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Senior Retail Analyst Nick Gladding looks at how Christmas played out for the grocery sector and the key challenges facing our industry in 2019.

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Britain's grocery market grew more slowly over the Christmas period as inflation softened and more people shopped at discounters, according to new data from Kantar Worldpanel.

Lower inflation impacts growth

In the 12 weeks to December 30th, market growth was 1.6%, down from 2.0% in the 12 weeks to October 7th and from 3.8% for the same period a year ago, pulled down by lower inflation. Inflation for the period was +1.3%, less than half the 3.6% rate of Christmas 2017 following investments in price by retailers to meet consumers' heightened focus on value. Despite this shoppers spent a record £29.3bn on groceries, £450m than a year ago.

Premium ranges drive growth for discounters

Once again Aldi and Lidl set the pace for the sector, with two thirds of households shopping at one or both of the discounters over the 12 week period. Aldi's growth of 10.4% is in line with the 10% growth it reported yesterday with strong sales of vegetables following the popular Kevin the Carrot marketing. At Lidl, nearly one third of December's growth came from sales of branded lines and sales of the Deluxe range jumped by one third. Together the two discounters secured a 12.8% Christmas market share, their highest ever.

Asda and Tesco strongest of Big Four

Asda narrowly beat Tesco to be the fastest growing retailer of The Big Four. Its Extra Special range was the fastest growing premium range of any major retailer.  Asda also performed strongly online with growth of 12%. Tesco meanwhile achieved growth of 0.6%, lifted by an extra 125,000 shoppers visiting its stores, particularly its larger formats. Interestingly, Kantar reports that Tesco was the only retailer to have increased its promotional activity year-on year, with its 29p festive veg packs securing its position as a destination for main Christmas meal shoppers. Tesco will report its Christmas results on Thursday Jan 10th.

Flat results for Morrisons and a decline for Tesco

Morrisons sales were essentially flat for the period though this result excludes sales through the retailer's fast growing wholesale operations. See Morrisons own results for the factors shaping its trading performance. At Sainsbury's, sales declined by 0.4% according to Kantar. The retailer will release its own results tomorrow.

Encouraging growth for Co-op

Co-op has continued its strong run of recent results, achieving 3.2% growth over Christmas. Its market share increased for the seventh consecutive period and is likely to advance further in 2019 as it pushes ahead with 100 new store openings.

 

12 weeks to 31 Dec 2017 (% share)

12 weeks to 30 Dec 2018 (% share)

Sales growth (Y-o-Y %)

Tesco 28.1 27.8 0.6
Sainsbury's 16.5 16.2 -0.4
Asda 15.3 15.2 0.7
Morrisons 10.8 10.6 0.1
Aldi 6.8 7.4 10.4
Co-op 5.8 5.9 3.2
Lidl 5.0 5.4 9.4
Waitrose & Partners 5.2 5.0 -1.7
Iceland 2.2 2.3 1.8
Ocado 1.1 1.0 1.3
Other multiples 1.6 1.7 7.3
Total symbols & independents 1.7 1.5 -6.2
       

Source: Kantar Worldpanel

Christmas results coverage from IGD

Christmas results tracker - See the story of Christmas emerge through tracker, updated on every results day

Christmas 2018 and new year outlook - Our report summarising retailer performance and key trends will be released on January 16th

Christmas 2018 and new year outlook - Senior Retail Analyst Nick Gladding's video briefing of Christmas performance and trends will be available on January 23rd

Morrisons has reported faster LFL Christmas growth than a year ago, boosted by its expanded wholesale operations, but its retail LFL sales slowed. Total sales were up 4.0% excluding fuel.

Wholesale drives growth 

For the nine weeks to January 6th, group LFL sales (exc. fuel) grew by 3.6%, a faster rate of growth than last year's 2.8%. Morrisons wholesale activities, which include sales of its products through Amazon and particularly its supply deal to 1,300 McColl's stores, contributed 3.0% to the LFL result, helping to compensate for a slowdown in sales through its own stores. The retail LFL at 0.6% was the weakest since Q4 2015.

Sharp pricing and improved appeal

Morrisons noted that a change in consumer behaviour in the period, with a decline in the number of LFL transactions (-0.9% y-o-y) but an increase in the LFL items per basket (+0.8%) through its core business. LFL growth is likely to have been driven by more competitive pricing, with price across its basket of 100 key Christmas items the same as a year earlier.  Morrisons also noted improvements to customer satisfaction metrics, particularly in terms of colleague friendliness and the checkout experience.

More relevant to customers

Commenting on performance CEO David Potts said "Our performance shows colleagues are listening hard and responding to customers, providing consistently great value and good quality when it matters most. Morrisons is well set to improve the shopping trip and become more and more relevant for more customers"

New year price cuts

Morrisons has this week followed up its Christmas price cuts with reductions averaging 20% across 935 products. The lower prices, which include cereals, tinned tomatoes and lunch box snacks will be in place for a minimum of 12 weeks.

Christmas results coverage from IGD

  • Christmas results tracker - See the story of Christmas emerge through tracker, updated on every results day
  • Christmas 2018 and new year outlook - Our report summarising retailer performance and key trends will be released on January 16th
  • Christmas 2018 and new year outlook - Senior Retail Analyst Nick Gladding's video briefing of Christmas performance and trends will be available on January 23rd

Morrisons is to hand out free fruit for children in a bid to promote healthier eating for young people, help make shopping trips easier for parents and reduce food waste.

40,000 pieces of fruit to be give away each week

The Free Fruit for Kids scheme will mean that unsold fruit - which is ripe, sweet and of good eating quality - does not go to waste. Every week Morrisons expects to give away 40,000 pieces of fruit that is within its ‘sell by’ window but is at risk of not being sold. 

Broad range of child friendly fruit to be offered

Through the scheme Morrisons will offer 39 varieties of fruit including; ‘top fruit’ – such as apples and pears; citrus – such as oranges and clementines; and tropical fruit – such as bananas. The fruit will be positioned on wooden stands at the front each store's fresh produce area every day.

Reducing food waste and promoting healthier eating

Clare Linstead, Fruit Buyer at Morrisons said: “Sometimes our stores are left with unsold fruit and customers would prefer us to find a use for it. So we’re putting out fruit - that’s at risk of not being sold - for children to help themselves. It’s healthy for them, reduces food waste in our stores and will help make shopping easier for parents.” Only 16% of children aged 5 to 15 consumed the recommended five portions of fruit per day in 2016 - down from 23% in 2014 - according to NHS statistics.

Follows popular Tesco scheme

The Morrisons scheme shares similarities with Tesco's free fruit for kids initiative. In its first two years, Tesco gave away over 50 million pieces of free fruit. Morrisons says it will offer free fruit in every store and ensure free fruit was always available.

 

For the latest on Morrisons strategy, visit our Strategic outlook for Morrisons: H1 2018/19 update

Presentations

04/02/2019
An essential summary of trading priorities, latest developments, and other key commercial insights for Morrisons.
15/01/2019
We compare the festive strategies and trading performances of the UK’s leading grocers. Hear Nick presenting the results here.
15/01/2019
Understand the unique opportunities and challenges of island retail.
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We review Morrisons newly released half year results and explore the next steps in its drive to build a stronger and broader business.

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An essential summary of trading priorities, latest developments, and other key commercial insights for Morrisons.

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

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