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Grocery sector grows despite food deflation

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 11​ April, 2016​​​​​​​​​​​​​​​​​​​​​

Grocery sector grows despite food deflation

The UK grocery market has shown signs of improvement with a 1.1% year-on-year rise in sales recorded for the 12 weeks to March 27 according to Kantar Worldpanel. Boosted by the early Easter, this is the fastest growth the sector has seen all year as Tesco, Morrisons and Asda slowed their pace of decline and sales rose at Sainsbury’s. Discounters Aldi and Lidl continued their strong pace of growth, rising 14.4% and 17.7% respectively. Tesco’s sales slid by just 0.2%, while Morrisons sales were down 2.4% and Sainsbury’s, the strongest of the big four, increased sales by 1.2% as it opened new stores.

In addition, the Co-operative Group’s food business is enjoying its strongest pace of sales growth since acquiring the Somerfield chain five years ago. The convenience chain’s sales grew 3.9% in the same period according to Kantar, building on strong LFL annual growth of 1.6% in 2015. However, the whole sector continues to be affected by the food deflation, with the BRC-Nielsen Shop Price Index stating that food prices fell 0.9% in March year-on-year. As a result of this recent trend, the number of food production companies that fell into insolvency last year has trebled on 2010’s level.

In other news, grocery continues to be the shining light for M&S, although its food division sales were flat in the 13 weeks to 26 March, it outperformed rivals and expanded its market share to 4.3%, after opening 80 stores and launching 400 new products. However, General Merchandise LFLs were down by 2.7% in the same period, despite recent investment, management reshuffles, re-branding and brand rationalisation.​

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