Clouds Loom Over Supermarket Sales

Promotions at Top 4 increase to help drive business – Up to a third of all sales now going through on promotion

25th July 2007, Oxford

Growth in the grocery sector slows further as interest rate increases and wet weather continue to dampen consumer spirits. Nielsen’s total till monitor sees overall grocery growth at just 4.8% in the latest 12 weeks versus the same period last year with the back end of this period, the 4 weeks to 14th July, seeing sales growth struggling at only +3.1% versus the same period last year. Over the past 2 years we have typically seen sales growths of between 6% to 9% on a regular basis.

Mike Watkins, Senior Manager Retailer Services at Nielsen commented, “June/July was always going to be a tough period set against a backdrop of the strong trading environment enjoyed in 2006 where the World Cup and last summer’s hot weather buoyed up sales. Moreover, the interest rate rises are hitting consumers’ pockets and the dire weather is doing nothing to help the situation.”

Like-for-like sales at the Grocery Multiples over this period paint a bleaker picture still - only just nudging over the +1% mark versus the same period last year. Watkins continued, “In this climate retailers are becoming increasingly more dependent on new store openings to drive year on year sales growths. On a tactical level, Nielsen can also report a significant increase in the amount sold on promotion with grocery retailers using offers and deep price cuts to drive consumers in store and bolster business.”

On a retailer by retailer basis, Asda’s performance stands out as the only one of the ‘Top 4’ who has maintained growth levels over 5% in the 4 weeks to July 14th. With shopper penetration increasing 5% YoY and shoppers visiting the store more often, growths at Asda stand solid at +6.3% for the latest 4 weeks and +6.4 for the full 12 weekly period.

Watkins observed, “New shoppers are visiting Asda are being rewarded with good deals. Over 28% of Asda’s business between mid-June and mid-July was sold on promotion – with an ‘everyday low price’ strategy, this level of promotional sales is unusually high.”

Other retailers are also turning to promotions. Morrisons – whose growths remain behind their peer group – have steadily increased their promotional offering since the beginning of 2007 and here, a third of all purchases were sold on promotion between 16th June and 14th July. “Despite having the deepest promotional offering, growth in spend is sluggish at Morrison’s. But with investment into re-branding and a new marketing campaign launching, we would expect to see the fortunes of Morrisons turn around in the coming months. “ Added Watkins

Tesco too has ramped up promotional offers with 29% of sales going through on promotion – and this is before the retailer launched its latest round of even more price cuts on the 16th July.

Table 1. % Share of Grocery Market Spend by Retailer

The figures in the table are based on 12 weeks sales through to 14th July 2007 compared to the same 12 week period last year. Source: Nielsen Total Till

Chart 1. % of Sales Sold on Promotion (by Expenditure)

Source: Nielsen Homescan

About Nielsen Homescan Total Till

Unless otherwise stated, data is based on all purchases, bar-coded and non bar-coded, brought back into the home from any outlet by an in-home scanning panel of more than 14,500 households.  Total spend includes all items stocked by any outlet, including grocery, durables and clothing.

About The Nielsen Company The Nielsen Company is a global information and media company with leading market positions and recognized brands in marketing information (ACNielsen), media information (Nielsen Media Research), business publications (Billboard, The Hollywood Reporter, Adweek) and trade shows. The privately held company is active in more than 100 countries, with headquarters in Haarlem, the Netherlands, and New York, USA.