Grocery price inflation drops

Grocery price inflation is returning to more normal levels while own brands are still growing faster than brands, shows recent industry data, suggesting that despite the drop, it will take a while for consumers to unwind the habits they picked up during cost of living crisis.

Take-home grocery sales rose by 2.9 per cent over the four weeks to May 12, according to new figures from Kantar Worldpanel. Grocery price inflation has also fallen for the fifteenth month in a row to 2.4 per cent, the lowest level since October 2021.  

Fraser McKevitt, head of retail and consumer insight at Kantar, comments, “Grocery price inflation is gradually returning to what we would consider more normal levels.  It’s now sitting only 0.8 percentage points higher than the 10-year average of 1.6% between 2012 and 2021, which is just before prices began to climb.  

“Typically, an inflation rate of around 3% is when we start to see marked changes in consumers’ behaviour, with shoppers trading down to cheaper items when the rate goes above this line and vice versa when the rate drops.  However, after nearly two and a half years of rapidly rising prices, it could take a bit longer for shoppers to unwind the habits they have learnt to help them manage the cost of living crisis. Own-label lines are proving resilient, for example, and they are still growing faster than brands, making up over half (52 per cent) of total spending.  Sales of premium own label ranges continue to increase too, up by 9.9 per cent compared with a year ago.”  

While pressures remain on household budgets, shoppers took the opportunity to enjoy the long weekend on 4-6 May.  

McKevitt explains, “It seems that many barbecues were given their first outings of the year during the most recent bank holiday weekend.  Burger sales climbed by 13 per cent, while beer and wine sales shot up by 9% and 21% respectively versus the Friday, Saturday and Sunday of the week before.”    

With the 2024 UEFA European men’s football tournament and the Olympic Games on the horizon, the summer months could see sales increases for the retailers.  

McKevitt comments, “Major sporting events can have a big impact on grocery sales, particularly in categories like alcohol.  During England’s quarter final match against France in the 2022 FIFA Men’s World Cup, take-home beer sales hit their biggest daily takings of the year outside of Christmas.  Especially if it’s paired with warmer temperatures, this year’s summer of sport could deliver a welcome boost for the sector.”  

Ocado was again the fastest growing grocer over the 12 weeks to 12 May, with sales up by 12.4 per cent – well ahead of the total online market, which saw sales increase by 5.4 per cent.  The online-only retailer accounts for 1.8 per cent of the grocery market, though this figure rises to 3 per cent in London.  Outside of the capital, Ocado saw its strongest growth in the south and east of England where one in twenty households shopped at the retailer in the latest 12 weeks.  

Britain’s biggest grocer Tesco now takes 27.6 per cent of the market – an increase of 0.5 percentage points since last year, marking its largest annual share gain since January 2022.  Convenience specialist Co-op’s share of the market is now 5.4 per cent. Both Waitrose and Iceland held market share steady.

Share of symbols and independents remained at 1.5 per cent with a minor dip.