Growth in grocery sales in the UK has halved since last year, due to increased pressure on the retail industry and falling consumer confidence and spending.
In 2003, grocery sales for the year to March grew by 3.5% compared to 7.3% last year, according to research by the industry information provider Information Resources.
Pressure on the retail industry has increased this year with consumer confidence and spending reported to have fallen. With concerns over falling house prices, redundancy, war and increasing council tax and national insurance contributions, consumers have chosen to hold onto their money. While a downturn in the economy generally benefits the grocery industry as consumers cut back on luxury items, pressure on prices in the grocery retail sector may well have affected growth figures.
The growth of online retailing has also put pressure on store sales growth. In January 2003, ONS suggested online sales represented 6% of all retail sales. In particular, supermarket giant Tesco has reported profits of £12.2m (US$19.6m) in 2002 for Tesco.com, compared to £0.4m the previous year.
Trends by sector
The chilled sector continues to drive growth in grocery sales. Although not yet the largest grocery sector, if growth continues at its current rate, sales of chilled foods could overtake those in the ambient sector.
Despite the absence of the Easter Bank Holiday weekend in the first quarter of 2003, the beers, wines and spirits sector has continued to grow, with sales up 7.5% compared to last year. Wine continues to drive this growth and sales in the ‘other’ category, which includes so-called alcopops, have maintained double digit growth.
The produce sector has shown less than 1% growth in the quarter compared to 2002, despite many New Year’s resolutions to eat more healthily this year. This is also contrary to the Government’s Five-a-day initiative launched in February to encourage people to eat five portions of fruit and vegetables per day.
Fresh meat has returned to strong growth after experiencing static sales for the first quarter of 2003. Sales of beef in particular have picked up from a decline last year (-1.5%) to a growth of 13.4% this year, although this could be because of the declining sales last year.
In the ambient sector, the largest category, soft drinks, continues to drive growth. This seems to be at the expense of coffee, tea and other hot beverages, which have all experienced declining sales. Unsurprisingly, confectionery sales have not performed well this period, caused by the early Easter in 2002. This illustrates the impact Easter sales have on this sector and growth should recover in April.
Despite the convenience of frozen foods, only the ever-popular ready meals category has experienced growth in the frozen sector this year. With the exception of vegetables, fresh equivalents have been performing well.