Grocery market grows after shop prices rise

The Irish grocery market grew by 3.5% in the 12 weeks up to Sunday, February 24, 2019, on the back of an “upward trajectory” in shop prices.

That’s according to data analyst Kantar Worldpanel, who released its latest figures on the Irish grocery market yesterday (Monday, March 11).

Kantar says that this data puts the Irish grocery sector on a “solid footing” in the run up to Brexit, pointing out that grocery prices are making a significant contribution to growth after a “prolonged period of deflation”.

Grocery prices rose by a further 1.5% in the most recent 12 weeks, marking the first time an increase has been recorded for four consecutive periods since February 2017.

According to Douglas Faughnan, consumer insights director at Kantar Worldpanel, “a number of factors had contributed to a lengthy spell of deflation, not least the intense price competition between retailers, which had driven down costs for consumers”.

Faughnan also pointed out that the continued growth of Aldi and Lidl – which now accounts for 11.2% and 11% of the market respectively – has encouraged other retailers to launch promotional campaigns.

Meanwhile, a stronger euro to sterling exchange rate has made British imported goods and ingredients cheaper, allowing retailers to pass some of those savings on to Irish consumers.

However, he pointed out that, with prices already rising as Brexit approaches, increases are likely to continue for the rest of the year.

“With more than €3.5 billion in food imports from the UK, the currency fluctuation can have a substantial impact on grocery prices in Ireland,” Faughnan added.

The data also highlights that own-label ranges grew by 4% in the last 12 weeks, which Kantar argues is a result of continued inflation forcing customers toward these products and away from branded sales.

The firm also claims that the increase in prices will result in more produce being put on promotion.

At present, the figures show that 30.2% of all grocery sales are on promotion, a figure that has been in gradual decline for the past five years of deflation; as prices begin to inflate, Kantar says that there may be an increased demand among consumers for produce on promotion.

“Each of the five major supermarkets played host to at least two-thirds of the population in the past 12 weeks, demonstrating that Irish shoppers are already prepared to shop around for the best deals,” argued Faughnan.

“Retaining the loyalty of their existing shoppers will be a key priority for retailers in the face of increased price pressure,” he added.