Food sales to reach new heights in lead up to Christmas

Posted by Daniel Palmer on 30th November 2009

The possibility of conservative festive season spending will not have an impact on the food industry, according to market researchers IBISWorld, with supermarkets expected to be among the biggest winners.

IBISWorld (Australia) General Manager, Robert Bryant, said his firm has forecast total retail spending during the month of December to reach $20.5 billion – softer growth of 5% when compared to Christmas sales of the past two years.

“Christmas 2007 was perhaps the best performing period for retail spending over the last five years, with December of that year seeing an 8.2% increase in total retail spending. In comparison, retail spending in December 2008 grew by only 5.7% – kept buoyant largely by government stimulus packages,” Mr Bryant said. “This year, whilst the economy is recovering and sentiment is improving, rising interest rates are raising the cost of debt and reducing disposable household income – meaning retailers will need to work extra hard to capture Christmas sales.”

In preparation for Christmas, the market research firm expects Australians to spend $8.33 billion on all food to be consumed at home, accounting for the largest share of retail spending (40.7%) in the month of December – representing a robust increase of 8.4% from the $7.68 billion spent in 2008.

Supermarket and grocery stores will be the biggest winners, taking $6.87 billion of the Christmas spend, while a further $724.9 million will go on specialised food, and $733.2 million on liquor.

In the supermarket sector, Woolworths and Coles are once again expected to be the market leaders, accounting for 40% and 30% of the spend respectively, while Independent Grocers of Australia (IGA) will account for 7%, and Aldi only 1.5%.

However, following a turbulent year, Mr Bryant believes the lead into Christmas will see heightened levels of competition between supermarkets, as consumers continue to seek best value for money.

“In 2009, our drive to get the best spread for our spend will see Aldi attract a larger portion of Christmas food sales than usual, with a growing number of households shifting their primary spending to Aldi, only looking to Woolworths and Coles to fill in the gaps,” Mr Bryant said. “This is in stark contrast to a few years ago, when Aldi was treated as an occasional shopping trip.”

IBISWorld anticipates Aussies to shop around for the best prices more than usual, opting to reduce quantities and trade-down rather than entirely forego any aspect of the traditional Christmas meal. In particular, chocolate and snacks – which held up well during the economic downturn – are expected to play a large role in the pantry, forecast to grow by 1.8% over 2009-10.