Recent data from market researcher Kantar reveals that UK grocery shoppers faced increased pressure on their budgets in September 2023, as grocery price inflation edged higher to 2.0% in the four weeks leading up to September 29. This marks an increase from the 1.7% recorded in the previous four-week period.
The rise in grocery inflation comes as the UK grocery market continues to evolve and adapt to changing consumer behaviors. The UK has a rich history of grocery retail, with the first supermarket opening its doors in 1951, revolutionizing the way people shop for food. Since then, the industry has seen significant transformations, including the introduction of self-service shopping in the 1950s and the launch of online grocery shopping in the late 1990s.
Among the various product categories, prices rose fastest in chilled soft drinks, chocolate confectionery, and skincare products. Conversely, household paper products, dog food, and cat food experienced the most significant price decreases. This fluctuation in prices reflects the dynamic nature of the UK grocery market, which is known for being one of the most competitive in Europe.
In terms of market performance, online supermarket Ocado emerged as the fastest-growing grocer, with sales up 10% year-on-year over the 12 weeks to September 29, 2023. This growth underscores the increasing importance of online grocery shopping in the UK, a trend that was significantly accelerated by the COVID-19 pandemic.
Industry leader Tesco also demonstrated strong performance, with sales growth of 5.2% and a market share increase of 60 basis points, reaching 28.0%. This marks Tesco's largest market share since December 2017, highlighting the company's resilience in a highly competitive environment. It's worth noting that Tesco, founded in 1919 as a market stall in London's East End, has a long history of innovation, including the introduction of the UK's first supermarket loyalty card in 1995.
While Sainsbury's, the second-largest supermarket chain and the oldest among the major UK supermarkets (established in 1869), saw sales rise by 5.1%, Asda struggled with a 5.1% decline in sales and a loss of 1.1 percentage points in market share year-on-year.
Discounters Aldi and Lidl continued to make their mark on the UK grocery landscape, with sales growth of 1.8% and 8.8% respectively. The rise of these discounters, which entered the UK market in the early 1990s, has significantly disrupted the traditional "Big Four" supermarket dominance.
Weather conditions played a role in shaping consumer behavior, with record monthly rainfall in September 2023 boosting demand for winter staples. Sales of hot chocolate and soup increased by 28% and 10% respectively. This trend aligns with the UK's shift towards more frequent, smaller shopping trips in recent years.
The data also revealed a strong start to Halloween sales, with pumpkin sales nearly doubling compared to September 2022, reaching just under £1 million. This surge in seasonal purchases demonstrates the importance of holiday-related products in the UK grocery market.
"Shoppers increased their spending moderately in annual terms last month, though ongoing concerns of consumers about the financial outlook kept demand low for big ticket items such as furniture and white goods."
Looking ahead, the UK grocery market, worth over £200 billion annually, continues to evolve. Supermarkets are increasingly focusing on sustainability, reducing plastic waste, and expanding their range of plant-based and vegan products. As the industry adapts to changing consumer preferences and economic conditions, it remains a crucial barometer of the UK's economic health and consumer confidence.