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Tuesday 23rd September 2014
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Supermarket Shoppers Enjoy Fruits Of Price War

Wednesday, 27th August 2014 12:04

Grocery price inflation has fallen to its lowest level since 2006, signalling more pressure on profits at the biggest supermarket chains.

In the three months to August 17, grocery price inflation eased for the eleventh consecutive period to stand at 0.2%, according to the latest industry figures from Kantar Worldpanel.

While slowing price growth is good news for consumers at a time of weak wage growth, it leaves chains feeling the squeeze as they compete to offer the lowest prices.

According to the data, market leader Tesco suffered the biggest drop in consumer spending as sales fell by 4% over the period compared the same time in 2013.

It took the chain's share of the market down from 30.2% last year to 28.8%.

It was its continuing struggles in the UK market which accounted for the chain's decision to replace Philip Clarke with a new chief executive from October 1.

Morrisons also saw a significant decline, Kantar said, with sales down 1.9% and a 0.3% fall in its market share.

Edward Garner, director at Kantar Worldpanel said: "Competitive pricing among the big grocers and deflation in the price of staple items such as vegetables, milk and bread has driven inflation down yet again.

"This naturally impacts on the overall growth of the grocery market, which has fallen to a 10 year record-low of 0.8%."

While Sainsbury's also saw its share of the grocery market dented, Asda and Waitrose performed better, enjoying growth on the same period last year.

Mr Garner explained: "Asda and Waitrose have achieved growth with differing strategies.

"Asda has pushed its 'Price Lock' strategy to keep prices on everyday essential items low, while Waitrose is running competitive offers on home delivery alongside offers for myWaitrose card users allied to its overall quality and provenance positioning."

Meanwhile, Aldi and Lidl maintained their record shares of 4.8% and 3.6%, as the figures showed 53% of British households shopped at either of the retailers over the past 12 weeks.

Last month the British Retail Consortium reported that retail sales in the UK had fallen as supermarket price wars continued to stifle growth.

Its data painted a dreary picture for supermarkets as food sales slumped by 3.5% in the three months to July.