It was a strong end to the year for grocery retailers in the UK as shoppers spent almost £500m more on groceries this December than the last one.
Grocery spend in the four weeks ending 30 December hit £10.5bn¹, a 3.7% year-on-year rise, Excluding the discounters, sales were up 2.3%². Across the whole of 2017, grocery sales rose 3.2% in comparison to 2016.
In stark contrast to many high street retailers who saw less footfall and sales declines, the supermarkets did well this Christmas, particularly amid fierce price competition and shoppers starting to feel the squeeze on disposable incomes. The timing of Christmas day certainly helped as it was conducive to last minute indulgences and fresh foods, with some supermarkets using private-label and branded promotions to drive Christmas footfall.
Indeed, private-label sales at the supermarkets grew at nearly three times the rate of the overall grocery market (6%)² as most retailers made a big play on the quality and value of premium private-label this Christmas, which is crucial as shoppers look to economise but not compromise.
Online sales played a key part, with 18% of households shopping online for groceries in December (up from 16% last year). Online sales grew 5%, resulting in the channel hitting a high of 6.4% share of all grocery sales in the final quarter. Online is the second fastest-growing grocery sector behind the discounters. This year it was definitely a multi-channel Christmas, as some shoppers planned an online grocery shop for around the 20th, followed up by visits later in the week to the bigger stores and then last-minute visits to smaller and convenience stores before and after the big day.
Among the Big Four, Tesco had the most improved performance over the final 12 weeks of the year, with sales up 3.4% year-on-year, followed by Asda at 2.1%, who gained particular momentum in December with growths of 3.7% - the highest of the four for December, ahead of Morrisons (up 3.4%) and Tesco (3.2%). Outside of the discounters, Iceland (up 3.9% year-on-year) and Marks & Spencer (3.6%) had the best grocery sales growth figures in the final quarter.
The grocery market will likely continue to grow at around 3% for the first part of the year but shopping behaviour could still be impacted by inflation shocks around oil prices and the uncertainty around the Brexit negotiations affecting shopper sentiment. However, the industry is now much better placed to navigate these disruptions.
We see shopper spend in food retail being maintained this year with shopper looking to manage households budgets by ‘shopping smart’ on each shopping trip, by delaying spend if needed and by changing the repertoire of the products they buy. Disloyal behaviour by ‘shopping around’ for wherever the savings are perceived to be the highest will continue as will the ‘little and often’ macro trend, which is likely to become more prevalent at larger stores.
All figures are from Nielsen Homescan Total Till unless otherwise stated.
¹Source: Nielsen Homescan Total FMCG