Price rules as inflation bites

The latest grocery share figures from Kantar Worldpanel, published today for the 12 weeks ending 2 October 2011, show the grocery market growing at 5.1% per year. Although this is a strong performance, it remains below the 5.7% grocery price inflation.

Edward Garner, Director at Kantar Worldpanel, explains: “The gap between inflation and growth has become a major feature of the grocery market as shoppers trade down to cheaper products and retailers strive to convince consumers they are combating inflation. As a result, those retailers with a low price message are the driving force in the market, with Iceland and Lidl enjoying sales growth of over 10% year-on-year, and Aldi leading the market with 25.1% growth.

“Morrisons posted the strongest growth of the big four this period but all of these retailers are responding to stretched household budgets with promotional initiatives. Tesco launched its ‘Big Price Drop’ and Sainsbury’s is responding with its ‘Brand Match’ this week, which will give shoppers a refund coupon at the till if branded products are cheaper at Tesco or Asda. While it is too early to see the effect of these campaigns in the figures, future performance will be critical.”

Asda held share at 17.1% this period which contrasts with the declines seen in previous periods and reflects the inclusion of newly converted Netto stores.

Despite inflationary and budgetary pressures, the ‘Two Nations’ effect continues unabated. Waitrose achieved 9.4% growth this period and the premium ranges at Tesco and Sainsbury’s show double-digit growth, suggesting the traditional trading up at Christmas can still take place.

Watch the previous commentary here