Top story
Grocery price inflation has hit a new record high resulting in cash-strapped households turning to the discounters and own-label ranges to manage stretched budgets, according to the latest Kantar figures.
Shoppers are facing a potential extra £682 on annual grocery bills with inflation in the sector over the past four weeks running at 14.7% - a new high since Kantar first started tracking prices in this way in 2008.
Higher prices helped take-home grocery sales rise 5.2% in the 12 weeks to 30 October, which is the fastest rate of market growth since April 2021.
Own label sales jumped 10.3% over the latest four weeks as shoppers adopted different strategies to manage their budgets. The branded goods market grew far slower at 0.4%.
Aldi and Lidl benefitted the most from the turbulent trading environment, with the former increasing sales 22.7% year on year over the 12-week period and the latter growing 21.5%.
Aldi’s market share now stands at 9.2% and Lidl holds a new record high of 7.2%. The pair now account for 16.4% of the grocery market, compared with 4.4% 14 years ago.
Asda again led the traditional ‘Big Four’ supermarkets with sales growing by 5.3%, maintaining an overall market share of 14.3%. Meanwhile, sales at Sainsbury’s increased by 3.3% with its market share now at 14.9%.
The largest retailer Tesco had a 27% share and saw sales grow by 3.1%, while embattled Morrisons market share is now 9% as sales plunged 4.6%.
Iceland grew slightly ahead of the market, with sales increasing by 5.3%. Co-op’s sales rose by 3.3%, while Waitrose’s sales dipped by 1.9%. Online retailer Ocado held sales flat versus last year and it has a 1.6% share of the market.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “Yet again, we have a new record high figure for grocery price inflation and it’s too early right now to call the top.
“Food and drink spending is generally non-discretionary so it’s not easy for shoppers to cut back the amount they buy. Many are looking to reduce costs in other ways and the big shift to own label is still accelerating.
“While some of the rise will be down to price inflation, we can clearly see the trend in sales of the very cheapest value own label ranges, which are up by a whopping 42%. These items currently represent just under 3% of the market, although retailers have been adding new products in recent months, so it will be interesting to see if this continues.”
With household budgets under increasing pressure, fewer people are stocking the cupboards for Christmas in October, instead preferring to wait until later in the year.
This time last year two-million consumers had already bought their festive Christmas pudding, McKevitt said.
“We’ve seen 32% fewer shoppers doing that this time around, suggesting people are not trying to spread the cost of their purchasing – at least not in October,” he added.
“This Christmas is going to be a bit different, of course, with the men’s football World Cup kicking off on 20 November. The novelty of two home nations playing for the first time in nearly 25 years should generate a lot of excitement and could boost sales at the tills depending on when the games fall.
“Beer in particular does well when the football is on. During the 2018 men’s World Cup, the number of shoppers buying beer to enjoy at home tripled on the day of England’s first match against Tunisia. The evening games for the 2022 tournament will likely generate the biggest sales, including England’s match against the US on 25 November.”
Morning update
Revenues and profits have soared at Associated British Foods as Primark recovered from the pandemic and food prices rose but the group warned pressure on the bottom line would increase in the year ahead.
Group revenues increased 22% to £17bn in the year ended 17 September as sales at Primark rose 43% to £7.7bn and the group’s food business registered 10% growth thanks to higher prices.
Adjusted operating profits for the year rose 38% to £1.4bn, with profits for the sugar, ingredients and agriculture divisions all ahead of last year.
CEO George Weston warned that substantial and volatile input cost inflation would be the most significant challenge in the new financial year.
ABF expected profits to fall as a result as margins come under pressure. The group will hold prices at Primark but expected significant growth in group sales from pricing in food.
“The group delivered strong revenue and profit growth this year in a clear demonstration of the benefits of our diversification, brand strength, and of our commitment to disciplined financing and investment,” Weston added.
“The performance was achieved despite pandemic-induced disruption being followed by high and volatile input cost inflation.”
Hilton Food Group has issued a profit warning as it struggled to absorbed rocketing costs in the UK seafood business.
In an autumn trading update, the multi-protein food packer said it continued to work closely with its retail partners in the UK and had made “good progress” in either mitigating or passing through unprecedented inflationary costs in the seafood business.
However, the group warned this was happening at a slower pace than anticipated and the process was not yet fully complete, continuing for the rest of the year and into early 2023.
“Given the challenges in the UK seafood business alongside the wider macro-economic environment, the board anticipates that operating profit will now be below its expectations for the full year,” the statement said.
“Despite this the board remains confident that the business is well placed for 2023, with the group’s financial position continuing to be strong, with leverage remaining at comfortable levels.”
Overall, Hilton said volumes and revenues had been in line with expectations.
Drinks bottler Coca-Cola HBC has lifted its profit expectations following a strong summer and better-than-expected financial performance.
Organic revenues - excluding Russia and Ukraine - rose 19.6% in the third quarter, with volumes up 5.7% on momentum in priority categories or sparkling, energy and coffee.
Group organic revenues increased 7.4% in the quarter but volumes overall fell 6.6% as a result of the all Coca-Cola brands being pulled from the Russian market.
However, the group upgraded EBIT guidance to €860m to €900m on the back of the strong trading, with organic revenue growth expected to be in the double digits.
CEO Zoran Bogdanovic said: “We delivered a strong performance and continued share gains in Q3, thanks to our effective execution during this key trading period and our focus on the categories and channels where we can drive the best growth.”
He added: “So far we have seen limited evidence of changing consumer behaviour, but are alert to this possibility and can adapt quickly if needed. We are mindful of the impact that the challenging environment has on our consumers. At the same time, we take a responsible approach to pricing and mix decisions as part of our revenue growth management framework, while continuing to provide value to our shoppers and customers.
“As a result of this mindful approach, we are encouraged to see consistently strong performance on price / mix, alongside continued share gains, and that we remain the number one contributor to revenue growth within fmcg across our retail customers.”
Retail sales volumes have fallen as rising prices depresses consumer discretionary spending, according to the latest data from the British Retail Consortium and KPMG.
On a total basis, sales increased 1.6% in October, compared with a 1.3% rise in the same month a year ago. However, the monthly sales monitor is not adjusted for inflation, which means the rise in sales masked a much larger drop in volumes.
Over the three months to October, food sales increased 5.1% on a total basis year on year and 4.7% on a like-for-like basis.
Non-food retails sales fell 1.2% over the three-month period, with in-store sales of non-food up 1.3% and online down 6.3%.
Paul Martin, UK head of retail at KPMG, said aales across almost every category both online and in store fell year on year as consumers adjusted to shrinking household incomes.
“Furniture, food and health products saved the day on the high street as consumers prepare for colder days at home,” he added. “Online retailers saw sales decline in every category apart from furniture, as consumers head to the shops more frequently in search of bargains to manage daily expenditure.
“Retailers will be hedging their bets on a successful World Cup and Black Friday to boost sales during the crucial golden quarter. Given the economic headwinds, it is unlikely that the usual festive boost will be enough to counteract the ongoing issues that retailers face with rising costs, squeezed margins and falling demand.”
Susan Barratt, CEO at IGD, said October’s food and drink sales were driven by inflation with volume sales over the period “notably negative”.
“Set against a turbulent backdrop with much uncertainty in both politics and the economy, shoppers are feeling cautious and are holding back their spending,” she added. “The food industry will hope that upcoming events like the World Cup and Christmas will encourage shoppers to loosen the purse strings.”
Consumer spending grew well below the rate of inflation as struggling households cut back on discretionary items and plan to reduce Christmas purchases.
The latest data from Barclaycard showed consumer card spending grew 3.5% year on year in October, which was higher than the 1.8% recorded in September but well below the 8.8% rise in consumer price inflation.
Spending on essential items – such as fuel and groceries – increased 5.7% year-on-year, steeper than September’s growth (3.3%), reflecting the impact of rising inflation.
Supermarket shopping grew 4.6% – 1.8 percentage points higher than last month (2.8%) - as the cost of food continued to rise. In response, two thirds of Brits (67%) are looking for ways to get more value from their weekly shop, with almost half of these shoppers (48%) paying closer attention to the prices of items they buy regularly, and the same number buying budget or own-brand goods over branded goods. More than four in 10 (44%) are opting for cheaper “wonky” vegetables, and one in four (26%) is only buying items that are discounted or on offer.
A further 13% are even growing their own produce at home to save money.
Spending on utilities grew 36% – much lower than September’s increase of 48% – as many households started receiving their discounts from the government’s support scheme.
Esme Harwood, director at Barclaycard, said: “Rising petrol and supermarket costs continue to bite, but Brits are spending less on energy bills as government support kicks in and people find ways to economise at home. Consumers continue to swap big nights out for cosy evenings in as they reduce their discretionary spending, while health & beauty and home improvements enjoy a little boost.
“With the festive season around the corner, we’re likely to see further cutbacks, as Brits reign in their Christmas spending. Consumers are adopting a restrained approach to festivities, reaching for pre-loved gifts and setting spending limits to manage their costs during this traditionally expensive time of year.”
Britvic CFO Joanne Wilson is leaving the drinks group to take up the role of CFO at global media firm WPP next year.
She will remain with Britvic until the end of her notice period in May 2023.
Wilson joined Britvic in September 2019 from Dunnhumby. The group said she had helped “successfully steer us through a challenging external landscape, particularly the global pandemic”.
Britvic has kicked off a recruitment process to find a new CFO.
The FTSE 100 fell back again by 0.5% to 7,265.63pts.
Shares at ABF jumped 5% to 1,500p as the group also announced a buyback in its results, while Coca-Cola HBC rose 3.5% to 1,993.5p and Hilton Food Group plunged 13.4% to 549p.
Yesterday in the City
It was a subdued start to the week for the FTSE 100 with little in the way of market news to drive movement. London’s blue-chip index fell 0.5% to 7,299.39pts.
Similarly, it was also quiet for food and drink news yesterday.
Embattled THG led the way, with shares climbing 6.6% to 64.1p as investor sentiment turned positive in recent weeks. The stock has more than doubled in value in the past month.
Renewed investor optimism also helped Ocado, which rose 6.1% to 672.6p. The stock is up more than 25% in the past week following the news of a deal in South Korea.
Other risers included Fever-Tree Drinks, up 5.3% to 986p, and Virgin Wines, which increased 4.8% to 61.8p after broker Liberum named it as its top pick for 2023, calling it “a corker of a stock”.
Fallers included PayPoint, down 4.3% to 555p after it announced an £83m deal to buy Appreciate Group.
No comments yet