The fallout of Brexit has been pretty sobering for Britain. Prices are up, wage growth is down, and both of those have dealt a blow to household spending power – and therefore the economy overall. Retail in general is suffering as consumers pinch pennies.
However, Brexit been nothing but good news for grocery stores, transforming last year’s declines into the highest sales growth in five years. People might be able to forgo new clothing, furniture or televisions, but everybody’s got to eat, inflation or no inflation.
This time last year, supermarkets were slumping, marking a 0.2 percent decline in the quarter spanning March through June. But that all changed in June 2016, when Britain voted to leave the European Union. Now, reports The Independent, grocery inflation is at 3.2 percent, with some products seeing additional price spikes due to supply issues. Farmed salmon, for instance, is up 14 percent, affecting both fresh and canned fish prices. And butter is a full 20 percent higher than it was a year ago.
Of the U.K.’s “big four” grocers, Morrisons enjoyed the strongest sales, increasing 3.7 percent. Tesco was up by 3.5 percent, Sainsbury’s by 3.1 percent and Asda (which is owned by Walmart) by 2.2 percent.
However, the biggest beneficiaries were smaller supermarkets and discounters. German discounters Lidl and Aldi raced to the top, with 18.8 percent and 18.7 percent sales growth, respectively. Both discounters have been expanding aggressively, drawing an estimated 1.1 million new customers through their doors in the first quarter.
Lidl has now positioned itself as the U.K.’s fastest-growing supermarket for the first time since March. Aldi ousted the Co-operative Group from its position as the country’s fifth-biggest supermarket in January, but the Co-Op still saw sales growth of 2.2 percent, putting it on par with the big four’s Asda.
Premium chain and online grocer Waitrose is growing marginally faster than the market average at a rate of 5.3 percent, and competitor Iceland has posted 15 periods of increasing sales.
On the other side of the coin, this good news for grocers is bad news for consumers. All of this amounts to an additional £133 in annual household grocery shopping bills, the equivalent of making seven extra trips to the store across the year.
And so, the experts’ predictions are coming true. In February, with inflation at 2.3 percent (almost a full percentage point less than it is now), Forbes predicted rough sailing ahead for the U.K.’s mid-tier grocers as consumers began to scrounge for savings, and it was right.
“We expect inflation to continue to accelerate, and as a result we’re likely to see consumers looking for cheaper alternatives,” Kantar Worldpanel’s Fraser McKevitt told Forbes.
The Independent noted that part of the recent grocery boost can be attributed to hot weather driving sales of soft drinks, ice cream, alcohol, and cookout fare, including produce and deli meats. Gin also saw a boost due to the timing of Father’s Day, according to Nielsen consultancy. The summer weather is projected to keep growth right around 3 percent for at least the next few weeks, Nielsen said.
In Other News…
India has launched a new tax regime, the Goods and Service Tax, or GST. Consumers will feel the relief as most food prices will drop under the new tax. Top sellers milk and curd will be exempt, along with grains, produce and salt. Non-exempted food items (mostly processed goods) will fall in the 5 percent tax bracket. The exceptions are tea, coffee and spices, which will be taxed at 5 percent compared with the current 3 to 4 percent, and carbonated beverages, which will now be taxed at 40 percent.
When it comes to grocery delivery, Amazon isn’t the only one that sees the writing on the wall. The big chains have cottoned on, and now smaller independent stores are following suit. Gazzali’s Supermarket of East Oakland is one of them.
“With the nature of our lives right now, we’re all so busy that I hardly even go shopping anymore,” said the store’s owner, Rahban Algazzali. Stores waiting to go online “are just wasting time. If we don’t offer online shopping to our customers, then they are gonna go shop somewhere else.”
Algazzali partnered with Indemand to build an online store and contract out delivery work – just in time to take advantage of the industry shakeup triggered by Amazon’s $13.8 billion acquisition of Whole Foods.
A new report by sales and marketing agency Acosta showed that more consumers are making online grocery shopping part of their weekly routine with click-and-collect boxed-meal delivery services. Still, despite growth in online sales, brick-and-mortar grocers continue to dominate, with 97 percent of consumer packaged-goods dollars being spent in physical retail stores.