Record Christmas for supermarkets, but inflation returns

UK supermarkets saw a record Christmas, according to the latest data from KantarWorldpanel, but the grocery market has returned to inflation after 28 months.

The 12-week Christmas trading period to 1 January 2017 showed the fastest recorded growth in the market since June 2014, with a £480 million boost on 2015, an increase of 1.8%.

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Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said last year’s weaker sales had helped the year-on-year market figures, but noted sales were “buoyed by strong consumer appetite for festive celebration after a turbulent year”. Premium own-labels – including top tier wines – were a star performer as consumers traded up and took advantage of the retailers’ massive investment in recent months.

Having an extra day of shopping due to Christmas Day falling on a Sunday also proved a boon, with more people shopping on Friday 23 December than any other day.

But inflation, which was widely anticipated after 30 consecutive period of deflation, returned with like-for-like grocery prices increasing by 0.2 percentage points. McKevitt said this suggested the speed of growth in the market would increase as consumers and retailers look to avoid increasing the cost of the weekly shop.

“Last year retailers focused on simplifying their discounts and offers, and the level of promotional sales has fallen to 37% as a result – the lowest level over Christmas since 2009,” he said.

In the week that retailers start to release their Christmas trading, Kantar reported growth across the big four, with sales up 0.1%, the first growth since June 2014,  although drilling down the picture was more varied.

Tesco, which is set to release its Christmas trading results on Thursday saw a slight dent to its market share but continued its recovery with sales growth of 1.3%. Yesterday the retailer announced it would close two of its distribution centres to simplify its distribution.

Meanwhile Morrisons saw its first growth since June 2015, rising 1.2%. Announcing its festive trading results this morning, the retailer said booze and new cloud-based stock-prediction tech had helped it realise its strongest Christmas performance in seven years, with like-for-like sales excluding fuel up 2.9%.

It also highlighted the new automated ordering system introduced across its stores which uses store-specific historic sales data to forecast stock requirements to improve availability.

“Our performance shows that when we improve the shopping trip, customers respond,” it said.

Asda also benefited from the festive period, improving “significantly”, McKevitt said, by slowing its decline and getting more consumers through the doors to record a fall of -2.4% compared to -4.7% last month. Despite strong online growth, Sainsbury’s overall sales dipped 0.1%. Conversely Waitrose, The Co-op and Iceland saw improved sales, up 3%, 2.4% and 9.6% respectively.

Sales growth at the discounters was undimmed, although growth was at a slightly slower rate. Aldi, whose Christmas trading was fueled by Prosecco sales rose up 11.8% and Lidl was up 7.5%, taking their market shares to 6% and 4.4% respectively.