Demand for Food Falls as Inflation Bites

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Neil Beston Tel: 07770 644136

London, UK, July 19, 2011 - Headline value growth from the UK’s grocery multiples has increased to +1.9% from +1.1% in the four weeks to 9th July, principally due to inflation, according to the latest retailer performance figures released today by Nielsen (Source: Nielsen Scantrack).

However, underlying demand is weak with unit growths falling further to -1.7% from -1.3% last month (Source: Nielsen Scantrack). This despite high profile fuel promotions by the big four retailers, designed to attract shoppers into stores and encourage them to spend.

Mike Watkins, senior manager Retailer Services at Nielsen comments: “While food inflation increased in June to +5.7% (source: BRC-Nielsen SPI) there was only a modest improvement on retailers’ headline growths last month. Inflation is dampening demand and retailers are seeing falling unit sales as shoppers continue to struggle not only with food costs but with rising fuel prices and utility bills as well.”

He continues: “Retailer-performance figures over the last 12 weeks are still appearing rosy, propped up by the sales boost from our late Easter. But growth over the last four weeks has fallen back, with Morrison’s performing best of the Big Four with +4.4% growth.

“Food inflation is now approaching the same level experienced three years ago when we entered the shopper recession, but headline growths were then up at five percent and unit growths were positive at the exit of Q2. But the flat-lining of consumer confidence back to 2008 recessionary levels are now being coupled with falls in disposable income and a more competitive retail landscape, which show the game has changed again in 2011.”

"Even so, while growths in the last four weeks are higher than average in Packaged Grocery (+8.2 %) and Household (+4%) we have also seen a stock-up and then de-stock pattern of shopping, typically around promotions. What’s more, in the expandable, more heavily promoted and certainly more affordable ‘treat’ categories such as Confectionery, sales growths are a strong +9.5% as shoppers look for simple ways to indulge.”

Table 1: 12 Weekly % Share of grocery market spend by retailer and value sales % change

The figures in the table are based on 12 weeks sales through to 9 July 2011 compared with the same 12 week period in 2010. Source: Nielsen Total Till, Nielsen Homescan

*Source: Nielsen Scantrack, Grocery Multiples including Co-op

About Nielsen Homescan Total Till:

Unless otherwise stated, data is based on all purchases, bar-coded and non bar-coded, brought back into the home from any outlet by an in-home scanning panel of more than 14,500 households. Total spend includes all items stocked by any outlet, including grocery, general merchandise and clothing.

About The Nielsen Company

The Nielsen Company (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and related assets. The company has a presence in approximately 100 countries, with headquarters in New York, USA. For more information on The Nielsen Company, visit www.nielsen.com.