Price wars push grocery market into decline for first time

The price war among the big four supermarkets has pushed the grocery market into decline for the first time as Tesco, Morrisons, Sainsbury’s and Asda all cut prices in an attempt to see off the threat of the discounters.

Tesco announced price cuts earlier this year
Tesco announced price cuts earlier this year

For the 12 weeks to 9 November, sales across the grocery industry fell by 0.2% compared to the same period a year, according to figures from Kantar Worldpanel. This is the first time sales have declined since Kantar began measuring the market 20 years ago.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, says the fight for a bigger share of sales has “ignited a price war”. That means an average basket of everyday goods such as milk bread and vegetables now costs 0.4% less than it did a year ago, the reason behind the decline in overall sales.

Sainsbury’s was the last of the big four to enter the price war, announcing plans to invest £150m in price last week as sales at stores open for more than a year fell 2.1% in its first year to 27 September. It joins Tesco, Morrisons and Asda, all of which have pledged to invest hundreds of millions in bringing down prices to ensure their pricing is closer to the discounters’.

However, that has not stopped all of the big four’s sales dropping, according to Kantar Worldpanel. Tesco was the worst performing, with its sales down 3.7%, followed by Morrisons on 3.3%.

Sainsbury’s has managed to improve on its dismal performance last month when its sales slumped by a record 3.1%. The latest figures show sales were down 2.5%.

Asda was the only one of the major grocers to maintain its market share although its sales were still down, by 0.2%.

“The major supermarkets have all had a difficult period, hit by both the flow of shoppers toward the discounters and reduced revenues as they competitively cut prices,” says McKevitt.

The performance of the big four is in stark contrast to that of Aldi and Lidl, which both saw double-digit sales rises. Waitrose also outperformed the market, with sales up 5.9%.

The decline in the grocery industry comes at an important time for the supermarkets as they gear up for the key Christmas trading period. All the major grocers have launched high-profile marketing campaigns in an attempt to convince consumers to shop with them over the festive season.

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