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Grocery market to slow as food inflation accelerates

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The UK grocery market is set to slow with food inflation predicted to exceed five per cent in the coming months, according to a report published today by industry analysts Kantar Worldpanel.

In the 12 weeks to July 10th 2011 grocery inflation rose from 4.6 to 4.8 per cent, prompting Kantar to revise an earlier prediction that it did not expect it to surpass five per cent during the course of the year.

An economic situation such as this is set to put increased pressure on the finances of British consumers as the year progresses, but the impact of the rising rate is already starting to be felt.

Overall grocery market growth of 4.6 per cent was reported for the 12-week period, but Kantar’s data shows that of the top four supermarkets only Morrisons saw year-on-year trading increase ahead of the market average, with sales rising 5.6 per cent.

Continuing the pattern of the last few months the German discounters operating in the UK saw improved sales, with till rolls at Aldi and Lidl growing 20.2 and 15.6 per cent respectively compared to the same period last year and market share jumping up at the expense of Asda and Tesco.

Martin Whittingham, director at Kantar Worldpanel, said: “Grocery inflation has been growing much faster than anticipated and as such we expect it to reach five per cent and perhaps go beyond in the next few months.

“However, unlike the high inflation that we saw in 2008, when it was over ten per cent in a third of the grocery categories, we are only seeing double digit inflation in a small number of categories.”

Kantar describes the current patterns in UK supermarket spending as a tale of “two nations” because as the value chains have progressed so too has up-market grocer Waitrose, which increased its market share 0.2 per cent and saw sales rise nine per cent year on-year.

“The increasing polarisation of the grocery market looks set to stay as consumers turn to the discounters to cut their budgets while others continue to spend in Waitrose,” Whittingham explained.

“This divergence seems to be reflective of some contrasting lifestyles in the UK at the moment.”

Published on Tuesday 19 July by Editorial Assistant

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