Discount supermarkets thrive as credit crunch bites

Jun 24 2008

Tesco and Sainsbury’s lost ground to rivals this month amid continued efforts by shoppers to cut their food bills, figures revealed today.

The duo gave up market share to Asda and Morrisons, while hard-hit consumers also flocked to discount stores Aldi and Lidl, according to market researcher TNS Worldpanel.

The shift comes as food price inflation reached 4.6% for the three months to April 20 - well above official overall inflation of 3.3% - based on the prices of 78,000 products compared to last year, TNS said.

The UK’s biggest supermarket, Tesco, saw 5.1% year-on-year growth in the 12 weeks to June 15, compared to overall grocery market growth of more than 6%. Its market share slipped 0.4% to 31.2%.

Sainsbury’s also lost market share with sales growth of 4.3% during the period. The TNS figures also include internet sales, but IT problems hit thousands of the website’s online customers last week.

Shares in both supermarkets suffered when the figures were revealed. Sainsbury’s fell almost 5%, while Tesco slipped 4%.

Among the “big four”, cheaper rivals Asda and Morrisons charged ahead, growing sales by 7.5% and 8.1% respectively. The duo both increased their market share by 0.2%.

Discounters Aldi and Lidl also continued their strong recent run as consumers struggling to beat higher food bills look for cheaper options.

Aldi took a record 2.9% share of the market after a 20.7% rise in sales, while Lidl and Iceland also saw double-digit sales growth.

Edward Garnier, TNS Worldpanel’s director of research, said: “It is now apparent that shoppers’ pursuit of value for money is affecting the outlet shares in the sector.”

Sainsbury’s said last week that like-for-like sales growth slowed to 3.4% from 4.1% in the first three months of its financial year.

Tesco has seen 3.5% growth but both were put in the shade by Morrisons, which boosted sales by 7% and slashed prices on 2,000 items. Asda - the UK number two and owned by US giant Wal-Mart - increased sales by 5% in the first quarter of the year.