Despite continued decline in grocery inflation rates, several U.K. supermarket chains are asking suppliers to lower their prices.
“Market data shows that, following recent inflation, some elements of cost price have started to subside. We’ve asked suppliers to let us know where they’re seeing costs fall to make sure we remain competitive,” the spokesperson said.
Waitrose’s push on suppliers follows a similar effort from Tesco in June, when it asked suppliers to lower prices so it could pass savings on to shoppers. A Tesco spokesperson said the market is moving from “inflation to deflation,” and that it wanted to get out in front of rival supermarkets by cutting prices more aggressively, according to The Guardian.
Food inflation has actually been declining through 2023 in the U.K., but the country is still facing economic struggles. Food inflation decelerated from 9.9 percent in September to 8.8 percent in October, according to new data from the British Retail Consortium and NielsenIQ.
“This is below the three-month average rate of 10.1 percent and is now at its lowest since July 2022,” the BRC said.
Research firm Kantar found that food inflation dropped to 9.7 percent in October, while take-home grocery sales over the same period rose 7.4 percent compared to October 2022.
“Grocery price inflation has finally dropped into single digits after 16 months of double-digit growth, marking a big milestone for the British public and retailers,” Kantar Head of Retail and Consumer Insight Fraser McKevitt said. “Consumers will still be feeling the pinch. We’re only seeing year-on-year price falls in a limited number of major categories including butter, dried pasta, and milk.”
Additionally, overall retail and food sales growth is slowing, BRC and Nielsen IQ found. While food sales inclined 7.9 percent for the most recent quarter to October, that is below the 12-month average growth of 8.5 percent.
“Retail sales growth slowed as high mortgage and rental costs further shook consumer confidence,” BRC Chief Executive Helen Dickinson said. “Many households are also delaying their Christmas spending in the hopes they can grab a bargain in the upcoming Black Friday sales.”
Responding to this pressure, U.K. retailers are looking for ways to slow the rate of price increases, according to McKevitt.
“This has included upping the ante on promotions – every single one of the grocers increased the proportion of sales through deals versus last year, which is something that has only happened on one other occasion in nearly 10 years,” McKevitt said. Consumer spending on promotions has now hit 27.2 percent of total grocery sales, the highest level since Christmas last year, according to McKevitt.
Shoppers are also trading down on the items they’re putting in their baskets. Own-label lines have grown ahead of their branded counterparts every month since February 2022, and own-label sales hiked up 8 percent in October, according to Kantar.
“However, the picture may well change as we go headlong into the festive period, when shoppers typically turn more to brands. Branded sales increased by 6.7 percent in the latest month, raising the distinct possibility that they will push ahead by Christmas,” McKevitt said. “And the fight for shoppers’ Christmas spending on groceries will be fierce [because] when it comes to where people shop, Brits definitely aren’t loyal and some of the traditional shopping demographics and stereotypes have been thrown out of the window.”
Shoppers are likely to favor discount grocers this holiday season, according to McKevitt, pointing out that 54 percent of Aldi and Lidl’s sales are now from more affluent shoppers. Discounters are making inroads in frozen items and fresh groceries like meat and vegetables, with those categories constituting a higher proportion of their sales than the traditional retailers, according to McKevitt.
Driving that point home, Lidl became the fastest-growing U.K. retailer in October, with a sales hike of 14.7, with Aldi’s sales rising 13.2 percent. Sainsbury’s was the fastest-growing traditional supermarket, with a sales increase of 10.1 percent over the 12 weeks to 29 October. Tesco’s sales also climbed 9.5 percent in October, and Waitrose’s sales rose 5.4 percent.
Photo courtesy of British Retail Consortium
