Discount retailers benefit from cost of living crunch as shoppers head to Aldi and Lidl
Grocery price inflation hit a new high of 4.3 per cent last month, with budget supermarkets luring shoppers in as the cost of living intensifies.
Fresh data from Kantar reveals the fastest rate of inflation since September 2013, with the exception of the start of the pandemic when households panic bought essentials.
Aldi and Lidl were the fastest growing retailers in the three months to 20 February, both increasing sales 3.3 per cent.
Aldi attracted an additional 1.3m customers compared with 2021 while Lidl brought in nearly an extra million.
Ongoing supply chain pressures and a potential impact of the war in Ukraine are poised to continue to push prices up, Fraser McKevitt, head of retail and consumer insight at Kantar, said.
The insights firm said grocery inflation now stands at 3.5 per cent for the three month period to February.
Products to see prices leap the quickest include savour snacks, fresh beef and cat food. However, prices have dropped in bacon, beer and lager and spirits.
Households spent average £26.07 less at supermarkets in February with own label sales performing better than brands for the first time in three months
Supermarket sales fell 3.7 per cent, with Kantar pointing to the easing of Covid restrictions as well as Brits looking to cut back on costs.
“It’s important to flag that the drop in monthly spending isn’t all down to savvy budgeting,” McKevitt added.
“With the formal end to Covid restrictions in England, more of us are now eating on the go, buying sandwiches, salads and snacks on our lunch breaks, and enjoying meals out with friends and family.”
It comes as households are facing soaring energy bills and a hike to National Insurance this spring. Previous forecasts have estimated the average household’s annual grocery bill will swell £180.
Tesco snapped up another 0.3 percentage points of market share, now accounting for 27.7 per cent of the market.
Sainsbury’s market share is now 15.5 per cent, Asda 14.6 per and Morrisons 9.8 per cent.
Following the financial crisis in 2008, people took the chance to buy cheaper products, more own label and promoted items, McKevitt told CityA.M.
However, the way retailers do promotions has changed radically in the past decade, with “historically low levels of promotions in the UK.”
“It is not clear there is appetite for the same promotions,” McKevitt added.
However, unlike previous periods of high inflation, big-name retailers will not be complacent. “What is different is there’s no complacency among other supermarkets with pricing compared to a decade ago. That is going to bethe battleground: price.”
While discount brands such as Lidl and Aldi may “fancy their chances of doing well,” titans such as Tesco will be keen to match low prices where they can too.
Anxiety over grocery bills has surged among Brits, fresh research from Ipsos has also found.
More than eight in 10 UK shoppers have started to change how they shop to cut costs this year, according to the research firm.
Behavioural changes include moving to cheaper brands, holding off on buying non essential groceries and buying yellow stickered discount items.
Ipsos CEO, Kelly Beaver, told CityA.M.: “We have seen public concern regarding the economy and rising inflation start to rise. It’s not that people are seeing [inflationary pressures yet, they’re standing on the edge of the precipice and expecting to fall off – they expect prices and costs to increase.
“So we have seen them start to tell us they are making changes. The public are preparing for things to get worse.”
Of shoppers planning to switch supermarkets, almost one in four said they planned to switch to Aldi for most of their grocery shopping, with one in five selecting Lidl and one in ten opting for Asda.
Shoppers have already seen price hikes in supermarkets with retail giants such as Unilever and PepsiCo warning of the possibility of further price increases as the year unfolds.