Price Cuts Preferred Over Short-Term Promotions; Convenience Sector Making Gains

 Namnews, 7th March 2023

New data released by NIQ (previously known as NielsenIQ) shows Total Till grocery sales climbed 11.1% in the four weeks ending 25 February, up from 7.6% recorded in January as a result of accelerating food inflation (+14.5% in February).

The sales growth came despite a lack of availability in some fresh produce categories, which impacted sales in the last two weeks of the period. However, total value sales in the fresh produce category grew only 1.1%, with a unit decline of 5.4%. The data confirms that supermarkets struggled to meet demand for certain products, such as tomatoes, where unit sales declined by 17.6%, and peppers (-16.8%). However, value sales for products that were available such as lettuce (+13.7%) and cucumber (+31.8%) increased despite limited availability.

Volumes at the grocery multiples fell by 4.1% in the four-week period, indicating that although inflation is still rising, shoppers’ varying coping strategies and the additional own-label price cuts by retailers are helping to alleviate the impact of inflation on shopping baskets. While volumes are down compared to the same period in 2022, they are broadly unchanged over the last 12 weeks (-4.0%). NIQ noted that higher inflation is boosting value sales, but declining volumes are no worse.

However, despite the squeeze on purchasing power, there was incremental spend for Valentine’s Day and over the February half-term, which helped lift value growth at the grocery multiples to 8.2%. Compared to last year, there was an increase in sales for boxes of chocolates (+23%), fresh roses (+20%), mixed floral bunches (+14%) and sparkling wine (+4%).

NIQ’s data also confirmed that in-store visits continue to rise (+8.7%), and sales at stores were up 13.1%. This was at the expense of online sales, which fell by 2.5% as a result of fewer shoppers and less spend. Compared to Total Till figures in February 2022 (12.4%), online share of FMCG sales dipped once again to 10.9% as shopping behaviours returned to normal after the pandemic.

While Aldi (+25.6%) and Lidl (+21.1%) continued to outperform the market and gain share, NIQ data reveals that convenience store value sales grew by 8% with volume sales up 1.4%. This suggests that some shoppers prefer to visit convenience stores to limit their overall grocery spend.

Mike Watkins, NIQ’s UK Head of Retailer and Business Insight, commented: “Promotional spend continues to be low and stable at 20% of all FMCG sales with longer-term price cuts and price locks now favoured by retailers and preferred by shoppers to short-term promotions. This also helps give shoppers more price transparency across different retailers, which is important when prices are increasing.

“And the attractive pricing around Valentine’s meal offers gave a boost to some discretionary categories, which suggests that shoppers are still looking to trade up for special events and spend on treats and indulgences, provided they can make savings on everyday grocery items.”

He concluded: “Discounters sales continue to accelerate, and we currently have the fastest growth in this channel over the last decade. With food and drink inflation not expected to slow just yet and shoppers paying more for all essential items (including their energy bills), we can expect lower prices – in particular supermarkets’ own label ranges – to be the key messaging from all retailers over the next four to six months.”

NAM Implications:

• Despite some promising blips…
• …the underlying growth of the discounters…
• …and the move to own label…
• …remain a double-threat for brands.
• Making it increasingly important that branded suppliers find ways of working with the discounters…
• …and explore own label options.
• (internal politics notwithstanding)