Glow of summer grocery sales boom begins to fade

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The hot summer weather triggered a bumper summer for the grocers, but the latest market share data suggests spending has slowed in more recent weeks.

Kantar Worldpanel found overall grocery spending was up 3.8% in the 12 weeks to 9 September, with consumers spending on alcohol, soft drinks and ice cream through the “hottest summer on record”.

However, the early summer grocery boom has tailed off, according to market share data from Nielsen, as consumers have returned to their regular shopping behaviours and more usual levels of grocery spend.

Over the last four weeks ending 8 September, value growths slowed to 2.4% and volume growth for grocery multiples fell back to 0%.

Kantar found that Asda had the best period of the mults, with sales up 3.1%, closely followed by Morrisons (MRW) at 3%, while Tesco (TSCO) and Sainsbury’s (SBRY) were at 1.9% and 1.6% respectively.

Aldi was the fastest growing grocer once more, with sales up 13.9%, but The Co-op is now growing faster than Lidl as their respective sales were up 8.5% and 8.3%.

In the overall market, promotional sales fell and accounted for 32.4% of total grocery sales – the lowest level since June 2009. Fraser McKevitt head of retail and consumer insight at Kantar Worldpanel explained: “Retailers are looking to offer consistently lower prices on everyday items rather than one-off deals and they have all reduced promotions as a result.

“That being said, consumers may not feel like they have more money in their pockets – grocery inflation has now reached 2.0%, adding £1.64 to each household’s weekly shopping bill. At the current rate, these price increases add up to an extra £85 per home annually.”

Nielsen said the early summer period was particularly strong owing to scorching hot weather and major sporting events like the World Cup.

Over the last 12-week period, there were 1.5% more visits than during the same period a year ago, while the level of in-store promotions remained stable at 26% of sales.

Over the last 12 weeks, The Co-Op outperformed the other major supermarkets growing by 7.3%, with Iceland up 6.1%.

Asda and Morrisons maintained strong performance (at 3.9% and +2.8% respectively), with Tesco growing sales by 2.5% and Sainsbury’s up 1.5%.

For the discounters, Aldi outperformed Lidl over the last 12 weeks, growing 12.5% compared with 9.1%, driven by a bigger increase in average basket spend as well as attracting more new shoppers.

Mike Watkins, Nielsen’s UK head of retailer insight, said: “While there is still pressure on the consumer wallet, we continued to see shoppers spend freely on indulgences, celebrations and events up until the end of August. The hot summer has been a windfall for most food retailers.

“However, with summer turning to autumn in the last couple of weeks, sales growths have mellowed. Even so, shoppers are maintaining their grocery spend and opting instead to make savings on overall household expenditure, including clothing and homewares.”

“The exceptional summer has given the industry some much needed momentum and with a recent small uptick in inflation, the improved growth we’ve seen in the first half of the year are likely to continue for the second half, even if the last few weeks have seen a pause for breath. We are still broadly optimistic about the rest of the year and anticipate FMCG growth to sit close to 3%, with volume growth positive during Q4.”

Morning update

Ocado (OCDO) has posted an 11.5% retail sales rise in the 13 weeks to 2 September 2018.

Retail sales in the quarter grew to £348.6m, with average orders per week up 11.4% to 283,000 and average order size stable at £106.26.

Ocado said it was seeing “good performance” from its new customer fulfilment centres at facilities at Andover and Erith, with “very strong” initial growth at Erith

Tim Steiner, Ocado’s CEO, commented: “The new capacity from Andover and Erith, our robotic third and fourth warehouses, is helping meet consumer demand for our services and drive the channel shift which is transforming grocery retailing in the UK. We are proud to have opened our Erith Customer Fulfilment Centre this summer on time and on budget.

”At full capacity, this latest state-of-the-art CFC will be the largest automated warehouse for online grocery in the world. We are delighted to report that last week Erith processed over 20,000 customer orders 14 weeks after opening, a number which took Andover 15 months to achieve. Together, Andover and Erith provide new opportunities for growth in our UK retail business while showcasing the scalability, adaptability and efficiency of our platform.

“Ocado’s unique and proprietary technology, which makes these facilities work, is bringing greater value, quality and convenience to British shoppers while at the same time helping our partners redefine the shopping experience for their own customers. We are on track to deliver a significant number of new CFCs for our Solutions partners in the coming years and as such are fulfilling our goal of changing the way the world shops.”

UK-listed stevia producer PureCircle (PURE) has achieved doubled-digits sales and revenue growth in its full year to 30 June after its prior year was hit by US customs seizing one of its shipments.

Group sales increased 10% to $131.1m in the period, primarily been driven by North America and reflects the continued positive mix benefit of the growth of its products as

Gross profit increased by $3.4m to $49.2m driven by the increase in sales, though gross margin decreased 1% to 38% due to higher production costs.

The Group recorded a $8.7m net profit in the year, an increase in $1.5m compared the prior year.

Investments in growth have increased the level of net debt in the business, with the Group ending the year with net debt of $98.1m compared to $84.7m at the end of the previous year.

PureCircle’s CEO Magomet Malsagov, said: “I am delighted that PureCircle has delivered a strong set of results with double-digit revenue and profit growth. The successful launch of Starleaf, our fourth generation of natural-origin stevia, is significant, as it enables our customers to achieve “no added sugar” and 100% calorific reduction in their products whilst ensuring best taste. Everything we do is about helping our customers achieve their goals of reducing sugar, calories and the cost of ingredients without compromising taste.

“Our commitment to continued innovation will ensure we remain the industry leader and provide our strong diversified customer base with the breadth and depth of applications it requires. We continue to invest in our systems, our people and our organisation in order that we can achieve our aspirations.

“Stevia is a force for good in the world - we are excited about the year ahead for both the industry and for PureCircle and look forward to the future with confidence.”

The group also announced that chairman, Paul Selway-Swift will be retiring from the board at its AGM, which will be held on 30 November.

Digital retail loyalty company Eagle Eye has posted a 33% rise in group revenues in the year to 30 June to £14.8m.

Some 89% of these revenues £13.1m relate to the Eagle Eye AIR platform, while revenue from subscription fees and transactions over the network of £11.4m represented 77% of total revenue and grew by 51% year-on-year

Gross margin was maintained at 87%, which translated to an adjusted EBITDA loss of £2m – up from a loss of £1.8m in the prior year, though ahead of management expectations

Its AIR platform’s capability and scale was enhanced in the period and is now delivering over 3,000 transactions per second and over 150 million offer permutations a week

Client and partner wins including Greene King, M&Co., Boparan, Groupon and Google, taking total number of customers to 294, including 85 brands

Tim Mason, CEO of Eagle Eye, said: “The investments we have made into our people, platform and processes mean we have the scale and proof points to deliver upon our growth strategy and potential. We believe our Digital Wallet provides us with significant competitive advantage and that this, coupled with our operational capability, will stand us in good stead to unlock new opportunities.

“Whilst it is still early in the current financial year, the momentum and number of visible sales opportunities in the pipeline give the Board confidence that trading is in line with its expectations for the full year. In order to achieve our targets, the focus for the team in the year ahead will be to convert these opportunities and continue to deepen our existing customer accounts.

“The size of our market opportunity underlines our belief that we are just at the start of our journey and we look to the future with confidence.”

On the markets this morning, the FTSE 100 has barely moved at 7,302.3pts despite market weakness elsewhere related to the latest US/China trade tensions.

Ocado has jumped 4.3% to 952.2p on this morning’s solid trading update.

PureCirlce is up 1.6% to 317p and Eagle Eye is up 4.8% to 130p.

Other movers include Devro (DVO), up 2.2% to 204p and C&C Group (CCR), up 1.8% to €3.44.

Fallers so far today include Premier Foods (PFD), down 3.3% to 41.3p, Imperial Brands (IMB), down 1.6% to 2,584p, Marks & Spencer (MKS), down 1.4% to 280.7p, British American Tobacco (BATS), down 1.3% to 3,623p and FeverTree (FEVR), down 1% to 3,712p.

Yesterday in the City

The FTSE 100 ended the day flat at 7,302.1pts as worries over global trade continue to weigh on international markets.

Dairy Crest (DCG) was up 1.7% to 466.8p yesterday after announcing that it expects a rise in profits and sales for the first half of 2018, driven by its cheese and spreads.

Finsbury Food Group (FIF) conversely was down 1.2% to122.5p after seeing full year pre-tax profits tumble 65% as it was impacted by £12m in costs caused by the closure of its Grain D’or bakery business.

Risers yesterday included WH Smith (SMWH), up 1,8% to 2,120p, PZ Cussons (PZC), up 1.2% to 229.4p and Associated British Foods (ABF), up 1.2% to 2,263p.

Other stocks on the up included McBride (MCB), up 2.8% to 154.2p, Devro (DVO), up 2.3% to 199.6p, Marston’s (MARS), up 2.1% to 101.3p and Greene King (GNK), up 1.8% to 519.8p.

Fallers yesterday included FeverTree (FEVR), down 2.9% to 3,750p, Greggs (GRG), down 2.1% to 1,062p, Coca-Cola HBC (CCH), down 1.2% to 2,567p and Greencore (GNC), down 1% to 195p.