According to the latest report from Kantar, a market research company, the four-week period leading up to July 9, 2023, showed a significant decrease of 1.6 percentage points in grocery price inflation, reaching 14.9%. Simultaneously, take-home grocery sales experienced a 10.4% surge compared to the same period last year, as per the latest statistics.
Fraser McKevitt, Head of Retail and Consumer Analytics at Kantar, highlighted that this marks the fourth consecutive month of declining grocery price inflation, which is positive news for households, although the rate remains considerably high. He also stated that this shift is a result of increased promotional spending, which has risen for the first time in two years, representing 25.2% of the overall market.
A notable change observed by Kantar in this context is the growing number of loyalty card deals offered by retailers, such as Tesco’s Clubcard Prices and Sainsbury’s Nectar Prices. This could indicate a shift in strategy for supermarkets that previously focused on everyday low pricing, particularly by expanding their range of value own-label products, added McKevitt.
However, McKevitt emphasized that while the increase in marketing spending has contributed to the reduction in inflation, it is not the sole driving factor behind this change. He further explained that prices had risen rapidly last summer, and the recent downturn is partially due to the current data being compared to the higher rates of one year ago.
In terms of consumer behavior, McKevitt highlighted that households would have had to spend an additional £683 on their annual grocery bill to purchase the same items as a year ago at the current inflation rate. Nevertheless, consumers have adjusted their habits to minimize this increase.
He stated, “It’s evident that shoppers have significantly changed their behavior to combat inflation, whether it’s by opting for cheaper products or visiting different supermarkets. The average annual increase in household spending over the past 12 months has actually been £330, which is well below the hypothetical £683.”
McKevitt also noted that the trend of visiting larger stores has persisted despite the challenges. He pointed out that consumers are now visiting supermarkets less frequently than before the outbreak, but their purchases are larger in volume.
As the nation experienced Wimbledon fever with the crowning of new tennis champions, consumers embraced the tradition of strawberries and cream. Kantar’s findings revealed increased spending on strawberries (up by 16%) and fresh cream (up by 13%) compared to the previous year. Notably, the average price of a box of strawberries rose by only one penny compared to last summer, bringing some relief to shoppers.
“The first two weeks of July mean strawberry and cream for many, and this year didn’t disappoint as record numbers queued to watch the action at SW19,” added McKevitt.
In June, temperatures soared, and shoppers took advantage of the opportunity to fire up their grills. McKevitt highlighted that many consumers enjoyed outdoor dining, resulting in a seven percent increase in volume sales of chilled burgers and a five percent increase in chilled dips.
McKevitt concluded, “One of the biggest shifts we’ve seen in this area is retailers ramping up loyalty card deals like Tesco’s Clubcard Prices and Sainsbury’s Nectar Prices. This could signal a change in focus by the grocers who had been concentrating their efforts on everyday low pricing, particularly by offering more value own-label lines.
“The boost to promotional spending has contributed to bringing inflation down, but this isn’t the only factor driving the change. Prices were rising quickly last summer, so this latest slowdown is partially due to current figures being compared with those higher rates of one year ago.”