Morrisons Christmas Ad 2022 (8)

Morrisons put in its best performance since June 2021, but sales still declined 2.9%

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Spending in supermarkets has breached the £12bn barrier for the first time this Christmas thanks to soaring inflation, new figures have revealed this morning.

Take-home grocery sales hit a record £12.8bn in the four weeks to 25 December, representing a £1.1bn rise compared with the same period in 2021, according to Kantar market share data. Sales were up 7.6% in the 12-week period.

However, volumes fell 1% year on year as inflation continued to pile pressure on hard-up households.

Grocery price inflation came in at 14.4% in December, compared with 14.6% in the prior month. It is the second month in a row that inflation measured by Kantar has slowed, leading to hopes the worst is over.

“However, it’s still a painfully high figure at the current rate, impacting how and what we buy at the shops,” said Fraser McKevitt, head of retail and consumer insight at Kantar.

“Value sales are up significantly but grocery price inflation is the real driving factor behind this rather than increased purchasing.”

Kantar highlighted a 19% jump in mince pie sales across the Christmas period despite volumes remaining almost flat, while Christmas puddings sales rose by 16% on 6% volume growth.

Consumers continued to trade down to deal with the higher prices as supermarket own label sales increased 13.3%, well ahead of a 4.7% increase in branded lines.

“The British supermarket sector is more competitive than ever and the grocers are keen to retain customers by offering their own festive alternatives,” McKevitt added.

“This has included an emphasis on premium own label products, giving consumers a way to treat themselves this Christmas.”

Sales of premium own label rose by 10.2% this Christmas to hit more than £700m for the first time. Tesco’s Finest range remained the single largest premium own label line by some distance, while Aldi and Lidl were the biggest contributors to the premium own label sector’s overall growth in 2022.

Friday 23 December proved to be the most popular shopping day of the year, with more than half of the nation’s households going to stores or receiving a delivery.

“Shoppers took to the supermarkets in their droves in the immediate run-up to the big day, but this was also evident throughout the month of December as people visited physical grocery stores 5.2% more often than this time last year,” McKevitt said. “In fact, December was stores’ busiest month since the start of the pandemic.”

The online grocery sector also remained in growth with value sales up 4% year on year. However, there was a slight decline in online’s total share compared to Christmas 2021, nudging down by 0.6 percentage points to 11.6%. Inflation put pressure on online basket sizes with the average cost of a virtual basket now sitting at £93.06.

The traditional grocers captured most of the Christmas purchasing, with Tesco, Sainsbury’s, Asda and Morrisons accounting for more than two thirds of all spending.

Asda led this group, with sales up by 6.4%, closely followed by Sainsbury’s and Tesco which achieved sales growth of 6.2% and 6.0% respectively. Despite sales falling by 2.9%, Morrisons had its best performance since June 2021.

Aldi remained the fastest growing grocer with 27% growth taking its market share up from 7.7% this time last year to 9.1%. Lidl’s sales increased by 23.9%, moving its market share up by 0.9 percentage points to 7.2%.

Iceland’s sales grew by 10.2%, with sales of frozen poultry rising by 15% and frozen prepared foods by 18%. This pushed Iceland’s market share to 2.5%. Co-op’s market share now stands at 5.6%, while Waitrose has 4.7%. Ocado increased sales by 8.2%, maintaining a market share of 1.7%.

The World Cup also provided a boost for the take-home beer market in December, with England’s quarter final against France on 10 December seeing sales hit their biggest daily takings of the year, surpassed only by the Friday and Saturday before Christmas as people stocked up on festive drinks.

The latest period saw a marked increase in the purchasing of cold and flu related items versus a year ago. Sales of cough lozenges were up by 54%, while the market for decongestants grew by 36% and facial tissue sales also increased by 35%.

Morning update

Food prices continued to rocket as 2022 drew to a close, according to the latest monthly survey from the British Retail Consortium and NielsenIQ.

Food inflation accelerated to 13.3% in December, up from 12.4% in the previous month. It’s the highest rate in the food category on record.

Fresh food prices increased 15%, compared with 14.3% in November, while ambient was up from 10% to 11%.

Overall shop price annual inflation slowed down a touch from 7.4% to 7.3% as non-food fell back to 4.4% from 4.8%.

BRC chief executive Helen Dickinson said it was a challenging Christmas from many households across the UK.

“Not only did the cold snap force people to spend more on their energy bills, but the prices of many essential foods also rose as reverberations from the war in Ukraine continued to keep high the cost of animal feed, fertiliser and energy,” she added.

“Non-food price rises eased as some retailers used discounting to shed excess stock built up during the disruptions to supply chains, meaning some customers were able to bag bargain gifts.”

“2023 will be another difficult year for consumers and businesses as inflation shows no immediate signs of waning.”

Mike Watkins, head of retailer and business insight at NielsenIQ, said consumer demand would likely be weak in the first quarter of the new year.

“So the increase in food inflation is going to put further pressure on household budgets and it’s unlikely that there will be any improvement in the consumer mind-set around personal finances in the near term. With shoppers having less money to spend on discretionary retail having paid for their essential groceries, there will be little to stimulate demand across the non-food channels.”

The FTSE 100 edged higher this morning, up 0.2% to 7,573.91pts.

Early risers included Heineken, up 2.9% to €91.92, Ocado, up 2.2% to 663p, Britvic, up 2.2% to 791.5p, and M&S, up 2% to 129.2p.

Fallers so far included Nichols, down 2.9% to 1,062.9p, Science in Sport, down 2.7% to 13.6p, and Deliveroo, down 1,2% to 87.8p.

Yesterday in the City

The FTSE 100 spiked to a seven-month high yesterday morning to shrug off persisting gloom, before falling back sligthly to close 1.7% higher at 7,577.90pts.

Tech stocks, which took a hammering in 2022, rallied as well, with HelloFresh up 9.5% to €23.12, Just Eat Takeaway up 8.6% to 1,886.2p, Virgin Wines UK up 8.2% to 75p, THG up 7.1% to 47p, Ocado up 5.5% to 651p and Deliveroo up 5.5% to 90.4p.

Hotel Chocolat Group also shot up 6% to 167.5p after the retailer revealed a new strategic partnership in Japan.

Early new year fallers included Hilton Food Group and Finsbury Group, down 1.8% to 547p and 1.2% to 90.6p respectively.