Tesco Leads U.K. Grocers into First Sales Fall On Record

The British grocery market is declining for the first time since records began two decades ago, researcher Kantar Worldpanel said.

Industry sales dropped 0.2 percent for the 12 weeks ended Nov. 9 as discounters Aldi and Lidl take an ever increasing share of the market at the expense of established competitors such as Tesco Plc and J Sainsbury Plc, Kantar said today.

“The fight for a bigger share of sales has ignited a price war,” Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said in a press release.

Aldi and Lidl’s combined share of spending increased to 8.4 percent, according to Kantar, while Tesco, Sainsbury and Wm Morrison Supermarkets Plc all lost ground. The emergence of the discounters is fueling price deflation, exacerbating the market’s difficulties. Grocery prices declined 0.4 percent in the 12-week period, Kantar said, the 14th successive fall.

Tesco’s sales fell 3.7 percent, while its share of the market declined to 28.7 percent from 29.8 percent a year earlier, Kantar said. The market leader’s efforts to revive business have been complicated by a profit overstatement that has led to the suspension of eight senior managers.

Asda, owned by Wal-Mart Stores Inc., was the only one of the U.K.’s major grocers to maintain market share. Waitrose, owned by John Lewis Partnership Plc, increased sales by 5.6 percent, taking its share to 5.1 percent, Kantar said.

Aldi’s market share rose to 4.9 percent and Lidl’s to 3.5 percent, according to the researcher. Their combined share could eventually settle at 15 percent, according to Moody’s.

Price Cuts

The fragmentation of the U.K. grocery market was described last week as a “shockwave” by Asda Chief Executive Officer Andy Clarke as the chain joined its major competitors in reporting like-for-like sales declines.

Sainsbury said a day earlier that it anticipates “years” of negative same-store sales growth for the industry as more shoppers seek out convenience and better prices.

The major mid-market grocers have responded to discounter competition with price cuts and promotions. Wm Morrison has given readers of a British tabloid newspaper vouchers for 5 pounds ($7.90) of fruit and vegetables for free with no minimum spending. Asda executives last week criticized such promotions as “desperate measures” and “panic tactics.”

“This is bad news for retailers, but good news for shoppers, with price deflation forecast to continue well into 2015,” Kantar’s McKevitt said in the statement.

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