Aldi and Lidl make big gains in UK supermarket sector

Sales at discount supermarkets Aldi and Lidl in the UK have risen at their fastest pace for more than two years, pushing their market share to a record high as shoppers sought to limit the impact of price rises.

The German retailers boosted sales by nearly 20 per cent compared with a year ago, giving them a 12 per cent share of the UK grocery market, according to figures from Kantar Worldpanel released on Wednesday. Sales growth at the chains over the past three months was well ahead of the 3.8 per cent increase recorded across the sector as a whole, and the fastest rate since January 2015.

More than 60 per cent of the UK population shopped at Aldi or Lidl in the 12 weeks to May 21st, 1.1million more households than a year earlier.

While the discounters still lag behind Britain's Big Four supermarkets – Tesco, J Sainsbury, Wm Morrison and Asda – in terms of market share, all the other major grocers other than Iceland lost share.

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Tesco still dominates with 27.8 per cent of the market, but its lead has slipped slightly. Although it attracted 250,000 more shoppers and sales rose 1.8 per cent in the past 12 weeks, its market share was down 0.5 percentage points compared with the same time last year.

Sainsbury also saw its market share fall 0.3 percentage points. The best performer of the Big Four was Morrisons, which registered a 1.9 per cent rise in sales and only saw market share slip by 0.2 percentage points.

Supermarket sales growth hit a three-and-a-half-year high in the three months

At Walmart-owned Asda, where shopper numbers rose by more than 360,000, sales rose 0.9 per cent in the three months. Its market share was down, however, by 0.4 percentage points.

Low-cost food ranges

Supermarket sales growth hit a three-and-a-half-year high in the three months. But the discount grocers and lower-cost food ranges were the biggest beneficiaries in a sign that inflation is starting to affect consumer spending.

After more than two years of price falls driven by supermarket price wars, prices began to rise again at the start of this year as retailers passed on to consumers exchange rate pressures from the weaker pound. Higher inflation meant the average household spent an extra £27 (€31) on groceries in the past three months, Kantar said, equivalent to an additional £119 a year.

Overall, grocery inflation rose 2.9 per cent according to Kantar Worldpanel, ahead of the official year-on-year inflation rate of 2.7 per cent.

The price rises helped all the UK’s major grocers to increase revenues, but sales of cheaper own-label products were 6 per cent higher than the same period last year, in contrast to growth of only 0.6 per cent in branded products.

Supermarkets have benefited from inflation in the past, when they have passed on price increases to consumers and boosted margins. But analysts have said they may hold off doing so now, if they think raising prices will exacerbate the switch to discounters.

Copyright The Financial Times Limited 2017