Shoppers turn to budget supermarket as inflation bites
Consumers are increasingly turning to budget supermarkets such as Aldi and Lidl for their weekly grocery shop in a bid to offset higher food prices.
A quarterly review of market share among supermarkets shows that those offering cheapest prices are posting the strongest performances. Both Aldi and Lidl have shown strong growth in the past three months, growing by 19.8% and 12.3% respectively, while Iceland has grown by 14.4%.
TNS Worldpanel, which compiled the research, says this growth is driven entirely by new stores and new shoppers, and does not reflect people spending more money at these supermarkets.
In fact, despite the increase in new shoppers, the amount of money spent at these so-called budget supermarkets remains low compared with the top four players (ASDA, Tesco, Sainsbury’s and Morrisons). For example, the typical Tesco shopper spends £126 a month, while the typical Aldi customers spends just £45.
And despite several reports claiming that more middle-class households are turning to cheaper supermarkets, TNS says the majority of the new budget shoppers are low-income families with young children.
With more people turning to budget shops for their grocery shopping, what does this mean for the top four players? According to TNS, their performance remains unchanged. However, while Asda and Morrisons have leapt ahead of the market and increased their market share, slower growth at Tesco and Sainsbury means the two supermarket giants are behind the total market.
Waitrose, typically seen as a the middle-class supermarket of choice, grew by 4% during the period, lower than its historical performance. TNS says this is “unsurprising given the way low price has dominated the current agenda”.
Supermarket market share 2007-2008:
| Multiple Supermarkets = 93.2% market share (2008) |
|Kwik Save ||0.1%||0%||- 100%|
|Netto ||0.7%||0.7%||- 0.4%|
|Farm Foods ||0.5%||0.5%||20.8%|
|Other freezer centres ||0.2%||0.3%||20.4%|
|Total independents||2.8%||2.5%||- 1.2%|
|Source: TNS Worldpanel|
Battle of the supermarkets
The onslaught of food price inflation on consumers’ budgets has led to several supermarkets kicking off a price war. Whether it’s petrol or food, the food giants are keen to cut their prices in an attempt to lure you through their doors.
As a result, a host of adverts promoting reduced food prices have taken over newspapers and television commercials in the past couple of months.
But for Tesco, the market-leading supermarket, this marketing tactic has backfired somewhat and it has been forced to withdraw two of its national press adverts.
The ads, both of which promoted that fact a basket of food was cheaper at Tesco than at its rivals ASDA and Morrisons, were challenged by viewers who questioned whether the claims were misleading. One complainant also pointed out that Tesco had included promotional prices in the comparison.
Despite Tesco defending the adverts, stating it attempted to use like-for-like comparisons and that where promotional products had been used this had been demonstrated in the small print, the Advertising Standards Authority (ASA) has banned both the ads.
It says that the claim in the adverts – “Why pay more at ASDA?” and "Save a trolley-load of cash at Tesco" – implied Tesco was generally cheaper than either of its competitors. In light of this, it considered that Tesco should have used a “fair and representative” selection of goods.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).