Tuesday, 26 January 2016

Christmas Food Buying - Consumers Win but Supermarket Performance Patchy

Major supermarkets and research companies have now reported Christmas trading results.

We have learned that food deflation continues, and that, according to research agency Kantar World panel, groceries overall were 1.8% cheaper than in 2014, with the cost of Christmas dinner dropping by 2.2%. Nielsen, another research company reported that sales of meat fish and poultry were down by 3.8%.

Nielsen also reported that in the 4 weeks before Christmas, the proportion of sales bought on promotion dropped to 31%, the lowest for over 5 years.

Online grocery shopping grew over Christmas but not by much. Tesco reported sales growth of 5%, and Sainsbury !0%. Once again the numbers suggest that some forecasts of a doubling of online grocery sales by 2020 seem optimistic.

Seeing the wood for the trees when it comes to how well supermarkets did over Christmas can be tricky, and headlines can be misleading.

The main cause of confusion is the difference between total sales and “like for like” sales which strip out the impact of new store openings and closings, with the picture being further muddied by the different time periods each company chose to report on.

Kantar World panel for example quotes data for the 12 weeks to 3rd January, and tells us that “Waitrose, the Coop and Sainsbury were the Christmas winners”. Yet, according to Waitrose’s own results,  like for like sales over Christmas were down 1.4%. Sainsbury did not disclose its Christmas trading, but stated that quarterly like for like sales were down 0.4%

By contrast, Morrisons like for like sales over Christmas were up by 0.2% which sounds miniscule but was celebrated for being the only sign of growth in the past 4 years. And Tesco’s like for like grew by 1.3% in the 9 weeks to January 9th. Both recorded declines for the quarter due to store closings.

Aldi and Lidl grew by 13% and 18% respectively in the quarter, but according to some reports,  Aldi’s like for like sales were only up around 1% in the run up to Christmas. If correct this seems to confirm that discounter growth will come from opening new stores rather than increasing business through the shops that they already have.

ASDA has not reported results but its recent promise to spend another £500million on reducing prices would seem to indicate that they are losing the competitive battle.

Consumers were the winners at Christmas, but they were restrained in their purchasing, and unlikely to loosen their grip on the purse strings any time soon. Supermarkets and those who supply them faced tough trading conditions, and the onward march of the discounters as they open new stores combined with a desperate search for market share by traditional supermarket  operators mean no let up in competitive pressure.  The one bright spot is that less product was sold on promotion, but any savings will probably need to be ploughed back into every day price reductions.