Belfast Telegraph

Spending on discounters' groceries hits seven-year low as superstores cut prices

Consumer spending on groceries on offer has dropped to its lowest level in seven years as UK supermarkets take on the discounters with permanent price cuts, figures show.

Just 29% of supermarket spending in April went on products with temporary price cuts or multi-buy offers, the lowest level since February 2009, according to analysts Nielsen.

The shift follows supermarkets turning to permanent price cuts to take on the might of discounters such as Aldi and Lidl, where almost half of households now shop.

Aldi and Lidl's share of the grocery market reached 11.5% in the 12 weeks ending April 25 compared with 10.1% a year ago, Nielsen's figures show.

Nearly half of all households now shop at a discounter every month, up from 40% two years ago.

All four of the major supermarkets - Tesco, Sainsbury's, Asda and Morrisons - saw a decline in sales.

Aside from the discounters, only Marks & Spencer (3.1%), Waitrose (2.7%) and The Co-operative (1.6%) saw higher sales than a year ago, and a rise in market share.

Mike Watkins, Nielsen's UK head of retailer and business insight, said: "Over the last two years around 34% of a typical supermarket shopping bill went on promotional items.

"However, to help combat the rise of the discounters, supermarkets are now turning temporary price reductions into permanent cuts.

"Consequently, there's now less promotional activity as many prices are cheaper all-year round."

He added: "Only M&S, Waitrose and the Co-op seem able to fight off the rise of the discounters and attract more shoppers, which is set to become even harder in the second half of 2016 as both Aldi and Lidl open more stores.

"The Co-operative Group, for example, has opened more convenience stores to capture a greater share of 'little and often' shopping trips, typically no more than 10 items."

Figures from Kantar Worldpanel also showed that all the major supermarkets posted a decline in their rate of growth over the 12 weeks to April 24.

The Co-operative increased sales by 3.3% year on year, taking its market share to 6.2% as refurbished stores and an improved range encouraged shoppers to visit and spend more.

Waitrose's market share also increased, to 5.2%, but the discounters maintained the record share high of 10.4%, which they first reached last month, Kantar Worldpanel said.

Lidl was the fastest growing, with sales up by 15.4% as shopper numbers increased by 648,000, and Aldi saw sales up by 12.5% as it added an additional 732,000 shoppers in the last 12 weeks - more than any other retailer.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: "Consumers are enjoying a golden period of cheaper groceries with like-for-like prices falling every month since September 2014.

"Nearly two years of falling prices mean the average household is spending £78.10 a week in the supermarket, so consumers have annually saved more than £400 than if prices had risen at the same rate as the last decade."

He said the overall market volume growth of 1% was in line with Britain's increased population, adding: "Individual households have stopped increasing the amount of groceries they buy and, while it is tempting to correlate lower volumes with the uncertainty surrounding the EU referendum, there is no evidence that supermarket purchasing has any significant link with consumer confidence."