British discount chains outperforming supermarket rivals

Discount grocery chains continue to outshine their “big four” supermarket rivals as consumers tighten their belts, figures revealed today.

German chain Lidl grew its share from 2.3% to a record 2.5% in the 12 weeks to March 20, according to market researcher Kantar Worldpanel.

Frozen food chains Iceland and Farm Foods also outperformed the market in the same period after posting sales increases of 4.2% and 11.7% respectively, while the wider industry saw a sharp dip in average sales growth from 3.9% to 2.6%.

There was little change among the top four supermarkets with only Morrisons marginally increasing its share to 12.2% compared with 12.1% a year earlier. Tesco and Asda saw slight declines, to 30.2% and 17% respectively, while Sainsbury’s held firm with a 16.3% share.

Kantar said customers were turning to cheaper outlets in search of better value-for-money products.

Edward Garner, communications director at Kantar Worldpanel, said: “While there are no signs yet of the explosive growth in economy own-label ranges that we saw in 2008, there are now clear indications that value-for-money is driving retailer performance.”

Discount chain Aldi increased its market share to 3.1% from 2.8%, while Iceland was up 1.9% and 1.8% and Farm Foods held at 0.6%.

Discounters enjoyed strong growth in the recession, but saw their popularity wane last year as shoppers began trading up.

Recent figures suggest consumers are once more striving to find value as their finances are squeezed by tax increases, spending cuts and soaring inflation.

Last week, Sainsbury’s sparked fears of a “perfect storm” for the supermarket sector after posting a bigger-than-expected slowdown in sales growth as shoppers cut back on their weekly shop.

Fourth quarter like-for-like sales rose 1% excluding fuel at the chain – but figures implied an underlying fall of up to 1% when VAT is stripped out and an even bigger decline after food price inflation.

Experts warned underlying negative sales growth was here to stay across the sector as customers are battered by Government tax hikes and spending cuts.