Supermarket price inflation has fallen to its lowest level since March 2022, according to new data from Kantar, as promotions accelerated and supermarkets continued to focus on price.

Kantar found that grocery price inflation fell to 5.3% in February, marking the lowest rate since March 2022 and a decrease of 1.5 percentage points from January.

Take-home grocery sales continued to marginally lag inflation, growing in value by 5.1% for the four weeks to 18 February 2024.

Tom Steel, strategic insight director at Kantar, commented: “Things are looking up for shoppers this February. Consumers have been navigating a grocery inflation rate of more than 4% for two years now, so this latest easing of price rises is especially welcome.

“Though there’s been lots of discussion about the impact the Red Sea shipping crisis might have on the cost of goods, supermarkets have been pulling out all the stops to keep prices down and help people manage their budgets.

“More generally, we saw promotions accelerate this month after a post-Christmas slowdown. Consumers’ spending on offers increased by 4% in February, worth £586m more than the same month in 2023. The battle between supermarkets’ own-label lines and brands also remains fierce. Own label nipped ahead this month, growing sales by 5.5% versus branded products at 5.3%.”

Lidl was the only retailer to achieve double-digit growth with sales up by 10.9% over the 12 weeks to 18 February 2024, making it the fastest-growing grocer for the sixth month running.

Fellow discounter Aldi also grew ahead of the market, boosting sales by 5.7% and maintaining its 9.4% share.

Sainsbury’s was the fastest-growing of the mults, up 7.6%, with Tesco up 6.2%. Morrisons was up 3.1% and Asda 1.9%.

Waitrose grew by 3.8% in the period, with Iceland and Co-op up 2.1% and 1.4% respectively.

Ocado now holds 1.9% share of the total market as sales rose by 4.9%, behind that of the total online market, which saw year-on-year growth of 6.8%.

Grocery inflation now stands at 6.1% for the 12-week period ending 18 February 2024. Prices are rising fastest in markets such as sugar confectionery, chocolate confectionery and frozen potato products, and are falling fastest in butter, milk and toilet tissue.

Morning update

Shop price annual inflation eased to 2.5% in February, down from 2.9% in January, according to the BRC-Nielsen shop price index..

This figure is below the three-month average rate of 3.3% and also found shop price annual growth was its lowest since March 2022.

Non-food inflation was unchanged at 1.3% in February and at its lowest since January 2022.

Food inflation decelerated to 5.0% in February, down from 6.1% in January. This is below the three-month average rate of 6.0% and is the tenth consecutive deceleration in the food category. Inflation is its lowest since May 2022.

Fresh food inflation slowed further in February, to 3.4%, down from 4.9% in January and is now at its lowest since February 2022.

Ambient food inflation decelerated to 7.2% in February, down from 7.7% in January and its lowest level since July 2022.

BRC CEO Helen Dickinson commented: “There was good news for consumers as shop price inflation fell to its lowest rate in nearly two years. Food prices fell month-on-month with drops in fresh food including meat, fish and fruit. This was driven by easing input costs for energy and fertiliser while retailers competed fiercely to keep prices down. In non-food, inflation for furniture, electricals, and health & beauty products rose, but the price of clothing continued to fall as many retailers kept promotions in place to entice consumer spend.

“Easing supply chain pressures have begun to feed through to food prices, but significant uncertainties remain as geopolitical tensions rise. Prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports around the Cape of Good Hope. Domestically, retailers face a major rise to their business rates bills in April, determined by last September’s sky-high inflation rate. April’s rates rise should be based on April’s inflation, and the Chancellor should use the spring budget to make this correction, supporting business investment and helping to drive down prices for consumers.”

Mike Watkins, head of retailer and business insight at NIQ, added: “Shop price inflation has slowed and the underlying trend in prices will be downwards over the next few months. Since the start of the year, food retailers in particular have reduced prices as well as passing on price cuts coming through supply chains. For high street retailers faced with weaker demand, keeping prices stable over the next few months will be key to encourage customers to spend.”

On the markets this morning, household goods manufacturer McBride delivered a “much improved” performance in the first six months of its financial year as consumer demand for own-label products boosted the group.

The household cleaning specialist’s revenue increased 9.8% to £468m in the six months to 31 December, which moved it to a profit before taxation of £17.4m from a £20m loss last year.

McBride said it had built on the momentum in the second half of the last financial year with the current period benefiting from continued strong demand for McBride’s private label products, as retailers look to support their customers as they continue to transition to better quality products to mitigate cost of living pressures.

Private label share in the overall household cleaning products market in Europe is estimated to have risen to 35% by volume, up over 4ppts since 2021.

In that period, McBride private label volumes are up 10.1%.

In its core strategic focus areas of Germany and laundry, McBride achieved volume growth of 10.5% and 9.8% respectively.

Gross margin continued to recover as a result of pricing actions implemented in the last financial year, helping to offset the input cost inflation seen by the business in previous periods.

During the period, raw material input costs remained relatively stable but inflationary pressures remain from employment, general supplies, energy and financing costs.

Reducing levels of debt is a key priority for the business and further progress was made in the period with net debt £20.8m lower at £145.7m.

So far in 2024 it said demand levels continued in line with trends seen in the first six months, and the group expects to see the favourable trends for private label markets continue throughout the year.

In addition, a number of new contract wins are expected to commence during the next six months, adding further volumes. As a result the group now expects full-year adjusted operating profit to be ahead of previous internal expectations by 10%-15%.

It also anticipates that net debt/adjusted EBITDA will be below two times by 30 June 2024.

CEO Chris Smith commented: “McBride has continued with its positive momentum in the first half of this financial year. It is pleasing to see all five divisions continuing to grow on a constant currency basis, supporting our customers with high-quality products to meet the consumer shift to private label. This strong performance is a result of the commitment across all the business teams to provide our customers with highest quality, best value products and the strongest innovation options in the sector.

“Our focus on operational delivery will see our second half year deliver ahead of our plan with full year adjusted operating profit now expected to be 10%-15% ahead of previous internal expectations.

“As we progress our transformation programme, with specific initiatives to enhance McBride’s capabilities and tools for the future, we remain focused on performance delivery today. This focus, together with our continued drive to reduce debt levels, will ensure McBride is well positioned to achieve further progress in the near and medium term and we look to the future with confidence.”

Also this morning, wholesale group Kitwave achieved significant growth in both revenue and adjusted operating profit during the year to 31 December.

Group revenue increased by 19.7% to £602.2m and adjusted operating profit increased by 48.8% to £32m.

Headline performance was helped by the 11-month contribution from Westcountry Food Holdings Limited, which is in line with expectations at the time of the acquisition in December 2022.

Adjusted operating profit from existing operations was up to £27.3m from £21.5m as management focussed on increasing gross margin in order to offset the adverse effects of inflationary increases in the group’s cost base.

As a result, the ratio of distribution costs to revenue is only slightly ahead of the prior year and is in line with our expectations.

CEO Paul Young said: “As announced in the Group’s trading update in November 2023, the strong performance continues to deliver growth with sustained momentum achieved throughout 2023. We are, therefore, able to report results in line with the significantly upgraded market expectations that were established after the group’s interim results, published in July 2023.

“As can be seen from the results for this year, all our divisions have continued to grow while managing well the inflationary pressures in their cost base that existed throughout the year.

“The successful integration of Westcountry into the foodservice division demonstrates the value of our buy-and-build philosophy, with the group continually assessing acquisition opportunities to combine with our initiatives to drive organic growth.

“While we have now acquired and successfully integrated 13 businesses since 2011, the board believes there remain a large number of opportunities available to us in what is a fragmented delivered wholesale market in the UK.

“In addition to acquisitions we also seek operational improvement. The new distribution centre is an example as it will be key to increasing the efficiency and capacity of the group’s south west operations.

“The group is strategically positioned to continue to deliver a high service offering within the UK wholesale market and we are confident of another positive trading period in 2024.”

Additionally, the group has announced that Young will step down from his role after the company AGM on 22 March.

Ben Maxted, the current chief operating officer, will become the new CEO.

Young said: “After over 35 years since Kitwave was founded and being a part of that process, I will be retiring after the AGM on 22 March 2024.

“It has been a pleasure to see the group grow and with Ben Maxted taking over as the new CEO, I am confident that the board and management have the expertise and experience to deliver Kitwave’s growth strategy and generate further value for the group and its shareholders.

“I would like to take this opportunity to acknowledge and thank everyone within the group. I am extremely grateful for my tenure as CEO and I wish Kitwave every success for the future.”

On the markets this morning, the FTSE 100 is flat at 7,684.1pts.

McBride has jumped 16.1% to 85.5p on the stronger than expected results. Other risers include Naked Wines, up 6.5% to 61.9p and Bakkavor, up 5.4% to 96.7p.

Fallers include Wynnstay, down 2.2% to 373.6p, Unilever, down 1.5% to 3,938p and C&C Group, down 1.3% to 153.2p.

Yesterday in the City

The FTSE 100 started the week down 0.3% to 7,684.3pts.

Ocado was one of the major fallers ahead of its full-year results later in the week, down 7% to 491.5p.

Other fallers included Naked Wines, down 6.4% to 58.1p, Kerry Group, down 3.8% to €78.75, SSP Group, down 3.2% to 225.6p, Pets at Home, down 3% to 283.6p and Deliveroo, down 2.6% to 111.7p.

The day’s risers included McBride, up 4.6% to 73.6p ahead of this morning’s half-year results.

Also on the up were Coca-Cola Europacific Partners, up 3.6% to €64.75, Nichols, up 2.7% to 1,000p, Cranswick, up 1.4% to 3,936p, THG, up 1.1% to 66p and Greencore, up 1% to 102.5p.

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