In the first half of 2014, sales of FCMG products across all of the UK’s major supermarkets were down in volume by -3.2% and value by -1.2%. This is lower than the first six-month period of 2013, and almost certainly unprecedented despite recent declines in food price inflation.
The retailer’s price war on hundreds of product lines, aimed at combating the growth of discounters, is so far not helping. IRI’s average shopping basket price has fallen just 0.5% in the past eight weeks, which equates to just 54 pence a week for the average family spending £500 a month on groceries.
IRI estimates that trading down cost the grocery industry over £800m in 2013, and expects this to be significantly more by the end of 2014.
“Consumers are struggling to keep within their budgets as wages rise slower than price inflation, and child benefit cuts kick in,” said Tim Eales, strategic director of insight at IRI. “They’re cutting back on how much they buy from the major supermarkets, some moving instead to the discount shops, buying lower-priced alternatives or simply making do with less. This is having an unprecedented effect on sales from the UK’s major supermarkets.
“The retailers’ price war is saving families close to nothing. It’s going to be increasingly difficult for supermarkets to find paths to growth during the next few years unless they think differently. Optimisation of price levels and range assortment, as well as focusing on the shopper’s experience, will all be critical.”
Volume sales have declined this year across multiple categories, including:
Pet care sales were similarly affected, with volume sales lower by -4.9% as consumers looked for better value at pet specialists through ‘bricks’ and ‘clicks’.
Confectionery and personal care were down too, by -2.4% and -2.2%, despite these sectors being the most promoted of all FMCG categories. Wines and spirits volume dropped by -2.5%.
There are pockets of growth, however. These include:
IRI also points to the decline of retailer’s own label packaged grocery products in the face of intensive promotional activity by national brands, which see average discounts of around 17%. On average, consumers save 20% on the branded prices by buying own label. Although this price gap has been closing as promotion levels on own label products have reduced, consumers still spend more on their favourite brands.
More products are sold on promotion in the UK than anywhere else in Europe, and at a huge cost to manufacturers. However, after a period of decline (down to around 52% in January 2013), retailers and manufacturers have once again started to increase their use of promotions, which are now at 55%. This means that more than half of our shopping is bought on promotion. A reduction in deal depth is also adding to price inflation in-store.
© FoodBev Media Ltd 2024