Grocery sales ‘worst ever’ in past two months

By Rod Addy contact

- Last updated on GMT

Related tags: Supermarket, Retailing

The Aldi effect: rising sales at discounters Aldi and Lidl revealed the recessionary trend, said IRI boss Tim Eales
The Aldi effect: rising sales at discounters Aldi and Lidl revealed the recessionary trend, said IRI boss Tim Eales
Grocery sales in May and June were the “worst ever” seen, as the market reeled in an aftershock of the recession, according to one longstanding industry analyst.

Tim Eales, strategic insight director at IRI and a veteran grocery market analyst, said despite signs the recession was subsiding, grocery spend from April to June remained “severely depressed”​, with value sales dipping.

“If anything, the last two months have been the worst two months ever​,” he told “I have done this job for 40 years and have never seen figures like it.”

According to the British Retail Consortium (BRC), food price inflation fell to 0.6% in June – the lowest ever recorded – while like-for-like food retail sales declined by 2% in the second quarter of 2014.

‘Never seen figures like this’

It was extremely unusual to see grocery value sales go down, he said, “because prices are always going up and the population is growing”. “As far as I am concerned I have never seen figures like this, apart from for the war ​[World War II].”

Eales attributed this to a number of different factors. On the one hand, the effects of the government’s new child benefit tax for higher wage earners had kicked in this year, particularly for those who had deferred paying extra charges. Those hit by this had to cut household budgets, he said.

On the other hand, he added: “There are an ever increasing number of people for whom £1,000 comes in and £1,000 goes out again.”

A change in that situation required a period of time when wages went up faster than the cost of living and that had not yet happened, he said. In fact, average wage figures had gone down in April by 1.5% and had only risen in May by 1.4%.

“I can’t see any reason why it should get any better for the moment,”​ said Eales. “There are a lot of people financially hurting out there, because the gap between wages and prices has been the wrong way round for the past six years.”

Turning to discounters

Eales acknowledged that IRI data only covered spending in the top supermarkets, so the drop it recorded might partly be down to consumers abandoning them and turning to discounters such as Aldi and Lidl.

However, he said: “Yes, the discounters are having an effect, but that in itself is a recessionary trend.” ​He also said that he did not believe it could account for the size of the hit to grocery spend taken by the major supermarkets.

Financial advisory group Begbies Traynor has claimed retailers had been “wrong-footed”​ by changing consumer habits.

The firm’s Red Flag Alert research draws on legal and financial data to measure the number of companies experiencing corporate distress. According to the latest figures, food and beverage manufacturing had seen a 68% increase in businesses grappling with financial distress in the past year.

The number of food retailers enduring such distress rose by 57% in the same period, according to Begbies Traynor.

Financially distressed

The company witnessed a 45% and 35% rise in the numbers of financially distressed food and drink manufacturers and food retailers respectively from the first to second quarters of 2014.

“Following years of cautious spending, consumers were finally feeling a little flusher at the start of 2014,”​ said Begbies Traynor partner Julie Palmer.

“But high levels of credit card debt and recent real wage cuts, combined​ with [governor of the Bank of England] Mark Carney’s warning of an early interest rate rise, have prompted many households to abruptly reassess their spending habits, catching many retailers by surprise.

“There is evidence that many consumers are now choosing to save instead, while seeking the security of fixed-rate mortgage deals to allow for a greater degree of financial management. This air of uncertainty has already had a tangible impact on discretionary spending habits, with customers becoming savvier, demanding better deals, and drawing in their spending.”

The latest BRC/KPMG Retail Sales Monitor, covering April to June, did not attribute declining supermarket food sales to the rise of online retail. It claimed online retailers were likely to be experiencing similar struggles to the supermarkets.

Meanwhile, Tesco boss Philip Clarke announced his decision​ to quit the troubled retailer today (July 21), after it announced another profit warning. He will be replaced by Dave Lewis, head of Unilever personal care.

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1 comment

'Worst grocery' sales

Posted by Adam Johnson,

Tim Eales forgot to mention the significant reduction or loss of 'working tax credits', through the government changes. This has affected low income families as well as middle earners (you have to have a very low income to receive the full credit allowance!).
Plus, what about the affect of free food banks?

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