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Supermarket growth has slowed and remained below inflation as shoppers take advantage of loyalty scheme discounts, according to the latest data.
Total till sales increased 9.1% in the four weeks ended 7 October, down on the 10.1% recorded a month ago and slightly below food inflation of 9.9%, Nielsen IQ reported this morning.
Volumes also remained negative, falling 0.4% in the past four weeks, suggesting some shoppers were “pressing the reset button on spending” and taking advantage of price cuts, the research firm said.
Visits to stores were only up 1.6% as the back to school period led shoppers to return to usual shopping patterns, with a slight boost to online grocery sales as a result. The online channel’s market share returned to 11% of fmcg sales in the same period. Shoppers choosing this channel claimed to be doing so to save money (51%) and time (48%).
Warm weather towards the end of September and early October also resulted in some seasonal categories registering a jump in sales, including fruit, vegetables and salads, with the category seeing volume sales increase (3.6%). In particular, there was a boost to unit sales for raspberries (+35%), strawberries (+33%) and vine tomatoes (+20%).
However, some categories continued to feel the effects of inflation. with confectionery value sales of (+12%) followed by frozen (+9.1%) and crisps and snacks (+9%). Beer, wine and spirits sales (+2.2%) continued to have the lowest fmcg growth in the four-week period. But there was an uptick in sales for beer and cider (+8.8%) and, in particular, stout (+19.2%), driven by the Rugby World Cup.
In terms of retailer performance, Aldi (+20%) and Lidl (18.4%) remained the fastest-growing over the past 12 weeks, although sales were also strong at Tesco (+9.5%) and Sainsbury’s (+8.9%), with both having more visits than the same time last year.
M&S (+12.6%) has also seen continued growth benefiting from the warm weather and Ocado was up 9.4%.
Waitrose recorded growth of 5.3%, while Asda managed 3.1% and Morrisons just 1.9%.
“Our latest data indicates that the online grocery channel is back into sustainable growth, with sales up 7.3% over 12 weeks,” said Mike Watkins, NIQ’s UK head of retailer and business insight.
“Ocado has grown market share of the online channel helped by increased marketing activity and the investment in price matching against Tesco including promotions and Clubcard prices. These seems to be resonating well with shoppers.”
He added: “There has been an improvement in volumes purchased over the last four weeks. This is a reflection that this time last year the pressure was growing on household incomes as inflation was accelerating in fuel, energy, and food.
“But it may also be an indication that some shoppers are now feeling more confident about their personal finances. If so, this would help sustain growth over the forthcoming half term period and may give a further boost in early November as seasonal advertising campaigns start.”
Morning update
’Strong’ progress at THG
Online group THG has continued to improve its performance in the third quarter as revenues fell by 4.4% to £466.5m.
It compares to a 6.5% drop in Q2 and a 5.6% fall in the first quarter, with CEO Matthew Moulding calling it “another strong quarter of progress”.
Across the divisions, beauty fell 4.4% to £272m in the period, while nutrition was down 4.6% to £155.7m and Ingenuity declined 8.8% to £155.7m.
THG said each division continued to make progress against the strategy to return to sales growth and rebuild margins.
The group’s full-year revenue guidance of 0% to -5% remained unchanged, as did forecasts for adjusted EBITDA.
“The pivots made within each division to ensure they thrive in a high inflation global environment are bearing fruit,” Moulding added.
“The momentum with which we exited Q3 was especially pleasing, with the group returning to positive constant currency revenue growth of +3.2% in September, driven by a strong performance across our beauty division.
“We remain focussed on restoring margins to pre-inflation levels while continuing to focus on cash generation. This is reflected in a best ever Q3 profit performance from our nutrition division.”
He said: “The group is exceptionally well invested with a strong balance sheet, with each division well positioned to grow market share in any market conditions.”
Food prices
Prices charged by UK food and drink manufacturers fell at the fastest rate in more than three years in September, according to the latest Lloyds Bank UK Sector Tracker.
In September, the food and drink manufacturing sector posted a reading of 48.8 on the tracker’s measure of output charges, down from 50.5 in August and the lowest reading since February 2020 (46), raising the prospect that food prices paid by consumers could fall significantly in the coming months.
A reading above 50 indicates an increase, while a reading below shows a fall. Of the 14 sectors monitored by the tracker, it was the only sector to record a decrease in output charges.
The dip in prices paid by food and drink producers’ customers, including retailers and wholesalers, was driven by a fall in input costs in September.
Morning shares
The FTSE 100 rose 0.5% to 7,665.60pts this morning.
THG shares reacted well to progress in the third quarter, jumping 3.1% to 68.9p.
Other risers included Nichols, up 2.7% to 910p, Ocado, up 2.4% to 512.2p, Hilton Food Group, up 2.3% to 677p, and Premier Foods, up 1.9% to 116.6p.
Fallers so far included Just Eat Takeaway, down 1.1% to 108p, and Finsbury Food, down 0.9% to 108p.
Yesterday in the City
The FTSE 100 nudged up 0.4% to 7,630.63pts yesterday.
It was a quiet day for market fmcg news but risers included Just Eat Takeaway, up 3.5% to 1,060p ahead of a trading update on Wednesday, SSP Group, up 2.2% to 194.3p, and Fever-Tree, up 1.5% to 1,018p.
Ocado led the fallers, sinking 5% to 504.2p, while PZ Cussons and Hotel Chocolat were also down 2.6% to 137.8p and 1.1% to 144p.
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