Market growth was 1.4% in the 12 weeks to 16 June 2019, according to the latest results from Kantar. Performance has slowed compared to this time last year, when growth was 2.1%. We look at the factors influencing this and key retailers' performance.

Cooler weather slows growth

This year growth is more modest due to the cooler weather and lack of celebratory occasions such as the World Cup to encourage spending. This month does however mark three years of continuous growth in the sector, and is an increase on May when growth was 1.3%. Also, as inflation is down 0.2pp this month to 1.0%, volumes have slightly increased 0.3pp to 0.4%.

Ocado becomes the fastest growing supermarket

Online specialist Ocado became the fastest growing supermarket with sales at +11.3%. This was ahead of the overall e-commerce market at 6%. The growth comes from a small base, with only 3% of shoppers buying from Ocado. However, the results are very positive for the retailer as it was expected to be negatively impacted by the fire at its Andover CFC for the next two years.

For subscribers who want to find out more about Ocado's results and strategy, take a look at our strategic outlook.

Discounters grow share as they expand in London

Discounters continue to win, although sales were slower this month than in May. Aldi grew the fastest at 9.3% (compared to 11.3% in May), increasing its share to 7.9%. This is up 0.5pp on last year. Lidl’s sales grew 7.5% (compared to 8.5% in May), growing its share to 5.7%.

Both discounters announced in June that they are focusing on expansion in London. Aldi 'Local' is growing, with one new store and six conversions opening in June. Lidl has set out plans to invest £500m in expansion in small London stores. This will include 40 new branches.

The new stores for both Aldi and Lidl will be smaller than their traditional format, and will have a reduced range. The discounters have previously struggled in London with the lack of large sites with car parks they prefer to operate in. The new format gives the retailers more flexibility to expand in the city.

Co-op grows through frequent store visits

Co-op continues to have positive results, growing its market share to 6.2%. The retailer continues to expand in London and the South, which has made the region its largest area for growth. Shoppers frequently visit stores for small basket shops, with the average visiting 22 times over the course of 12 weeks.

Tesco is the best performer of the big four

Tesco was the only one of the big four to not lose sales. Last week, the retailer updated its strategic priorities and going forwards will prioritise total sales growth over LFL growth in its continuing drive to rebuild its profit margins.

The other retailers in the big four; Sainsbury's, Asda and Morrisons continue struggle in the challenging market, with negative sales growth.

Iceland remains in growth

Iceland continues to perform well, with growth of 0.6%. The retailer recently revealed its results for the 52 weeks ending 29 March 2019. Sales increased by 4.5% to £3.08bn in the reported period. This was driven by new store openings as like-for-like sales were broadly flat.

 

Retailer	12 weeks to 17th June 2018	12 weeks to 16th June 2019	Sales growth (Y-O-Y%)
Tesco	27.7	27.3	0.0%
Sainsbury's	15.6	15.3	-0.6%
Asda	15.1	14.9	-0.1%
Morrisons	10.6	10.4	-0.5%
Aldi	7.4	7.9	9.3%
Co-op	6.1	6.2	3.0%
Lidl	5.4	5.7	7.5%
Waitrose	5.1	5.0	0.0%
Iceland	2.2	2.1	0.6%
Ocado	1.2	1.3	11.3%
Other Multiples	1.8	1.9	8.5%
Symbols & Independents	1.8	1.7	-3.0%

 

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Sainsbury’s is set to restructure its fresh food department, in a bid to reignite this crucial part of its business, according to reports from The Grocer.

Focus on ‘value-added’ fresh food

The retailer plans to divide its fresh food department into two, with the creation of a dedicated unit to lead and grow what it calls ‘value-added’ fresh food. This includes counters, concessions, food-to-go and cafes, all key elements of Sainsbury’s proposition and defining features of shoppers’ in-store experience.

Building on Selly Oak success

The move follows the success of the trial at Selly Oak, Birmingham which opened last November. The 67,000 sq ft store showcases the retailer's latest thinking on boosting footfall and serving customer missions better. The store blends the food and grocery offer with Sainsbury's non-food brands and offers a wider range of foodservice options, through its 'Food Market' concept. This feature is designed to serve up to 180 customers, and includes options such as street food and freshly made curries.

The new store is a showcase for the retailer’s Destination Sainsbury’s strategy, creating new reasons for customers to visit and developing the customer experience.

Management shake-up

The transformation will be overseen by Jon Bye, the retailer’s current zone managing director for the south. Bye has been with Sainsbury's for over 11 years and is set to take on the new role at the end of July.

Adrian Cook, director for fresh food, is set to leave the business. His replacement is yet to be confirmed.

 

Sainsbury’s announces plans to replace plastic bags across loose fruit, vegetables and bakery items, with paper alternatives.

Providing sustainable solutions

Sainsbury’s has announced plans to replace plastic bags across loose fruit, vegetables and bakery items, with paper alternatives.

From September, customers shopping loose items from fresh produce or the bakery will be able to bring their own bags or buy a re-usable bag made from recycled materials.

According to the retailer, this move alone will help save 489 tonnes worth of plastic waste.

Sainsbury’s is also set to remove a few other plastic items including plastic cutlery, plastic trays for tomatoes and carrots and plastic lids from cream pots.

The move is aligned with Sainsbury’s sustainability commitments. The retailer has pledged to remove dark coloured plastics by the end of 2019, replacing them with sustainable alternatives.

Sainsbury’s CEO Mike Coupe said: “We are absolutely committed to reducing unnecessary plastic packaging in Sainsbury’s stores. Our customers expect us to be leading the way on major issues like this, so I am determined to remove and replace plastic packaging where we can and offer alternatives to plastic where packaging is still required to protect a product.”

‘Doing good is good business’

Retailers are continuing to announce new initiatives around what we have identified in our Global retail trends 2019 report as 'doing good is good business'.

Earlier this week, Waitrose launched its ‘Waitrose Unpacked’ trial in its Botley Road branch, Oxford. The trial will run for 11 weeks until 18th August. The retailer has removed hundreds of products out of their packaging and launched new in-store refill zones dispensing loose products.

In May, Morrisons launched packaging-free areas in many of its stores. The introduction followed a ten-month, three store trial which saw shoppers purchase an average of 40% more loose fruit and vegetables.

Similarly, earlier this year Tesco launched a two-store trial removing plastic packaging from 45 fresh produce items.

We expect retailers to continue pushing their sustainability credentials further in the future, with a focus on helping customers and communities live better and more sustainable lifestyles.

 

Want to know more?

Retail Analysis subscribers can read and download our latest 'Strategic outlook for Sainsbury's' presentation here.