According to new industry data, a supermarket price war is breaking out as grocery inflation moderates, and the main players in the United Kingdom “up the ante” on promotions.
According to market researcher Kantar, for the first time in a decade, in 2023, all of the leading grocers in the United Kingdom increased their share of sales concluded through deals compared to the previous year.
Member Pricing Initiatives
Certain supermarkets, including Sainsbury’s, have instituted member pricing, whereby customers who possess loyalty cards are granted discounted prices on specific merchandise.
Based on the data, Lidl has experienced the most rapid growth of any supermarket chain over the past year, increasing its market share by 14.3% annually to 7.6%.
Grocery Inflation in Decline
The promotional drive coincides with the first time since July 2022 that grocery inflation in the United Kingdom has fallen to single digits.
The annual grocery inflation rate decelerated to 9.7% in the month ending October 29th, from 11% in the previous report by the market researcher.
Supermarkets continue to engage in intense competition regarding prices with the objective of retaining customers and expanding their market presence.
Certain essential products have seen price reductions at each of the nation’s main supermarket chains in recent months.
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Sainsbury’s disclosed last week that it has invested £118 million since March to maintain low prices.
Nevertheless, the deceleration in grocery inflation was of a restricted magnitude. Kantar reports that while the price of butter, dried pasta, and milk is declining, frozen potato products such as frozen fries, eggs, and sugar confectionery are experiencing a precipitous increase in price.
Amidst the impending Christmas season, shoppers will find solace in the general deceleration of grocery inflation; however, numerous consumers continue to contend with exorbitant expenses encompassing food, mortgages, automobile gasoline, and utility bills.
September annual food inflation was 12.1%, according to the most recent official data, but prices decreased for the first time in two years.
Fraser McKevitt, head of retail and consumer insight at Kantar, remarked, “After sixteen months of double-digit growth, grocery price inflation has finally fallen into single digits, marking a significant milestone for the British public and retailers.”
Although the decline to 9.7 percent represents a turning point and is cause for optimism, consumers will continue to experience the adverse effects. Annual price declines are observed exclusively in a restricted set of significant product categories, such as milk, dried macaroni, and butter.
In comparison to the same period last year, grocery sales increased by 7.4% in the four weeks ending October 29.
During the period, the growth of own label lines was 8%. However, the growth disparity is narrowing as branded products experienced a 6.7% increase.
Promotional expenditures reached 27.2% of total grocery sales, the greatest level since the holiday season of the previous year.
According to Victoria Scholar, the director of investment at Interactive Investor, grocery inflation remains significantly higher than the headline rate of inflation in the United Kingdom, despite showing signs of improvement. This underscores the financial strain that the escalating cost of food items places on individuals and families.
She further stated, “This year, supermarkets in the United Kingdom have reduced the prices of essential food items in an effort to retain market share and attract customers.”
Additionally, they have been prioritising promotions and loyalty programmes in an effort to increase foot traffic and deter customers from purchasing elsewhere and switching to cheaper alternative supermarkets, such as the notoriously competitive German discounters Aldi and Lidl.
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