British grocery shopping habits changing

Posted by Daniel Palmer on 26th September 2008

Supermarket aisle - shopping trolley

So far this year, British shoppers have been in denial – spending more than they did in 2007, in spite of the mounting evidence that their incomes were being squeezed. Until now, with the latest research from MINTEL* finding that reality is beginning to strike and Brits are now making dramatic changes to the way they shop for food.

Consumer research from MINTEL highlights that, in the last 12 months alone, 41% of shoppers have switched to cheaper brands and three in ten (34%) have cut down on the premium ranges, such as Tesco Finest and Sainsbury’s Taste the difference, that they buy.

“It is clear that shoppers are now really feeling the pinch and beginning to trade down when out buying food,” explained Richard Perks, Director of retail research at MINTEL. “During the recent years of unprecedented prosperity in Britain, we saw a very noticeable shift towards premium, upmarket food, with shoppers buying more luxurious ready meals and exotic produce. But in the space of just a few months, this trend has already started to be reversed.”

Brits are also becoming a lot more price conscious. Two-thirds (66%) are now searching for promotions and deals more often than a year ago, while 29% spend more time comparing prices in the supermarket. There has also been a rise in the popularity of the hard discounters, like Lidl and Aldi. And they are not just appealing to those who are less well off, as 31% of adults go to discounters more often than they used to. All these changes are now having a profound effect on the food retailing market, as supermarkets are forced to take action to appeal to the changing face of the consumer.

“The major battle of this recession will be the fight between the hard discounters and the market leading superstores,” Mr Perks suggested.

In the UK the market leaders – such as ASDA and Tesco – have been fighting back against the discounters by increasing their focus on price. This has led to Tesco, one of the world leaders when it comes to private label, launching an ultra-low-priced range called ‘Market Value’. There is a clear concern amongst the majors that market share lost to the discounters during the downturn could be difficult to pull back even when prosperity returns. “With this shift they are making it very clear that they will not just lie back and watch their market share being whittled away by the likes of Lidl and Aldi,” Mr Perks noted.

In August, ONS (Office for National Statistics) figures showed that volume sales in the food retail market dropped for the first time. And, while this is not welcome news for the supermarkets, MINTEL believe the increased variety of their offering can offset such negative statistics. Many of them have for some time dedicated much more store space to clothing, interiors and electrical appliances, which will serve them well during these uncertain times.”Value for money is the key to success in tougher times and the supermarkets are the retailers best able to offer that, whether it is for food or for clothes and electricals. Although no-one is likely to have an easy time, they will undoubtedly be the winners over the next couple of years,” Mr Perks concluded.

A similar situation has been unfolding here in Australia, with market research firm Freshlogic recently reporting that consumers were ‘trading down’ in Australian supermarkets. Freshlogic and Woolworths have both claimed private label is increasing its share of the market during the downturn – not surprising given that private labels share of the grocery market is substantially below that seen in America and the UK.

Discounters in Australia are not as prominent as in the UK, but Aldi is beginning to gain a foothold in the “workably competitive” Australian grocery sector.

Aldi was the major beneficiary in the wake of the ACCC’s Grocery Price Inquiry, with ACCC Chairman praising their influence and the much-publicised, oft-criticised GROCERYchoice website suggesting the cheapest place to get a basket of groceries is at Aldi. The German discount grocer, which primarily sells private label products, has since used this data as the basis for their latest advertising campaign.