Back To Business For Grocery Sector Following Bumper Summer
Following a bumper summer of spending, consumers have returned to their regular shopping behaviours and more usual levels of grocery spend.
Over the last four weeks ending 8 September, value growths slowed to +2.4% and volume growth for grocery multiples fell back to 0%. Many shoppers still being on holiday in late August also contributed to a return to normal for industry sales growth.
This summer was one for the record books: the six-week long heatwave from the end of June to mid-August makes it the joint hottest summer, a title it shares with the summer of 1976 and, more recently, 2003 and 2006. The summer brought with it the hot weather and volume growth of 1.4% over the last 12 weeks*. The beginning of September and the ‘back to school’ period prompted shoppers to return to usual shopping behaviours and expected levels of grocery spend.
The summer period is important for retailers, accounting for 23% of all annual grocery sales each year and is an opportunity to drive additional sales. This summer was particularly strong owing to scorching hot weather and major sporting events like the World Cup. Such events increased footfall to food and drink retailers and got shoppers into the celebratory mood with alfresco dining and viewing parties.
Over the last 12-week period, there were 1.5% more visits than during the same period a year ago, while the level of in-store promotions remained stable at 26% of sales. Many of these promotions were also relevant to ’summer shopping’ and were targeted at incremental spend in categories such as alcoholic and soft drinks, where 35% and 28% (respectively) of sales were promoted. The same was true for the confectionery and delicatessen categories (33% and 28% respectively). This encouraged shoppers to spend more across the total store during each visit, with total sales up 3.8% over the last 12 weeks.
The latest UK consumer confidence figures also show that, whilst 55% of consumers are concerned about their personal finances, 50% still believe that now is a good time to spend.**
This summer presented some clear winners. Over the last 12 weeks, The Co-Op outperformed the other major supermarkets growing by 7.3%, with Iceland close behind at +6.1%. Asda and Morrisons maintained strong performance (at 3.9% and +2.8% respectively), with Tesco growing sales by 2.5%.
When it came to the discounters, Aldi outperformed Lidl over the last 12 weeks, growing 12.5% compared with 9.1%, driven by a bigger increase in average basket spend as well as attracting more new shoppers.
Table: 12-weekly % share of grocery market spend by retailer and value sales % change
While there is still pressure on the consumer wallet, we continued to see shoppers spend freely on indulgences, celebrations and events up until the end of August. The hot summer has been a windfall for most food retailers. However, with summer turning to autumn in the last couple of weeks, sales growths have mellowed. Even so, shoppers are maintaining their grocery spend and opting instead to make savings on overall household expenditure, including clothing and homewares. We are still broadly optimistic about the rest of the year and anticipate FMCG growth to sit close to 3%, with volume growth positive during Q4.
All figures are from Nielsen Homescan Total Till unless otherwise stated.
*Source: Nielsen Scantrack Grocery Multiples 12 weeks to 8/9/18
**Source: The Conference Board® Global Consumer Confidence Survey Q2 2018 conducted in collaboration with Nielsen.