Supermarket Xmas Trading Shows Food Sales Resilient

The major supermarkets have posted their Xmas trading results, and its worth a burrow through the detail to see what they tell us about consumer spending, given the current economic gloom. People have to eat and indeed total food sales were well up v Xmas 2006 compared with all retail (everything from frocks to fridges) which was up just 1.4%. The question is whether belt tightening means a change in the type of food people buy.
Conventional wisdom, echoed by Justin King of Sainsbury's, says that at a time of tightened purse strings consumers will treat themselves to luxury food whilst cutting back on big ticket items, and it would appear that conventional wisdom is right.
With total food inflation for the period estimated at 1%, the league table of growth is led by Aldi at a whopping +12%. Whilst normally associated with low price food they said it was their premium range which drove the high sales. Morrisons was the clear winner among the "big four" supermarkets, coming in at + 9.5 %. Morrisons said the growth came from heavy advertising spend, and an emphasis on fresh food. Certainly they seemed to spend far more on advertising than other supermarkets, and much of the spend was behind their premium "The Best" lines. Next up was Waitrose, home of top quality, premium price products, with a 4.1% growth. Sainsbury reported figures for the 12 weeks to 5th January, and sales were up 3.7%. Their premium "Taste the Difference" range recorded its best ever quarterly sales growth. Luxury seemed to be the order of the day here with TTD Sherry Trifles up 154%, Courvoisier Butter up 232%, Salmon Fillets up 116%, and even Stilton up 43%. Sale of organic food was said to be strong, but no figures were given. By contrast, the basics range of low price food also grew, leading King to observe that growth came from "both ends of the basket". (Might explain the Aldi growth too). Somerfield grew by 4.7%, and Tesco by 3.1%. The one cloud on the generally strong story for food sales in general and premium food in particular was Marks and Spencer where sales were down by 1.5%. Sir Stuart Rose hinted that the type of food offered was out of line with consumer trends, and that he was planning radical changes, the first of which is the introduction of more specialised cooking ingredients such as smoked paprika and cinammon sticks. Which sounds pretty premium.
All supermarkets cut the price of many lines pre Xmas, particularly alcohol, and all warned that consumer spending would slow in 2008. Competition between supermarkets is likely to intensify which means a redoubled effort from the farming industry to ensure fair treatment for producers.