With the sun having shone over much of the UK today (25 July) – and with England winning the Test match against India at Lord’s – just-food is reluctant to dampen the mood but, in recent days, there has been yet more evidence of how tough trading conditions are.

On Tuesday (19 July), Kantar Worldpanel said UK grocery sales rose 4.6% in the 12 weeks to 10 July but, with food prices up by 4.6-4.8% over the period, volumes are clearly under pressure. The analysts at Kantar also had a warning on food inflation. They had believed food prices would not rise by more than 5% in 2011 but said inflation was now likely to rise above that level. No wonder, then, that consumers, keeping a tight control over their spending, seem to be buying less.

Two days later, data from the UK’s Office of National Statistics showed that, in June, sales in the country’s food retail sector – when measured in volume terms – had fallen by the most since records began in 1988. The 4.2% drop emphasised how challenging the UK grocery market is right now. However, it also compounded the ongoing trend of falling volumes, according to the ONS, there have been only two occasions in the last 18 months when food sales volumes rose.

And the trend is not just confined to the UK. On Friday, a report from analysts at SymphonyIRI claimed a “consumer recession” had hit food sales volumes in other parts of Europe. After looking at food retail sales in seven European markets for the first quarter of 2011, SymphonyIRI said consumer confidence was at an “all-time low”.

SymphonyIRI’s research showed that FMCG volumes in the UK fell 1.8% during the first quarter of the year. Volumes in Italy also dropped by 1.8% while, in Germany, they were down 1.6%.

Sales held up in some markets. In the Netherlands, volumes were up, climbing 1%. Sales volumes also rose in France, increasing 1.2% and, further south in Spain, volumes grew 2.2%.

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However, in a bid to drive sales, manufacturers are resorting more often to promotions, SymphonyIRI said. In the UK, the research firm claimed, over 50% of FMCG products are sold on deal. With commodity costs still weighing on manufacturers, particularly in markets like the UK where the domestic currency is weak, profits are set to come under pressure. 

Even a giant of the industry like PepsiCo is facing that problem. The weakness of the US dollar means PepsiCo now sees its raw-material bill at the top end of its forecasted range and the company said last week has upped prices to compensate. Will its volumes suffer? And how will other manufacturers react? We may not have to wait long to find out with PepsiCo’s peers set to announce their own second-quarter results in the coming weeks.

We will have even less time to wait to see what happens next in the story surrounding Superquinn, the Irish retailer that last week moved into receivership. Three banks, said to be owed around EUR400m (US$575.1m) by Superquinn, called in the receivers last week. The move followed weeks of speculation over Superquinn, which had been reported to be looking for a buyer. 

In May, rival retailer Musgrave was said to have made an approach for the business. On Tuesday, alongside the announcement that Superquinn was in receivership, came news that Musgrave, which owns Irish chains including Centra and SuperValu had struck a deal to buy the retailer, pending regulatory approval.

However, 48 hours later, it emerged that Superquinn chief executive Andrew Street had decided to quit and he hit out at how the receivers were treating the retailer’s suppliers. Two othe directors, meanwhile, went to Ireland’s High Court to try to block the receivers from running the business and to press for the retailer to move into examinership. Such a move would place Superquinn under High Court protection from all creditors for up to 100 days.

The receivers came out fighting, insisting a move into examinership would put jobs at Superquinn – and the retailers’ payments to suppliers – at risk. The court will hold a hearing on the move to block the receivers tomorrow. On Thursday, it will decide whether to place Superquinn into examinership.

For Superquinn’s staff and suppliers, a decision cannot come soon enough.