3rd Jun 2014 13:00
LONDON (Alliance News) - The UK's biggest four supermarket chains continue to face pressure from heavy discounters Aldi and Lidl, new data showed Tuesday, and the price war that has ensued as the big chains try to win back customers means the broader market is growing at the slowest rate for more than 11 years.
According to the latest grocery market share figures from Kantar Worldpanel, Tesco PLC, J Sainsbury PLC and Wm Morrison Supermarkets PLC all reported market share declines in the 12 weeks ending May 25, while Wal-Mart Stores-owned Asda was the only large grocer to grow its share year-on-year during the period.
The big supermarkets have also lost customers at the top end of the market, with Waitrose, part of the John Lewis Partnership, growing strongly in recent years. It maintained the all-time record share of 5.1% it secured during the last survey period.
Asda surpassed its major rivals with 2.4% growth in till rolls, according to Kantar Worldpanel, with market share rising to 17.1%, from 17.0% a year earlier. Tesco's till rolls declined 3.1%, while its market share dropped to 29.0%, from 30.5%, while Morrisons till roll fell 3.9% and its market share declined to 10.9%, from 11.6%. Sainsbury's till rolls rose 0.9%, but market share still declined to 16.5%, from 16.7%.
Tesco and Morrisons have already launched huge investments in price cuts this year. Sainsbury's has said that it will not be dragged into an outright price war, but will remain competitive using its brand match programme, which gives customers vouchers to cover any difference in prices of branded goods they paid for at Sainsbury's that were cheaper at Tesco.
"If Tesco and Morrisons continue to compete on price, unless people react by flocking to their stores and buying more stuff, decreasing price immediately deflates their business and produces a drop in turnover and market share," said Edward Garner, Director at Kantar Worldpanel.
Garner expects further erosion in market share for the UK's biggest supermarkets.
"Despite the wider market slowing, Lidl achieved a record share of 3.6% this period, accelerating with its highest ever year-on-year growth of 22.7%. Similarly, Aldi has gained 35.9% and retains its record 4.7% share reached last period," said Garner.
Kantar said that the broader UK grocery market grew only 1.7% in the period, the slowest rate for more than 11 years.
The discounters and top end retailers aren't just winning on price, but are also pulling in shoppers because they offer some different products to the big supermarkets. Aldi and Lidl are both German brands.
"In terms of competing with discounters, you have two options - one is to compete direct on price, and the other is to differentiate yourself," said Garner. "At Waitrose, managing director Mark Price?s tactic of being 'everything that the discounters aren?t' seems to have paid off for the retailer".
Waitrose's food product offering is similar to that of high street retailer Marks & Spencer Group PLC, which has seen its food business boom while its clothing arm continues to struggle.
"M&S food is another example of differentiation, as they sell food which would be classed as "shopping for tonight" with their chilled food, and ready meals. Again that is a market which M&S food dominate, but discounters simply don't have an offering in at the moment," Garner said.
The price competition in the sector prompted another drop in price inflation, to 1.2% for the 12 week period, the lowest level in four years, reflecting the impact of Aldi and Lidl and the market?s competitive response.
"The Kantar data represents a continuum of recent trends with the limited assortment discounters gaining share at a rapid rate whilst Tesco in particular looks to be the big loser," said Shore Capital analyst Clive Black.
Tesco is set to report its sales figures for the first quarter Wednesday, with analysts expecting more weak figures from the UK and Europe.
Garner said there is going to be a "huge spotlight on Philip Clarke", Tesco's Chief Executive who is yet to smooth investors concerns about the ongoing pricing war and how the company will return to growth in its home market.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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