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The Big Four Supermarkets See Green Shoots of Recovery
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The Big Four Supermarkets See Green Shoots of Recovery

U.K. supermarkets experienced a tough year in 2019—last year’s Christmas period showed the lowest growth since 2014. But in the last four weeks, it looks like there may just be a light at the end of the tunnel for retailers and manufacturers. In the four weeks up to the 22nd February, sales at the country’s top four supermarkets improved to + 0.7%, despite sales in general merchandise declining by -2.9%1. This improvement is expected to continue through to Easter, with shoppers expected to visit more stores, more often. However, looking further ahead, this tentative growth could be challenged by disruptions to both the supply chain and consumer demand.

The recent spread of the Novel Coronavirus (COVID-19) to several countries globally, including the U.K., has dominated headlines and fueled concerns among consumers. Yet despite the media reports, the impact from the spread of the Coronavirus in the U.K. has so far been limited, and at this point, has been restricted to a growth in sales for multi-purpose surface cleaners, which are up 8% over the last four weeks.

However, retailers would do well to keep an eye on this. Our initial investigation has found significant spikes in the hoarding of emergency supplies is occurring in China, the U.S. and Italy, where consumers are rushing to build what are being labelled “pandemic pantries.” And there is potential for U.K. consumers to begin stockpiling canned goods and other household cleaning products in the weeks to come.

Weather can also be a major factor on grocery sales. And February brought a seemingly never-ending series of storms and flooding in the U.K. This wet and windy weather did cause some short-term disruption mid-month, although sales during the week ending 15th February peaked at +1.6% as shoppers traded up on their food and drink purchases for Valentine’s Day.

The holiday played a role in helping to boost sales in a number of categories in the last four weeks, including confectionery (+4.8%), bath and shower products (+11%), and pre-mixed alcoholic drinks (+10%).2 While British shoppers remain cautious about their spending intentions, the results from Valentine’s Day prove that shoppers are still willing to spend on premium food and indulgences for events and holidays. In particular, gifting for Valentine’s Day was robust, as was the traditional ‘dine in’ alternatives. We saw this clearly come through as British shoppers spent over £104 million on fresh cut flowers for Valentine’s Day—£2.3 million more than last year—and over £26.5 million on gift cards for their special valentine, an increase of 13% over last year.¹

In terms of retailer performance, Sainsbury’s (+0.6%) was once again the only supermarket of the ‘Big Four’ to experience growth, helped by new shoppers, more visits and the launch of “Nectar Prices.” Outside of the “Big Four,” sales at Lidl remained strong, growing by +10.5%, helped by new store openings since Christmas 2019. The Co-operative (+2.4%), Marks and Spencer (+1.3%) and Iceland (+1.7%) also experienced an increase in sales. Meanwhile, online grocery experienced a growth of +6%.²

Whilst discounters continue to open new stores, which is helping to drive growth, the big supermarkets have the advantage of having a grocery online business, and this channel has grown +6% in the last 12 weeks. We expect this growth in online to continue—and may possibly accelerate if shoppers begin to stockpile as a result of further spread of the Coronavirus—which will help the green shoots of recovery to flourish. Ensuring the right range online and appropriate stock levels, combined with clear information and promotions, will be key.

While we can’t predict the weather for the next month, it’s likely that there will be an improvement on the wet and blustery days of recent months. So retailers and manufacturers should look to maximize this opportunity by stocking and promoting the seasonal and local foods that shoppers increasingly buy in early Spring, such as fresh produce and of course a wide range of chocolate for Easter.

Notes:

Unless otherwise stated all data is Nielsen Homescan Total Till.

1 Nielsen Scantrack Grocery Multiples
2 Nielsen Homescan FMCG 12 weeks to 22 February 2020