The rise in food prices fell to their lowest level in more than two years last month as supermarkets increased their discounts ahead of the Chancellor’s Budget and the Christmas shopping season to attract cost-conscious shoppers.
Food inflation slowed to 4.7 percent in the four weeks ended November 2, compared to 5.2 percent the previous month, according to new data from Worldpanel by Numerator. The fall came as supermarkets rolled out a wave of price cuts and promotions to offset consumer jitters ahead of Rachel Reeves’ autumn budget, due to be delivered just four weeks before Christmas.
Spending on specials rose 9.4 percent during the period and accounted for nearly a third of all grocery sales, while spending on full-price goods rose just 1.8 percent.
Fraser McKevitt, head of retail and consumer insights at Worldpanel, said supermarkets were “very conscious of the financial issues facing some households, not least ahead of this year’s budget”, and were focusing on price cuts rather than multi-buy offers to provide clearer value.
He added that discounts are likely to increase with the upcoming holiday season as retailers look to protect margins while maintaining customer loyalty in a difficult economic climate.
The fall in food inflation reflects broader consumer trends, with headline inflation in the UK holding steady at 3.8 per cent in September, according to the latest figures from the Office for National Statistics. The next official inflation data will be released on November 19th.
Worldpanel reported that prices fell the most for dog food, toilet paper and confectionery, while prices rose the most for chocolate, unprocessed meat and coffee.
Despite tighter household budgets, British consumers continue to price out supermarkets, with sales of premium own-brand ranges expected to hit a record £1bn in December as shoppers opt for restaurant-quality meals at home. Premium own-brand products generated sales of £582m in the last four weeks.
Overall, takeaway food sales rose 3.2 percent year-on-year, with most major supermarkets reporting growth. Tesco, Sainsbury’s, Aldi and Lidl all posted increases, while Asda and Co-op fell.
Asda, owned by the Issa brothers and TDR Capital, reported a 3.9 per cent fall in sales in the last 12 weeks, with market share falling from 11.8 per cent to 11.6 per cent. The Co-op’s sales fell 1.4 per cent, reducing its share from 5.7 to 5.4 per cent, while Morrisons saw a modest 2.3 per cent increase in sales but still lost share, falling from 8.5 to 8.3 per cent.
In contrast, Ocado, the Marks & Spencer-backed online grocer, reported a 15.9 per cent increase in sales, marking one of the strongest performances in the industry as more shoppers combine their grocery shopping online and in-store.
Now that the crucial festive season is underway, all eyes will be on how consumers react to the ongoing price cuts – and whether further economic uncertainty ahead of the Budget will weigh on the country’s wallet or encourage early holiday spending.
