The supermarket price war has been escalating recently as the traditional leading grocery retailers attempt to win back consumers from discounters such as Aldi and Lidl. While this technique has appeared unsuccessful to date, it seems that two of the Big Four are finally beginning to see results with grocery sales growing at their fastest rate since 2008 in the past quarter.
During the 12 weeks to the 1st of February, Tesco noted a year on year sales rise of 0.3 per cent – its first real growth since January of last year. Furthermore, the retailer managed to lift in-store footfall by 236,000 shoppers during the period, indicating that new chief executive Dave Lewis’ turnaround programme is finally starting to bear fruit.
Similarly, Morrisons enjoyed its strongest performance in more than a year as sales contracted by only 0.4 per cent. Although this is still a poor result when compared with the supermarket brand’s heyday, it was a better result than those of key rivals Asda and Sainsbury’s and a much needed win for the brand which is often left trailing in the wake of the other three members of the Big Four.
According to figures from Kantar Worldpanel, these results helped to boost overall food sales by volume by an encouraging 2.3 per cent, with total grocery sales rising by 1.1 per cent. Falling oil prices, which have driven consumers into petrol station forecourts, and the ongoing price war have been cited as key reasons for this strong result for the grocery sector.
Kantar Worldpanel head of retail and consumer insight, Fraser McKevitt, speculates that the last quarter might have signalled the beginning of the turnaround for large grocers.
He continues; “Shoppers are taking advantage of both lower fuel prices and the continuing price war among the supermarkets to slightly increase their grocery spending.
“This has pushed the market into 1.1 per cent growth, low by historical standards but a considerable improvement compared to November 2014 when the market contracted.”
In further good news for the Big Four, it appears that discounters are beginning to lose their edge with the British public, as both Aldi and Lidl saw a considerable slowdown in sales during the quarter. When compared to their respective sales growth peaks of 36 per cent and 24 per cent in May last year, rises of 21.2 per cent and 14.2 per cent over the key Christmas period were somewhat disappointing and marked the slowest growth in the discount sector since April 2013.
Shore Capital analyst Clive Black believes this may be due to the fighting spirit shown by Tesco of late.
He says; “The most eye catching development is the return to sales growth by Tesco.
“It would appear that shoppers are responding to the steps Dave Lewis has instigated at the group – cleaner stores, better check-out experiences, stronger overall availability and selective but seemingly effective price reductions, including those announced in early January on proprietary brands.”
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