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Supermarkets slash prices as Brits buy Christmas dinners at discounters Aldi and Lidl

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Price wars: The logos of the UK’s leading supermarkets (Left to right from top row) Lidl, Asda, Sainsbury’s (Middle row left to right) Waitrose, Tesco and Aldi and bottom row Morrisons, are displayed outside various branches on November 18, 2015 in Bristol, England. Photo: Matt Cardy/Getty Images

‘Big Four’ supermarkets Tesco (TSCO.L), Sainsbury’s (SBRY.L), Asda, and Morrisons (MRW.L) are cutting prices as Aldi and Lidl continue to gain market share in the UK.

Aldi and Lidl enjoyed their highest ever Christmas market share in the 12-weeks to December 30, market research firm Kantar Worldpanel said on Tuesday (8 January). Two thirds of all British households went to one of the German discounters over the period and they had a combined market share of 12.8%.

Aldi’s sales grew by 10.4%, Kantar said, while Lidl’s grew by 9.4%. Aldi said separately on Monday that it had enjoyed its best ever Christmas, with sales of £1bn ($1.27bn) in December.

Meanwhile, Kantar Worldpanel’s data showed that Sainsbury’s (SBRY.L) market share dropped by 0.3% in the run up to Christmas and Morrisons (MRW.L) market share declined by 0.2%. Morrisons also reported worse-than-expected Christmas trading on Tuesday, with sales rising by 3.6% against forecasts of a 4% rise. Sales in its supermarkets, as opposed to its wholesale operation, rose by just 0.6%.

It’s worth stressing that we are in a goldilocks period for grocers with gently rising inflation and real terms wage growth at long last,” Neil Wilson, the chief market analyst at Markets.com, said. “But the hit from discounters is affecting the big supermarkets hard — the strong Aldi numbers highlight the kind of pressure the likes of Morrisons faces.”

Kantar’s data showed that Tesco managed to grow its market share by 0.6% over Christmas but this was linked to the fact that it was “the only retailer which increased its promotional activity year-on-year, bringing in discounts such as its 29-pence pricing strategy on vegetables,” Kantar said.

The discounters have continued to make their mark over Christmas: two-thirds of all households shopped at either Aldi or Lidl over the 12-week period culminating in a highest-ever combined Christmas market share of 12.8%,” Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said in a statement.

“With sales up 10.4%, Aldi narrowly won the crown of the fastest-growing supermarket and it appears its marketing efforts are paying off – at least when it comes to vegetables. The return of Kevin the Carrot contributed to an 18% increase in carrot sales and nearly one in five households bought the vegetable at the discounter.”

Faced with increased competition, the so-called ‘Big Four’ are cutting prices to stay competitive. As well as discounting over Christmas, Tesco recently launched its own discount supermarket chain called Jack’s. It also announced on Monday price cuts of up to 50% of hundreds of products.

Morrisons is also reducing prices. On Monday, the supermarket said the price of over 900 core items would be reduced by an average of 20%. Sainsbury’s launched its New Year’s discounting offers last week.

Asda, Sainsbury’s, Morrisons, and Tesco are all also cutting their petrol prices. Petrol is often used as a way to lure customers into big supermarkets.

Sainsbury’s will report its Christmas trading figures later this week on Wednesday, while Tesco follows on Thursday.

Supermarket sales grew by 1.6% in December, Kantar Worldpanel’s said, which was the slowest pace since March 2017. However, the sector still managed record sales of £29.3bn.