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Promotions now represent 39% of grocery sales

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UK grocers are increasingly turning to discounts and promotions as the volume of sales slumped during May, new research has shown.

Research company Nielsen’s grocery market data shows that unit growth at supermarkets declined by 1.3 per cent during the four weeks to June 11th 2011, and value growth slowed to 1.1 per cent from two per cent in the previous month.

Promotions now represent 39 per cent of all sales in the sector and Nielsen anticipate this to increase even further over the summer as trading continues to struggle.

All of the major supermarkets saw at least some growth in market share during the period but Morrisons was the biggest winner with implied sales growth of 3.5 per cent year-on-year despite no new store openings whereas Asda saw the smallest rise in market share of the top ten grocers of just 2.9 per cent.

Mike Watkins, Senior Manager for Retailer Services at Nielsen, commented: “With mixed British summer weather returning and no large social or sporting event for the nation to celebrate in the last month, value growth has dipped and unit sales have declined year-on-year.

“In their continued plight to drive demand, retailers have maintained high levels of promotions.

“Retailers use promotions to create events. These not only help footfall, but they push up the value of the shopping basket, which is key in a market where underlying demand has weakened. There has also been more reliance on ‘multi-buys’ in the last 12 weeks.”

Further evidence of the ‘two nations’ divide in retail was seen in the data, with upmarket Waitrose and discounters Aldi and Lidl seeing higher market growth then the top four supermarkets.

Although all the main players have grown their slice of the grocery pie over recent weeks, market analyst Clive Black of stockbrokers Shore Capital warns that the overall trading is still relatively weak.

“Stripping out the impact of new stores, LFL sales are also reported to have declined by 1.2 per cent in the four-week period,” Black said.

“Such an outcome is also consistent with trade and official statistics on retail volumes and the Asda Income Tracker, which gave some colour as to the stress being faced by UK households at present.”

Published on Wednesday 22 June by Editorial Assistant

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