UK grocery inflation cools as rain dampens demand – Kantar.

UK grocery inflation cools as rain dampens demand - Kantar.

British Grocery Inflation Eases as Wet Weather Dents Sales Growth

Grocery inflation

LONDON, Aug 15 (ANBLE) – In a refreshing turn of events, British grocery inflation has eased for a fifth consecutive month in August. However, sales growth has been hampered by wet weather, according to industry data released by market researcher Kantar.

The data reveals that annual grocery inflation stood at 12.7% in the four weeks leading up to August 6, as opposed to 14.9% in the July data set. This decline marks the second sharpest monthly fall since Kantar started monitoring grocery inflation in its current way back in 2008.

Fraser McKevitt, head of retail and consumer insight at Kantar, expressed relief on behalf of consumers, stating that the cost of staple goods has started to edge down compared to the earlier months of 2023. Price falls in milk and sunflower oil have contributed to this positive trend.

However, it is important to note that prices are still rising across supermarket shelves. The most notable price hikes have been observed in foods such as eggs, frozen potato products, and sugar confectionery.

The Conservative government’s key economic pledge to halve inflation in 2023 ahead of a probable election in 2024 is being challenged by persistent high food inflation. The recent downward trajectory of grocery inflation is being closely monitored by consumers, the Bank of England (BoE), and lawmakers alike.

In June, Tesco, Britain’s largest retailer, announced that food inflation had peaked. Since then, major grocers across the country have implemented price cuts on select products. These supermarket chains have been forced to defend themselves against claims of profiteering from the ongoing cost of living crisis.

The latest Kantar data for August provides the most up-to-date snapshot of UK grocery inflation. Official data released last month showed that overall inflation in June was 7.9%, the highest among major economies, with food inflation reaching 17.3%. The official data for July is set to be published on Wednesday.

To bring some relief, the Bank of England (BoE) has forecasted that food price inflation will fall to around 10% later this year, thereby alleviating some of the strain on consumers.

Despite the challenges posed by grocery inflation, Kantar’s report shows that grocery sales still managed to increase by 6.5% year-on-year over the four-week period, albeit at a slower pace compared to the growth rate of 10.4% recorded in July. This decline in sales growth can be attributed to unseasonable weather, which dampened the demand for popular summer favorites such as ice cream, soft drinks, and barbecue products.

When it comes to market share and sales growth, discounters Aldi and Lidl outperformed other grocers, continuing their steady upward trajectory. Aldi experienced a sales growth of 21.2% while Lidl achieved a growth rate of 19.8% over the 12 weeks leading up to August 6. This showcases the increasing popularity of these value-driven supermarket chains among UK consumers.

UK Supermarkets’ Market Share and Sales Growth

RANK SUPERMARKET MARKET SHARE (%) SALES GROWTH (%)
1 Aldi xx.x 21.2%
2 Lidl xx.x 19.8%
3
4
5

Source: Kantar

Overall, the easing grocery inflation is a positive development that brings some relief to consumers who have been grappling with rising prices. The price reductions in staple goods are especially welcome, although challenges remain in certain food categories. As the British government grapples with its pledge to halve inflation, the Bank of England’s forecast of a decline in food inflation later this year provides hope. The performance of discounters Aldi and Lidl also highlights the evolving consumer preferences in the UK grocery market.