King sees volume declines ahead

King sees volume declines ahead

More frugal consumers are evolving the way they shop in response to the austere economic environment, Sainsbury's CEO Justin King has suggested.

Sainsbury's booked a 0.9% increase in third-quarter like-for-like sales excluding fuel this morning (9 January), marking its thirty-second consecutive quarter of comparable sales growth.

While this represents a slowing of LFL sales growth at the UK supermarket - which has seen comparable sales over the past two years grow a total of 2.9% - King was quick to emphasise that the firm "outperformed" in a "difficult" market.

"In absolute terms, it has been many a year since our like-for-like was as low as 0.9%. It is probably the lowest [LFL result] of those 32 consecutive quarters," King conceded during a conference call.

However, he added: "There won't have been many years in that period that where we can say we were the only major grocer to be growing market share... it reflects a good performance in a challenging market."

According to figures released yesterday by Kantar Worldpanel, Sainsbury's was the only retailer among the big four to increase its market share in the last three months of 2012, placing the group's growth ahead of Tesco, Asda and Morrisons.

While inflation slowed in the quarter, Sainsbury's like-for-like figure includes a contribution of almost 3% from price increases, King added.

"Our inflation in the third quarter was lower than our inflation in the second quarter," King revealed. "We have seen inflation in this quarter in our numbers come off slightly, in quarter two we've seen inflation north of 3% and in quarter three inflation has been just below 3%."

Indeed, King confirmed, sales volumes continued to decline during the period as consumers reigned in spending by adjusting their shopping patterns.

"If you look at the overall figures, both in 2011 and 2012, you would conclude that food volumes have reduced somewhere between 1% and 2%... In simple terms that is explained by less waste."

King suggested that consumers have adapted their shopping patterns by reducing the size of the weekly shop and top-up shopping more frequently in order to reduce food waste. He added that shoppers are adopting measures to stretch food similar to their parents - recooking and reusing leftovers more frequently.

This trend was reiterated by research firm SymphonyIRI, which revealed that in the five week period up to 29 December, the sales volume of all grocery products declined by 1.1%.

"Shoppers are continuing to buy less to control their grocery basket cost. They have also been controlling the cost of their grocery shopping by trading down - buying more products on promotion and switching to lower cost alternatives to their usual purchases," Tim Eales, director of strategic insight at SymphonyIRI, commented.

Indeed, King confirmed that own brand ranges were a "key driver" for the group over Christmas, while the company's Nector loyalty programme was "another way they have managed the cost of the Christmas shop".

Looking to 2013, King said Sainsbury's expected little improvement in volumes. 

"[Lost] volume is not going to reappear. People are not going to be more wasteful... and in the year ahead it is possible that volumes will decline further," King said. 

However, he remained up-beat on the longer-term prospects for grocery volumes. "In the longer run the UK population is growing," he emphasised.