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Rising Prices Drive Grocery Sales Growth

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Rising Prices Drive Grocery Sales Growth

Rising Prices Drive Grocery Sales Growth
March 14
15:18 2019

The latest figures from Kantar Worldpanel show the Irish grocery market grew by 3.5% in the 12 weeks to 24 February 2019, putting the sector on a solid footing as the UK finalises preparations to leave the EU. After a prolonged period of deflation, an upward trajectory in grocery prices is making a significant contribution to growth.

Douglas Faughnan, consumer insight director at Kantar Worldpanel, comments: “Grocery prices rose by a further 1.5% in the most recent 12 weeks, marking the first time an increase has been recorded for four consecutive periods since February 2017. Prior to this a number of factors had contributed to the lengthy spell of deflation, not least the intense price competition between retailers which has driven down costs for consumers and has been to the benefit of Irish shoppers overall. The continued growth of Aldi and Lidl who now account for 11.2% and 11% of the market respectively has encouraged the three traditional retailers to bolster their value credentials by launching promotions such as Tesco’s The 800 campaign, Dunnes’ Everyday Savers and SuperValu’s Fill Your Trolley.

Douglas Faughnan, consumer insight director at Kantar Worldpanel.

“Meanwhile, a stronger euro to sterling exchange rate has made British imported goods and ingredients cheaper, allowing retailers to pass some of those savings on to Irish consumers. However, with prices already rising as Britain’s exit from the EU draws near, increases are likely to continue for the rest of the year. With more than €3.5 billion in food imports from the UK, the currency fluctuation can have a substantial impact on grocery prices in Ireland”

Douglas Faughnan continues: “While branded sales have remained resilient despite higher prices, growing at 3% and accounting for 47.3% of overall sales, continued inflation may drive Irish consumers to trade down to cheaper own label ranges which are already growing at 4% in the latest 12 weeks.”

Price growth will likely also affect the promotional landscape. At present 30.2% of grocery sales are on promotion, though this has been in gradual decline over the past five years. An extended period of inflation may see Irish shoppers seeking more value by preferring to buy more on promotion.

Douglas Faughnan continues: “Shoppers may opt to save money by moving more of their spend towards the retailers they perceive as offering better value. Each of the five major supermarkets played host to at least two-thirds of the population in the past 12 weeks, demonstrating that Irish shoppers are already prepared to shop around for the best deals. Retaining the loyalty of their existing shoppers will be a key priority for retailers in the face of increased price pressure.”

While many shoppers may have treated their other halves to an evening on the town for Valentine’s Day, supermarkets cashed in from those choosing to celebrate at home. Douglas Faughnan explains: “Convenience continues to be a major priority for people celebrating with a night in. Valentine’s Day is no different, helping drive overall sales of chilled ready meals and chilled desserts, which grew by 8.4% and 6.9% in the past three months.

“Traditional gifts also benefited, with wine and chocolate confectionery sales growing by 17.1% and 10.7%. However, as Lent kicked off on the 6 March, some of these more indulgent categories may face a more challenging period in the run up to Easter.”

Following a strong festive period, both Aldi and Lidl continued their impressive start to the year, growing sales by 10.5% and 6.0% respectively. Douglas Faughnan continues: “This marks the second consecutive period in which Aldi achieved double digit sales growth, a feat it has not achieved since March 2015. Meanwhile, Lidl’s growth of 6.0% is the highest for the retailer since May 2016.

“For the seventh consecutive period Dunnes was Ireland’s largest retailer, posting sales growth of 3.8%. While both Tesco and SuperValu saw their overall market shares decline, the pair did enjoy positive sales growth of 1.1% and 0.8%.”

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