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UK grocery inflation drops to single digits

07 November 2023 By Arabella Mileham

UK grocery inflation has dropped to single digits for the first time in 16 months, the latest data from Kantar has revealed – as retailers ramp up the promotions.

The milestone drop below 10% inflation was positive news, Fraser McKevitt, head of retail and consumer insight at Kantar said, and marked a big watershed after 16 months of double digit growth. However he warned that consumers were still “feeling the pinch” with year-on-year price falls only in a limited number of grocery categories such as butter, dried pasta and milk.

The price of sparkling wine was also lower in the latest 12 weeks, down from £7.46 in August to £6.86 in October, the data revealed.

Consumers were continuing to manage spend by trading down on some items, with own label lines still growing ahead of branded counterparts, a trend seen every month since February 2022, although as Morrison’s BWS category director John Morris recently told db, often this is less seen in wine than in other categories.

McKevitt said the picture could change in the run up to Christmas, and noted that the gap between own label and branded goods was at its narrowest since spring last year, with own labels up by 8%, versus 6.7% on branded products.

There has also been a rise in promotional activity, he pointed out, with every single one of the grocers increasing the proportion of sales through deals compared to last year – something that has only happened on one other occasion in nearly ten years, he said.

“Consumer spending on promotions has now hit 27.2% of total grocery sales – the highest level we’ve seen since Christmas last year. This is a big gear shift from October 2022 when this figure was less than a quarter.”

Meanwhile take-home grocery sales in the four weeks to 29 October 2023 rose by 7.4% compared to last year.

There was also promising signs for low-alcohol beer, as volumes rose 16% last month versus the same period in 2022.

Little loyalty

Fraser McKevitt noted that the fight for shoppers’ Christmas spend looks set to be fierce between the retailers this year, with little loyalty among retailers to retailers, as “some of the traditional shopping demographics and stereotypes have been thrown out of the window”.

“The typical customer walking through the doors of the discounters is now representative of the country as a whole, with 54% of Aldi and Lidl’s sales coming from the more affluent ‘ABC1’ social group – close to the national average of 55%,” he said.

The latest 12 weeks saw Lidl as the fastest growing retailer with sales up by 14.7% and market share up by 0.4 percentage points to 7.6%. Meanwhile Aldi sat beside Waitrose as one of only two grocers to increase its number of shoppers year-on-year, with sales up 13.2% and 5.4% respectively to take 9.7% and 4.6% of the market.

Sainsbury’s proved to be the fastest growing traditional supermarket in the 12-week period, with sales up 10.1% year-on-year, boosting it share from 14.9% last year, to 15.2% this year, while Tesco also gained share for the fourth consecutive month in a row, gaining 0.4 percentage points to 27.4% of the market, on year-on-year sales of 9.5%.

There was sales growth at Morrisons too, which has been back in growth for seven months, with sales in the latest period up by 3.2%, accounting for 8.6% of the market, behind Asda’a 13.6%. The Co-op also saw sales of 5.2%, the fastest rate since March 2021. As Kantar points out, its market share stands at 6.0%, although with baskets that are less than £20 this figure jumps considerably to 16.9%.

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