently with the average shopper now visiting almost twice a week – an 8% increase,” he said.

Meanwhile Waitrose’s was still enjoying a boost from its half price September event, which had seen its level of promotion rise just behind Tesco. Sales grew 3.5%, boosting market share by 0.2 percentage points to 5.4% of the grocery market.

The discounters also saw sales rise, Aldi up by 11.4% while Lidl saw increases of 8.4%, taking market share to 6.2% and 4.6% respectively, or 10.7% combined. The combined ‘other grocers’ also saw a sales rise of 10.2%, with market share standing at 3.1% but symbol groups and independents saw sales fall 7.2%, taking their combined market share below 2%.

Sainsbury’s and Morrisons also failed to see gains, with Sainsbury’s sales down by 0.4%, and Morrisons continuing to feel the bite of its smaller store portfolio, as sales fell 3.0%, despite the positive impact (6%) of the re-launch of its ‘The Best’ range. Similarly Asda saw sales down by 5.2% – its slowest rate of decline for four months – despite a premium own label sales increase of 8%.