Branded goods to take a hit as food inflation soars

Food inflation shows “no signs of abating”, and Kantar Worldpanel expects that to benefit own-label products over branded FMCG goods.

The price of everyday groceries rose by 2.3% year on year over the 12 weeks ending 26 March, the highest rise for more than three years, according to the latest grocery market share figures from Kantar Worldpanel.

The increase means the average household had to spend an additional £21.31 on their grocery shopping over the 12-week period. There was also a reduction in promotional activity by the UK supermarkets, with promotional spending now standing at just 32.9% – 5.5 percentage points lower than the same period last year.

As a result, Kantar Worldpanel’s head of retailer and consumer insight Fraser MvKevitt has backed own-label products to thrive as consumers move away from branded FMCG items in a bid to save money.

He says: “Inflation shows no signs of abating so consumers will naturally look for cheaper food and drink items. However, offers and discounts are clearly becoming a less significant option for shoppers looking to save money.

“Already taking market share from their branded rivals – and up nearly 5% during the past 12 weeks – own-label lines could be among the main beneficiaries of inflationary pressure.”

Inflation has largely been driven by the fall in value of the pound due to Brexit. There has been around a 15% depreciation of the pound since the EU referendum in June and this is making imports dearer and resulting in a pick-up in producer price inflation.

Record market share for the discounters

Aldi and Lidl reached new record high market shares, with the German discounters now accounting for 11.7% of the UK grocery market.

Sales growth of 15% at Lidl made it the fastest growing retailer and suggested the discounters could profit from an inflationary retail environment. And as people look to save the pennies, frozen food is also on the rise. Iceland recorded its strongest sales growth since March 2013 – up 9.8% year on year.

Morrisons was the only big four supermarket to grow its sales over the period.

McKevitt concludes: “Slowing growth rates because of the late Easter meant that Morrisons was the only one of the big four to grow sales over the period: up 0.3% during the past 12 weeks. However, strong performances in produce and chilled convenience weren’t enough to stop Morrisons’ market share slipping by 0.1 percentage points to 10.4%.

“Sales at Tesco were down 0.4% overall, although growth in its own-label Farm Brands remains impressive one year after launch: 64% of Tesco shoppers made a purchase from the line during the past 12 weeks. Despite success in this area, Tesco’s market share fell by 0.5 percentage points to 27.6%. At Asda sales fell by 1.8%, while Sainsbury’s declined by 0.7%.”

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