UK Frozen Sales Up as Overall Grocery Prices Deflate

It’s official: the United Kingdom’s retail grocery market has entered a period of deflation. The latest figures from Kantar Worldpanel, published for the 12 weeks ending on October 12, 2014, show that like-for-like prices have declined by 0.2%, nudging the grocery market into deflationary territory.

kantar Worldpal-logoMeanwhile, the retail frozen food sector is charting continued growth. A report issued by Kantar Worldpanel covering the 52-week period ending on September 14, 2014, revealed that the value of the frozen food market reached £5.8 billion, advancing 1.6% over the previous year. This was achieved at a time when the broader grocery market was relatively flat.

The strongest performance was in the frozen savory food sector – which includes meat, vegetarian and pastry products – where year-on-year value grew by 4.9% as volume advanced by 2.9%. Frozen potato products and ice cream also fared well, respectively rising 4.1% and 3.8% in value.

Brian Young, chief executive of the British Frozen Food Federation (BFFF), commented: “With opposing fortunes in the wider retail industry pitting the value retailers against the previously established big supermarkets, it is reassuring to see such consistency in the frozen food market.”

Brian-Young-BFFF-chief-exec“A developed knowledge and understanding of the valuable properties of frozen food should see growth [in the UK retail market] remain constant,” says Brian Young, chief executive of the British Frozen Food Federation.He added: “There are signs that life is returning to the economy; we predict the consistent growth in frozen food to continue alongside the resurgence. There are notable differences, unlike previous occasions when the UK has emerged from recessions, which should stand frozen food in good stead.”

Addressing the UK grocery market’s deflationary trend, Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, commented: “While the supermarkets are battling it out on price, the real winners are consumers. Extensive price cutting by some supermarkets in a bid to win the price war means that customers are saving on everyday items such as vegetables and milk.

“While price is a key battleground among the big four [retailers], at the top end of the market Waitrose secured a record grocery market share of 5.2%. Impressively, it has boosted sales by 6.8% over the past year, continuously growing its sales every month since March 2009.”

At the opposite end of the market, the growth rate of discount chain Aldi slowed slightly compared to recent months, but sales were still up 27% versus last year resulting in a market share of 4.8%. Sales for rival discounter Lidl grew by 18%, with its market share standing at 3.5%.

Fraser concluded: “We are seeing clear polarization of the market with both the premium and discount ends gaining share, while the mainstream grocers continue to be squeezed in the middle. Asda has again emerged as the winner among the big four, growing sales ahead of the market, up 1% over the past year, boosting its share to 17.3%. Tesco is yet to see substantial improvement, however it seems it may be turning a corner, as sales are down 3.6%, which is the grocer’s best figure posted since June. Meanwhile both Sainsbury’s and Morrison’s sales slipped back, down 3.1% and 1.8% respectively.”

Update on Inflation
Grocery prices, which are now in a deflationary zone at -0.2%, have fallen successfully for the thirteenth time. Shoppers in Britain are now paying less for a representative basket of food than they did in 2013. This is another record low since Kantar Worldpanel began recording GPI in October of 2006, and reflects the impact of Aldi and Lidl and the market’s competitive response, as well as deflation in some major categories including vegetables and milk.

The -0.2% figure is based on over 75,000 identical products compared year-on-year in the proportions purchased by shoppers. It is a “pure” measure in that shopping behavior is held constant between the two comparison periods – shoppers are likely to achieve a lower personal inflation rate if they trade down or seek out more offers.