After a slow start to the year, the warm weather this summer has been critical for bringing momentum to the retail sector in the lead up to the second half of 2018, with the last four weeks alone bringing industry growth of +4.2%.
During the last 12 weeks, the big four supermarkets (Asda, Morrisons, Sainsbury’s and Tesco) saw more shoppers, visiting more often and spending more at each visit as a result of the warmer temperatures and the prolonged heatwave. In the last week of July, when the hottest days of the year were recorded, retailers experienced the best growth of the four week period ending 11 August.
Value and volume growths are expected to remain positive going into H2, painting a very different picture to the same period last year where volumes were in decline.
Over the last four weeks, volume growths at supermarkets improved to +2.9%, up from +2.2% in the previous four weeks. Two thirds of this additional purchasing came from growth in soft drinks and fresh fruit and vegetable sales.*
Soft drinks, in particular, saw massive growth during the last four weeks, with value growth up +29% and volume growth up +20%. Fresh fruit and vegetables also saw considerable growth for the category, with value growth up +4.4% and volume growth up +4.6%.*
Earlier this summer the World Cup boosted sales of fresh meat and alcohol as consumers opted for barbecues and parties to celebrate England’s success. But as the football tournament came to a close and the hot weather persisted, shoppers swapped steaks for salads to cool down from the July heat.
Looking at retailer performance, the big four supermarkets did well over the last 12 weeks. Outside the top four,the Co-op was the fastest growing retailer (disregarding discounters Aldi and Lidl), experiencing growth of +6.6%. The strong performances from the supermarkets has taken the edge off the discounter growth.
Table: 12-weekly % share of grocery market spend by retailer and value sales % change
As one of the hottest summers on record, these past 12 weeks have given a real boost to sales at supermarkets. This is welcome news for the industry after a lacklustre start to the year following the ‘beast from the east’ and a squeeze on spending as inflation continued to bite.
Over the last four weeks, we also saw promotional activity fall back to 26% of sales, the lowest since March 2017. Looking ahead, retailers and brands will begin to invest more in targeted promotions around upcoming events such as back to school, Halloween and Christmas to encourage incremental spend and will be less reliant on general promotions around the weekly shop.
The next few weeks will now set the tone for the rest of the year. Shoppers will return from holiday, kids will go back to school, and there will be a return to more usual shopping patterns. We are expecting the momentum to continue with industry growth of around +3% , just ahead of inflation, and volume growths to remain positive.
All figures are from Nielsen Homescan Total Till unless otherwise stated.
*Source: Nielsen Scantrack Grocery Multiples