Grocery price inflation eases off as Tesco growth accelerates

Supermarket prices continue to rise but are no longer accelerating, found researchers at Kantar Worldpanel, with Tesco enjoying the best of the summer but all of the 'big four' still losing market share to discounters.

One year on from the Brexit vote, like-for-like grocery prices rose 3.2% in the 12 weeks ending 16 July, Kantar said, which was the same rate of increase as a month ago.

Price inflation helped supermarket sales increase 3.9% in the 12-week period compared to the same timeframe a year ago.

"Robust market growth this year has been boosted by higher grocery inflation, but consumers will be pleased to hear that price rises are no longer accelerating," said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.

"One year on from the EU referendum – which had a marked impact on the price of imported groceries – hard-pressed shoppers could soon start to feel upward pricing pressures ease."

Tesco saw sales surge 2.3% but its market share fall five basis points to 27.8% from 28.3%.

Sainsbury’s sales increase 2.2% but its share shrank three points to 16%, while Morrisons lifted sales 2.1% but saw its share shrink just two points to 10.5%.

Asda, amid rumours it is looking at making a bid for discounter B&M, increased sales 1% for its fourth consecutive period of growth but saw market share drop two points to 15.1%.

Lidl remained the fastest growing supermarket in the UK, driving sales up 19.4%, which was its strongest growth in almost three years to take its market share to a new record 5.1%.

Fellow limited assortment discounter Aldi grew sales 17.9% to up its share of the market to 7.0% from 6.2%.

NIELSEN'S ALTERNATIVE NUMBERS

Research from Nielsen released on the same day found shoppers spent 5.1% more on groceries during the four weeks ending 15 July versus the same period a year ago – the highest year-on-year rise for at least four years, following a 4.0% year-on-year rise in the period ending 17 June. The week ending 24 June alone saw sales rise 7.1%.

"Various factors typically drive extra spend in grocery shopping – more disposable income, more promotions, peak events and changes in weather, and lifestyle,” said Mike Watkins, Nielsen’s UK head of retailer and business insight.

"However, the first two have been falling in recent times which shows the impact that hot weather and big sporting events – such as Wimbledon, the British Grand Prix, the British and Irish Lions rugby and the women’s cricket World Cup – had on people’s purse strings. This combination encourages shoppers to spend more, particularly on fresh foods and to use Convenience stores more often. With the likelihood of eating and drinking outside also increasing people are more inclined to indulge and treat themselves.”

Nielsen's research for the 12 weeks to 15 June found only the second time since July 2013 that all of the 'big four' saw year-on-year sales rise.

Nielsen had Tesco up 2.8%, Sainsbury's increasing 2.2%, Morrisons 1.7%, but Marks and Spencer trading strongest of the listed players, with food sales increasing 4.1%.