Discounter growth dips to lowest point since 2011

By Jo Gilbert

Published: 16 November, 2016

Sales growths across discounters Aldi and Lidl have hit their lowest level in five years as the supermarkets - led by Tesco - continue to fight back.

During the 12 weeks to November 5, Aldi's year-on-year sales revenue increased 11.3%, while Lidl's increased 5.2%.

The combined figure is the lowest percentage growth for the two discounters since the end of 2011 - although their current growth still far outstrips the 1.4% rate across the overall UK grocery market.

Between them, Aldi and Lidl account for 11.8% of UK grocery sales, up from 11.1% a year ago.

"It's inevitable that a time would come when the discounters experienced a slowing growth rate, and three factors have combined to see this happen," said Mike Watkins, Nielsen UK's head of retail and business insight which analysed this month's retail performance data of the major supermarkets.

"Firstly, the growth rates a year ago were particularly high due to a period of new store openings, so it's always harder to maintain growth against that. Secondly, the supermarkets have had more time to alter strategies to fend off the discounters, particularly Tesco whose recovery continues apace - its 2.3% growth was the strongest in over three years.

"Finally, shoppers are still spending freely and we've seen a return of sustainable growth in the volume of items people are buying, helped by industry-wide price cuts, so one of the discounters' USPs is less pronounced in shoppers' minds."

Market data shows that shoppers continue to spend freely, as the so-called "Brexit impact" isn't expected to hit consumer spending until next year.

Recent months have shown that the supermarkets are pushing back to reclaim some of the discounters' success.

The four weeks to November 5 was the fourth consecutive month of growth for the UK's leading supermarkets in both money taken at the till and volume of goods sold.

Revenues were up 1.1% versus the same period a year ago - the highest figure, excluding Easter-inflated periods, since the end of 2013, while volume rose 0.3%.

"Driven by Halloween and Bonfire Night, the week-ending November 5 was particularly strong for the major supermarkets, with money taken at the checkout up 2.7% and volumes up 1.9% on last year," Watkins added.

"This combined with their recent mini-revival suggests this Christmas will see an improvement for the supermarkets over last Christmas when sales were flat. As the festive ad campaigns kick-off, it will be interesting to see how much the supermarkets invest in media spend to support this new momentum. Last year Aldi and Lidl alone spent £27m to help their sales growth."

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