FMCG slowdown bites in UK

Warc, 15 August 2014

BRACKNELL: The FMCG market in the UK is experiencing its most significant decline in seventy years a new report has claimed.

The UK Topline Retail Trends report from market and shopper intelligence firm IRI said that in the first half of 2014 sales of FCMG products across all of the UK's major supermarkets were down in volume by -3.2% and in value by -1.2%. This was lower than the same period in 2013 and was, said IRI, "almost certainly unprecedented, despite recent declines in food price inflation".

Tim Eales, strategic director of insight at IRI, observed that wages were rising more slowly than prices and that consumers were finding it hard to keep within their budgets.

"They are cutting back on how much they buy from the major supermarkets, some moving instead to the discount shops, buying lower priced alternatives or simply making do with less," he said. "This is having an unprecedented effect on sales from the UK's major supermarkets."

The price-cutting strategies of the leading supermarkets – an attempt to ward off the challenge from discounters – do not appear to be helping them. IRI reported that its average shopping basket price had fallen just 0.5% in the past 8 weeks which equates to just 54 pence a week for the average family spending £500 a month on groceries.

"The retailers' price war is saving families close to nothing," said Eales. "It's going to be increasingly difficult for supermarkets to find paths to growth during the next few years unless they think differently. Optimisation of price levels and range assortment as well as focusing on the shopper's experience will all be critical."

IRI estimated that trading down cost the grocery industry over £800m in 2013 and expected this would be significantly more by the end of 2014. It also noted that more than half of the UK's shopping was bought on promotion "at a huge cost to manufacturers".

Volume sales in the confectionery and personal care categories fell -2.4% and -2.2% respectively, despite these sectors being the most promoted of all FMCG categories. But other categories fared worse: ambient food/hot drinks fell -5.0%, frozen foods -4.1% and chilled foods -3.6%.

Wines and spirits volume dropped by -2.5%, but warm weather and the World Cup helped boost sales of beer, lager and cider, which grew by +6.8%.

Data sourced from IRI; additional content by Warc staff