The latest data reveals a notable slowdown in UK supermarket sales, marked by a rate of 7.2% for the four weeks to 12 August, the lowest since the start of the year.
- Contributing to this slowdown are lower inflation rates and unpredictable summer weather, which have led to less frequent shopping trips by consumers.
- In response, retailers have intensified promotional efforts, increasing spending by 23% on all fast-moving consumer goods to buoy consumer engagement.
- Amidst this, Tesco and other discount retailers like M&S, Aldi, and Lidl saw market share gains, contrasting with weaker growth figures from Morrisons and Co-op.
- Key challenges persist for the industry as it grapples with declining volumes and broader economic pressures such as rising mortgage and rental costs.
UK supermarket sales have experienced a marked slowdown, with the Total Till sales increasing by only 7.2% in the four weeks ending 12 August. This rate represents the slowest growth since January and is attributed to a combination of reduced inflation and adverse summer weather that deterred frequent shopping visits. As a result, consumers appear to be restraining their grocery spending habits.
To combat the impact of a challenging economic environment, retailers have invested considerably in promotional activities. Overall spending on promotions has risen by 23%, a 0.5% increase from the previous month, as retailers seek to encourage more consumer spending amid the cost-of-living crisis. These efforts, alongside strategic price cuts and loyalty schemes, represent a concerted attempt to stimulate demand for fast-moving consumer goods.
Notably, the retail landscape has seen Tesco achieving a 9.7% increase in sales, positioning it as a market leader in this period. Discount retailers including M&S, Aldi, and Lidl also managed to capture additional market share, with the latter two benefitting substantially from an influx of over 780,000 new shoppers year-on-year. This trend underscores consumers’ shifting preferences towards more cost-effective shopping options.
Conversely, Morrisons and Co-op have reported marginal growth, with their performance figures rising by just 1.7% and 2% respectively. According to Mike Watkins, NIQ UK Head of Retailer and Business Insight, this downturn in supermarket volumes is likely influenced by seasonal factors like summer holidays and volatile weather patterns, coupled with overarching economic pressures.
The industry faces ongoing challenges in driving volume growth despite easing inflation. Watkins highlights the broader difficulties, including the rising cost of mortgages and rentals, which weigh heavily on consumer sentiment. Hence, while inflation may be tapering, the journey towards revitalising consumer spending remains complex and fraught with hurdles.
The UK supermarket sector continues to navigate a challenging economic landscape, with strategic promotions and market adaptations proving essential to sustaining growth.
