Blog: Olympic light shines on food sales
Michelle Russell | 4 September 2012
While the London Olympics may have failed to boost total UK retail sales in the three months from June to August, food featured as the one shining light.
According to figures released by the British Retail Consortium and Nielsen total food sales were up 3.4%, with like-for-like sales up 0.8%.
UK retailers had hoped the Olympics would inspire a pick-up in spending, but these hopes appear to have been dashed, for the most part, as shoppers stayed away from the high street, with total like-for-like sales only up 0.4% in the three month period. August was the worst month, with like-for-like sales down 0.4%.
Food and drink sales, however, were supported by Olympic-related celebrations and a warmer middle of the month. Party snacks, such as crisps and nuts, were consumed in front of the TV, while hotter weather saw strong sales for barbecue foods including meats, salads, ice-cream and alcohol, the BRC noted.
Conlumino analysts said the grocery sector was "the one winner" from the Olympics. "Sales of soft drinks, snacks and confectionery all performed above average helping the sector as a whole."
Yet, while the Olympics may have given food sales a boost, the industry will need to be aware that the sales increase may have been due to inflation and not necessarily improved volumes.
Nielsen's senior manager for retailer services Mike Watkins believes retailers need to rein in price increases going forward, with underlying demand still weak.
"It's been a roller coaster year for inflation and we know that shoppers remain cautious and are probably more inclined to save than spend any small increase in household income. So, despite lower inflation in food, slight deflation in non-food and after one of the most intense periods of vouchering from supermarkets during the summer, retailers will now need to focus on limiting any price increases for the rest of the year, as underlying demand is still weak."
Morrisons is due to release its half-year results on Thursday and in a market dominated by special offers and price matching guarantees, analysts are expecting the UK's fourth-largest retailer's results to show it is feeling the squeeze.
The retailer has faced fierce competition from Tesco, and Asda has also been treading on Morrisons' toes with the help of recently-acquired Netto stores. Morrisons has also been contending with competition from German discounters Aldi and Lidl.
Data from Kantar Worldpanel shows Morrisons continued to lose out to rivals in the 12 weeks to 5 August. Its overall sales rose 1.8%, giving it a market share of 11.7%, down from 11.9% a year ago.
According to Shore Capital analysts, Morrisons' under-performance seems to be widening.
"The most notable score to our minds is that for Morrisons' supermarkets, which reads circa 1.5% sales growth in the 4-weeks to mid-August. Whilst comparatives are steady, such a measure is a worry to our minds because it implies negative LFL volumes (after new space and inflation) and, in Morrisons case, scope for negative operational gearing; that will at least offset the benefit of productivity programmers.
"Such a performance also suggests to our minds at least that fresh formats are either not performing or, if they are, non-modernised stores are going backwards at a rate of knots."
And the analysts believe this kind of momentum means Morrisons second half has "not started with a bang".
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