As inflation eases, grocery shopping patterns are shifting notably.
- Premium own-brand products see a significant increase in sales.
- Shoppers are gradually moving away from budget options.
- Retailers are adapting to these changes in consumer behaviour.
- Uncertainty over future inflation impacts remains a concern.
The reduction in inflation is having a tangible effect on consumer grocery shopping habits. As inflation rates have fallen from 17.5% in March 2023 to just 2.3% in October, shoppers are demonstrating a renewed willingness to invest in premium products. This shift is evidenced by an increase in sales of premium own-brand products, notably highlighted by Sainsbury’s data which indicates that nearly two-thirds of large baskets now feature items from their premium range.
Retail data reveals that premium own-label sales have surged year-on-year, with a growth of nearly 16%, while economy own-label options have decreased by 10%. This represents a significant change from earlier consumer behaviours when more affordable options were favoured due to rising food prices in 2021.
Upmarket grocery retailers have seen substantial growth, with Ocado and M&S reporting sales increases of 15.9% and 12.4%, respectively. Similarly, Waitrose has gained market share for the first time in two years. However, Lidl, a discount retailer, also achieved record market share in May, indicating that the demand for value pricing remains strong.
The shift towards premium own-brands also reveals changes in the types of products being purchased. For instance, Aldi has observed increased sales in their premium lines such as Wagyu steak and artisan cheeses. Asda and Waitrose have responded to this trend by enhancing their premium product ranges.
Despite these trends, there remains a degree of caution among consumers. Fraser McKevitt from Kantar notes that while there is interest in trading up, inflation has only decreased and has not turned negative, meaning past price increases are still influencing consumer spending decisions. The premium own-label sector is growing rapidly, appealing both to those upgrading from standard labels and those downgrading from name brands.
The question of whether this newfound ability to spend translates to a greater volume of groceries purchased remains open. The Office for National Statistics reported a 0.7% decline in food store volumes in October, raising the possibility that dining out may be appealing to consumers once again. Food retail advisor Katharine Shipley suggests that while dining out is increasing, it is often more spontaneous and casual, presenting a challenge to traditional supermarkets.
In response to changing consumer behaviour, supermarkets are adapting by expanding their hot food and ready-to-eat offerings, as seen with M&S and Waitrose. Yet, as Christmas approaches, there is a careful optimism among retailers. Asda’s chairman Lord Rose notes that despite economic challenges, consumers are seeking occasions to unite with family, hoping for economic growth.
As inflation eases, the grocery sector sees shifts in consumer preferences with a cautious optimism for future spending.
