Blog: Dean BestAre there signs of a recovery from the UK's Big Four?

Dean Best | 10 February 2015

Figures released today (10 February) by Kantar Worldpanel made for interesting reading.

The UK grocery market grew 1.1% in the 12 weeks to 1 February, the fastest rate since June, Kantar said.

And the growth came even as prices continued to fall. According to Kantar, prices dropped 1.2% during the period.

Of course, one has to account for weak comparatives but, notably, the combination of the two figures indicates sales volumes are growing.

Shore Capital retail analyst Clive Black said: "The fact that Kantar records 12-week market growth of 1.1% with grocery deflation, reflecting weaker commodity prices and price investment by the majors in particular, of 1.2% suggests that volume performance is actually quite robust. We deem volume growth to be the best indicator of an improvement in underlying trading conditions as it provides a firmer basis to support the operating cash flows of retailers and their supply chains alike."

An analysis of Kantar's numbers shows Tesco saw its sales grow for the first time in over a year, with sales up 0.3%.

However, Tesco were the only member of the UK's Big Four to report rising sales. Asda saw its sales drop 1.7%, while Sainsbury's reported a 1% decline in sales, Kantar said.

Morrisons' sales dipped 0.4% but Kantar said the UK's number four grocer had enjoyed its "best performance since December 2013".

All of the Big Four have, in varying ways, sought to emphasise the value they can offer consumers in the face of the growing popularity of Aldi and Lidl.

The German discounters are seeing their growth slow - which is natural - but both enjoyed double-digit increases in sales during the period.

Kantar also said Aldi and Lidl were continuing to gain share, a fact that will not be lost in the boardrooms of the Big Four. One look at the expansion plans of the discounters suggest they are likely to continue to gain share but, in recent months, it could be argued there are signs the Big Four are competing a bit more effectively.

There have been some noises among food manufacturing executives that the UK's Big Four were seeing their fortunes improve.

Speaking to just-food last month, Premier Foods plc Gavin Darby suggested a recovery at the UK's biggest supermarkets could be gaining steam. "What I tend to see is the resurgence of the supermarkets. It is very early days, but there were certainly some signs of it in our run into Christmas. There was some growth in market share."

Darby's comments look to be partially borne out by Kantar's numbers, certainly when looking at the figures on Tesco.

However, even if one can argue Tesco and Morrisons are seeing encouraging sales numbers, that has come in response to the challenge on price laid down by Aldi and Lidl. Moreover, both Tesco and Morrisons have announced plans to work harder on range and on price, strategies that will have obvious impacts on manufacturers operating in the UK.

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