UK Grocery Price Inflation Softens, Supermarket Sales Growth Slows


Market research firm Kantar has reported a decrease in the annual grocery price inflation to 6.8% in the four weeks leading up to January 21, down from a recalculated 6.9% in the prior four-week window. Contrary to speculations about the influence of the disruption in Red Sea shipping on the cost of goods, retail head Fraser McKevitt indicated that the main factor was competition among supermarkets to provide value. A decline in promotional activities in the new year impacted inflation. The total take-home grocery sales saw a rise in value by 2.9%, albeit slower than December’s 7.0% growth. Leading the market growth are Lidl, Sainsbury’s, Aldi and Tesco.

Grocery Inflation Trends

According to Kantar, the annual grocery price inflation saw a dip by 0.1% as at January 21, from 6.9% to 6.8% within the same four weeks. This easing in inflation was milder compared to the 2.2 percentage point drop recorded between November and December 2023.

Supermarket Competition and Effect on Inflation

Fraser McKevitt from Kantar pointed out that the current scenario in the grocery sector primarily revolves around the supermarkets’ competition to offer the best value rather than global politics or potential disruptions to Red Sea shipping. Furthermore, he stated that the retailers’ scaled-down promotions at the beginning of the year had a slowing effect on inflation decline.

Impact on Retail Sales

Kantar’s findings revealed that grocery sales purchased on promotion represented 27% in January compared to 32% in December. This shift in retail practices, along with the continuous rise in UK food and drink prices, as predicted by researcher IGD, could influence overall retail sales. Kantar reported that total take-home grocery sales increased in value by 2.9% in the four weeks year-on year, albeit slower than in December, which saw a growth of 7.0%.

Supermarket Growth and Market Share

Among the leading grocers, Lidl showed the fastest growth over the 12 weeks leading up to January 21, with sales up by 11.9%, followed by Sainsbury’s (8.1%), Aldi (7.2%), and market leader Tesco (6.3%). However, sales growth in Asda and Morrisons lagged, at 2.1% and 2.8% respectively. Supermarket market share changes and sales growth rates are shown below.

The current trends in the UK’s grocery market and retail sales can have significant implications on trading, particularly on assets of the leading supermarket companies. Their shares could experience fluctuations based on these sales growth figures and their market dominance.

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