Twelve months ago, the KPMG/Ipsos Retail Think Tank (RTT) wrote off 2013 as another tough year for U.K. retail as austerity measures continued to hit consumer confidence. However, in the latter stages of the year, there were clear signs that an economic corner had been turned, and the RTT now believes the overall outlook for the country’s retail sector in 2014 is positive.
“The potential for recovery is great and the [United Kingdom] could be the fastest growing market economy in 2014. GDP growth for Q4 2013 is thought to be at 1 percent quarter-on-quarter, and I believe the U.K. economy could outperform expectations and grow by 3 percent,” said James Knightley, senior U.K. economist at ING and RTT member.
David McCorquodale, head of retail at KPMG, said 2013 saw retailers achieve year-over-year sales growth of just under 3 percent, but added that it had been “hard earned and fragile,” and the market had not seen the quick thaw that had followed previous downturns. Nevertheless, he expects 2014 will see growth continue to build at a “slow and steady” pace, but warned this could be easily derailed by measures that impact consumer confidence or incomes.
“Until wage growth outpaces inflation, we won’t see soaring sales growth in the retail sector, because squeezed consumers simply don’t have large surplus amounts of cash to spend in the shops,” said McCorquodale.
The RTT has predicted another difficult year for the big supermarket chains and expects to see continued polarization in the grocery sector. Nick Bubb of investment bank Zeus Capital said “the astonishing rise of the discounters” like Aldi and Lidl showed that many households are still keen to economize. And with Waitrose and M&S Food continuing to do well at the premium end of the market, “there is no end in sight for the squeeze on the middle ground,” he said.
Backing up Bubb’s reckoning, the latest grocery share figures from Kantar Worldpanel, published for the 12 weeks ending 8 December 2013, show that for the first time over half the country shopped in either Aldi or Lidl.
“Both Aldi and Lidl have continued to record double-digit growth and are successfully broadening their shopper base,” said Chris Longbottom, director at Kantar Worldpanel.
Aldi can currently boast a record 4 percent of the grocery market while Lidl has retained its record share of 3.1 percent. Market leader Tesco has 29.9 percent of sales, Asda 16.9 percent, Sainsbury’s 16.8 percent and Morrisons 11.6 percent.
It’s still early days in terms of an economic turnaround, but there have been some positive trends within seafood retail.
According to Nielsen Scantrack data supplied by Seafish, the value of seafood sales for the 12 months ending 12 October 2013 totaled GBP 3.1 billion (USD 5.1 billion, EUR 3.7 billion), an increase of 3.2 percent year-over-year. In volume terms, U.K. shoppers bought 353,000 metric tons (MT) of products, a decrease of 2 percent. This shows Brits are spending more money on their seafood.
Perhaps the most telling indicator of an upturn is that the more expensively-placed chilled category was the only seafood format to grow in both value and volume in this period, with increases of 6.4 percent and 3.4 percent, respectively. Chilled sales achieved a value of GBP 1.9 billion (USD 3.1 billion, EUR 2.3 billion), which is 59.7 percent of the total. From a volume perspective, chilled sales totaled 153,000 MT or 43.4 percent of the total. The average price paid for chilled fish was GBP 12.23 (USD 20.07, EUR 14.76), an increase of 2.8 percent year-over-year.
Not surprisingly, the chilled category was led by sales of salmon and cod. Fresh salmon sales achieved a value of GBP 653.7 million (USD 1.1 billion, EUR 789.1 million), an increase of 9.5 percent year-over-year, based on 37,220 MT of products, a 6.2 percent increase. Fresh cod sales totaled GBP 156 million (EUR 188.3 million/USD 256 million) and 12,047 MT, increases of 11 percent and 11.2 percent, respectively.
Optimism also comes from the fact that the 6.4 percent chilled fish sales growth exceeded the increases of all the other major proteins. Poultry, beef, lamb and pork recorded year-over-year sales increases of 5 percent, 3.1 percent, 6.1 percent and 2.1 percent, respectively. Furthermore, only lamb reported a higher increase in the volume of its sales with 5.3 percent, compared with chilled seafood’s 3.4 percent. The year-over-year volume of poultry, beef and pork sales all declined.
But while the chilled seafood category is performing well, Nielsen Scantrack found total frozen is in decline, due to both falling prices and purchase quantity. Meanwhile, ambient experienced value growth due to inflation, but falling purchase quantities, penetration and purchase frequency are having a negative effect on volume growth. With value continuing to be the most powerful purchase incentive for the British shopper, these categories are still ideally placed to turn around their deficits.
Arguably, all that retailers and brands need to do is follow the lead of chilled and invest in new convenient formats and product innovations.
