A 2024 outlook – supermarket and fmcg priorities for the year ahead

Return of the friendly supermarket 

Not all supermarkets are in the same place right now – compare the stability at Sainsbury’s and Tesco, whose strategies and management have been settled for years, with the recent changes at Asda and Morrisons. Asda’s plans under the Issa brothers are starting to take shape and indeed bear fruit, while 2024 looks set to be a year of interesting changes at Morrisons under new CEO Rami Baitiéh, who arrived in November.

There are some common themes that all retailers will have to handle in the coming year. The expected easing of inflation and even moving into a possible deflationary phase will bring a need to balance supplier relationships with customers’ expectations of lower prices. Likewise, we can expect the environment and healthy eating to remain high on shoppers’ agendas – and they will expect their retailer of choice to help them do the right thing.

However, the less tangible quantity that the major supermarkets will need to get right is making their stores somewhere shoppers actually want to visit.

For far too long, supermarkets have been tailored as super-efficient and functional places geared towards speeding the maximum number of customers through as quickly as possible. That’s not to say the major supermarkets should all be ripping out their self-service checkouts, à la Booths, but a return to some genuine in-store theatre – and a better balance between friendly customer service and pure functionality – would be a welcome step in the right direction.

– Ronan Hegarty

Self-service sacrifice?

Last year Tesco trialled new tech so customers didn’t have to scan items at self-service tills. Since November, customers at Tesco’s Fulham Reach Express GetGo store have been able to take items from shelves and “just walk up” to the checkout, which will “magically present them with a list of the products they have picked up” – all without the involvement of any barriers on entry or exit, app downloads or long waits for a receipt.

It’s a slick and friction-free self-service solution – one which checkout-free rival Amazon Fresh is fast reaching after numerous refinements over the past 12 months – and is likely to be emulated by others, with law firm Lewis Silkin predicting “magic till technology is set to grow” through 2024.

While providing a great customer experience (most of the time), supermarkets will, however, need to consider if checkout-free is really worth all the effort and expense. The lesson from Amazon in 2023 may be that no matter how swish your stores, it doesn’t guarantee footfall or sales. And the tech spend might better be put into promotions, given the promised labour savings may still be some time off yet.

Moves like that of Booths to remove self-checkouts almost completely may be extreme, but getting the balance right will be a priority in the year ahead.

– George Nott

Discounter growth dilemmas 

As is usual for the first week of January, Aldi and Lidl have both reported “record” Christmas sales, earning now familiar headlines about shoppers flocking to them during the cost of living crisis.

But they are not breaking any records with their growth rates. Aldi has said its sales increased 8% in the four weeks to 24 December. That’s lower than the Kantar grocery price inflation figure for November, of 9.1%.

As GlobalData retail analyst Tash Van Boxel notes, with December’s inflation figure expected to also be about 8%, “volumes are likely to have been broadly flat at the discounter”.

Lidl is putting its sales growth at 12% in the same four weeks to 24 December, which is a slowdown if compared with its Kantar growth figure for the 12 weeks to 26 November, of 14.2%.

Aldi is also behind its own Kantar November figure, which was 11.1%.

The figures start looking distinctly lacklustre when compared with Christmas 2022, when Aldi boasted of a 26% sales increase and Lidl reported a 24.5% year-on-year uptick.

Historically, the market share of the two discounters has tended to dip slightly at Christmas as shoppers lean more into the traditional supermarkets for the special occasion. Wednesday’s new Kantar figures will reveal the extent to which this has played out this Christmas.

Either way, the trading updates indicate the challenge for both retailers in retaining the growth momentum of the cost of living crisis as inflation eases.

Hence the heavy messaging on value from Aldi, which has started 2024 with a promise to ‘lower prices even further’, and offer ‘simple, clear prices on every product’.

Aldi UK & Ireland CEO Giles Hurley said: “As we look ahead to 2024, our promise to customers is that they will always make significant savings on every shop with Aldi because we have the lowest grocery prices in Britain.”

Lidl GB CEO Ryan McDonnell promised: “As we look ahead into 2024 and even higher footfall, we remain relentlessly focused on continuing to do what we do best – which is always offering the highest quality on the market for unbeatable value.”

So far, the two discounters sales figures have benefited from their equally relentless estate expansion, but this cannot continue forever. With Aldi on over 1,010 stores and Lidl over 960, both maintain they can still open hundreds more – but neither has forecast a number for 2024.

A recent report from property consultancy Knight Frank said the cost of living crisis would be putting pressure on their expansion because neither have “significant margin to play with in formulating a response to prevailing market conditions”.

Perhaps Lidl can ease margin pressure with supply chain efficiencies, including at its largest distribution centre in the world, and first to use automation, which opened in September in Luton.

For both, any slowdown in store openings will increase pressure to improve sales and profits from existing sites.

– Steve Farrell

The consumer definition of health

What does a healthy product look like? The answer is murkier than ever in a world of HFSS regulations, nutritionist influencers and the debate around ultra-processed foods (UPFs).

The government’s HFSS regulations are based on the nutrient profiling model, which awards punitive points for the likes of sugar, salt and fat, and deducts points for beneficial nutrients. But as critics have pointed out, this points-based system means a can of diet soda and sugar-free sweets could pass for a healthy lunch.

Many nutritionists are keen to put a greater emphasis on nutritional attributes such as protein and fibre. There is also a growing debate around the role of processing. Increasingly, a diet that involves minimal UPFs is being held up as the holy grail.

These contrasting definitions of health present a challenge for the industry in the year ahead. So far, the majority of retailers and fmcg giants have used the nutrient profiling model as a yardstick. But if consumers start to value different attributes, they may be forced to think differently about healthy ranges and what they constitute.

The kickoff of Veganuary exemplifies the dynamics at play. While meat alternatives tend to be UPFs, they are largely deemed healthy under the nutrient profiling model. How sales of these lines perform this month may provide some indication of which way consumer sentiment is wavering.

– Emma Weinbren

Where will vegan go in 2024?

Veganuary is an important month for the category as suppliers launch a raft of (sometimes gimmicky) vegan NPD in the hope of luring new and already plant-based shoppers towards their brands. However, as Brits look increasingly towards healthier options, it’s going take a lot more than the promise of being meat-free to keep them coming back.

Last year, retailers rationalised their meat-free ranges by over 10%, with the The Tofoo Co and Unilever’s The vegetarian Butcher bearing the brunt.

Other casualties of the slowdown included Nestlé, which in March unveiled plans to pull its plant-based Wunda and Garden Gourmet brands from sale in the UK; Meatless Farm was ultimately rescued from administration by VFC; and vegan meat and cheese manufacturer VBites called in the administrators in December. Such demises point to market oversaturation.

While meat and dairy alternatives are useful entry points for first-time vegans, long-term vegans don’t rely on them and account for a tiny proportion of the UK population (2%-3%, according to YouGov).

It stands to reason that success will follow brands that focus on high-quality, great-tasting products that also happen to be vegan. Tesco, for instance, is exploring a new ‘plant forward’ strategy that will provide veggie options made from Whole Foods Market, rather than meat mimics.

There are complications, such as in ice cream where signposting a product as ‘vegan’ can be a barrier to purchase. But there are workarounds. Viral TikTok brand Little Moons built its plant-based portfolio without shouting vegan. It debuted its dairy-free Refreshos range in January 2023 and recently expanded with a Blood Orange & Pink Grapefruit variant.

“We’re a flavour and quality-first brand,” says Little Moons marketing director Ross Farquhar. “So, whenever we bring out a vegan flavour, we have to be absolutely clear that it is as good, if not better than, it would have been if we’d put milk into it.”

Rivals would do well to follow its example.

– Niamh Leonard-Bedwell