The uptick in UK CPI (consumer price index) to 3.6% in June from 3.4% in May – and just 2.5% in December – was largely attributed to a sharp increase in housing and energy costs, which are growing at an annual rate of 7.5% according to the ONS (Office for National Statistics).
However, food price inflation has also increased since the start of the year, so whereas at the end of 2024 supermarkets were charging around 2.6% more than the previous Christmas, last month prices were rising at 5.2% or double that rate.
This was confirmed by the latest till roll figures from Worldpanel by Numerator (formerly Kantar), which showed grocery prices increased by 5.2% in the four weeks to 13 July.
Given total sales grew by 5.4%, that means we bought roughly the same amount of goods we did a year ago but almost all of the increase in sales was down to inflation.
If people’s shopping habits stay the same, the increase in inflation could add £275 to the annual shopping bill says Worldpanel’s head of retail and consumer insight Fraser McKevitt.
‘Just under two-thirds of households say they are very concerned about the cost of their grocery shopping, and people are adapting their habits to avoid the full impact of price rises,’ adds McKevitt.
Customers are heading to the supermarket more frequently, but the average basket size is shrinking and spending on promotions has risen toward 30% of the total.
Also, sales of own-label goods are growing faster than branded goods and we are cooking simpler meals with fewer ingredients to keep costs down.
The discount, or ‘limited-assortment’ chains, are naturally benefiting as more customers switch their allegiance, with sales at Aldi and in particular Lidl outpacing the market.
Over the last three Worldpanel reports spanning mid-May to mid-July, Aldi has grown its sales by an average of 6.5% against 4.6% for the market while Lidl has racked up 11.1% growth.
As a result, the two chains now account for almost one pound in every five spent in the UK on groceries, more than Sainsbury’s (SBRY) but still less than Tesco (TSCO), which accounts for just under one pound in every three.
The main losers in the battle for customers’ wallets appear to be Asda and Morrisons, both of which were taken over by private equity and both of which have lost market share this year.
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