December 13, 2016 / 1:13 PM / 10 months ago

UPDATE 2-Return of inflation to UK grocery sector imminent - Kantar Worldpanel

* Grocery deflation 0.1 pct in 12 weeks to Dec. 4 - Kantar
    * Some categories already seeing price rises
    * Tesco sales up 1.6 pct in 12-week period, market share up

 (Recasts, adds detail, shares)
    LONDON, Dec 13 (Reuters) - 
    Britain's grocery industry is edging closer to a return to
inflation after more than two years of falling prices, industry
data showed on Tuesday.
    Researcher Kantar Worldpanel said grocery deflation was 0.1
percent in the 12 weeks to Dec. 4, having been 0.5 percent and
0.8 percent respectively in its November and October reports.
 
    It noted that some categories were already seeing price
increases, with fresh fish up 5.3 percent year-on-year, chilled
ready meals up 2.3 percent and beer up 2.1 percent.
    Though the Brexit vote pulled down the value of the pound,
increasing import costs, deflation in the grocery sector has
been easing since December last year, well before June's
referendum.
    "The rapid improvement implies inflation is positive on a
four week basis. We expect inflation to increase further next
year when (the) Brexit forex shock starts to feed into food
prices," said Bernstein analyst Bruno Monteyne.    
    Separately, official data, also published on Tuesday, showed
consumer prices rose by 1.2 percent, the most in more than two
years, pushed up by more expensive clothing and technology
goods. 
    Kantar said Tesco, Britain's biggest supermarket
group, recorded sales and market share growth for the third
monthly data set in a row.
    It said Tesco's sales rose 1.6 percent year-on-year in the
12 week period, taking its UK market share to 28.3 percent from
28.0 percent this time last year.
    Conversely the other three major players in the sector -
Sainsbury's, Asda and Morrisons - saw
sales fall 0.6 percent, 4.7 percent and 1.4 percent respectively
and all lost market share.
    Morrisons' fall is, however, partly explained by store
closures.
    Sales growth at discounters Aldi and Lidl
 slowed to 10.0 percent and 5.7 percent respectively.
    Tesco, under boss Dave Lewis, has lowered prices, improved
product availability and bolstered customer service.
 
    "Tesco's volume sales are growing faster than its value
sales, particularly in the meat and fresh produce categories,"
said Fraser McKevitt, head of retail and consumer insight at
Kantar Worldpanel.
    Tesco's shares have increased 38 percent so far this year.
However, they were trading down 3 percent at midday on Tuesday.
    Analysts noted that Kantar's data for the four weeks to Dec.
4 was less encouraging for Tesco than the three months data it
publishes.
    Barclays analysts said over the later four weeks Tesco's
sales fell 0.9 percent and it lost 2 basis points of market
share.
    "Tesco's headline performance seems to be being depressed by
weak alcoholic drink sales - its sales on a 'food and drink'
basis were actually very strong versus peers," they noted.
                
 Sales and market share (percent)    
                  12 wks to     12 wks to     pct change
                  Dec 4, 2016   Dec 6, 2015   in sales
 Tesco            28.3          28.0          1.6
 Sainsbury's      16.5          16.7          -0.6
 Asda             15.3          16.2          -4.7
 Morrison         10.8          11.0          -1.4
 Co-operative     6.3           6.2           2.0
 Aldi             6.2           5.6           10.0
 Waitrose         5.1           5.1           1.1
 Lidl             4.6           4.4           5.7
 Iceland          2.2           2.0           8.6
                                              
                                              
    

 (Reporting by James Davey; editing by Sarah Young and Susan
Thomas)

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