Advertisement
News

Here's Why UK Supermarket Sales Are Falling

Sales are falling for Tesco, Sainsbury's, Morrisons and Asda – so where are we getting our food?

by Huw Oliver
12 May 2015, 8:45am

Image via Wiki Commons

The British supermarket sector appears to be crumbling. You'll remember it was only last month that market-leaders Tesco announced a record-smashing pre-tax annual loss of £6.4 billion. Well, since then, Sainsbury's are also said to have fallen £72 million in the red, Asda have reportedly registered their worst sales in two decades and fourth largest chain Morrisons have announced a 2.9 percent drop in sales. All "big four" supermarkets are apparently in turmoil.

Interestingly, though, it's food sales bearing the brunt of the slouch, with merchandise sales largely unaffected (Sainsbury's clothing section, for example, grew by 12 percent last year), so it's not like we've somehow been put off supermarkets altogether. But this does beg the question: if not from the supermarkets, where the hell are we getting our food?

Austerity can go some way to explaining the current situation. With wages shrinking since the economic downturn, many shoppers have begun to change the way they go about filling their weekly shopping basket. Put off by factors like, you know, supermarket prices increasing by upwards of 8 percent, the average cost-aware and open-minded shopper seems to have gradually shifted allegiances to a mixture of major supermarket convenience outlets, limited-stock discounters Lidl and Aldi and online retailers.

So, alongside the recession, shopping routines changed too: people were making more frequent trips and buying less product; the weekly "big shop" now spread across a variety of different supermarkets.


Photo by Hannah Ewens

Of course, the trouble for the major supermarkets now is that, although disposable incomes and real wages are apparently on the rise, people are generally reluctant to alter these shopping habits. Shopping around has become habit rather than necessity. And instead of injecting that extra cash "we" now have back into the supermarkets, we can spend it elsewhere – like on eating out.

According to a report published by food service consultants Horizons last month, increasing numbers of people are now purchasing restaurant meals and "food-to-go", with the number of food outlets and choice of cuisines hurtling ever upwards – especially in London.

The report found, for instance, that 66 percent of these "to-go" retailers saw an increase in food sales in the last year, with 21 percent indicating a "large" increase. Meanwhile, a second report published last week found that over half of brand owners planned to open more than five outlets in the next year (up on 35 percent the previous year), specifically targeting shopping centres, transport hubs and suburban retail parks. If you thought you couldn't escape the temptation of an overpriced Starbucks Frappuccino before, things are about to get worse.

WATCH: Our documentary on Britain's busiest food bank


"People have been eating out more for years," says Peter Backman, Managing Director of Horizons. "It came a little bit unstuck during the recession, but if you go back 20 or 30 years, you can see it's just been increasing and growing its share of social spend. Since 2013, the trend has started up again." Backman says that with more money floating around, consumers are getting increasingly used to eating out, so are doing so more often. Temptation has also been fuelled, as higher-profile places to eat out grow in number, with a heightened emphasis on new, innovative products and good-value meals.

We're still not splashing out on swanky three-course dining experiences, though; the first report also found that 62 percent of consumers spent an average per head of under £12 this year (compared with 51 percent the year before). So budget meals are still the cash-wary consumer's priority: "People are eating out more often, so volumes are up," explains Backman. "But their increase in eating out tends to be in the cheaper places, so it's not that they're necessarily spending less on a meal, it's that when they go out for an additional meal that they didn't have this time last year, it's in a cheaper place."

Singled out by Horizons in this respect were Pret A Manger and Nando's, both considered as "admired brands" by their peers. Nando's, for its well-executed but simple concept and all-age appeal; Pret, for its freshly prepared food, organic coffee and pleasant ( albeit controversial) staff-customer engagement. Elsewhere, Burrito brands are rolling out the outlets at the moment (the Guardian recently reported that the number of Mexican restaurants in the UK has increased by 71 percent in the last year), with street food, "Italian casual dining" and anything with an American theme also proving popular.

Image via Wiki commons

Snacking is also on the rise, with 48 percent of operators noting that snack sales have increased year-on-year. "Coffee seems to be the driver," says Backman. "People will have a coffee and then a muffin or a wrap to go with it." Model examples of the "food-to-go" concept, he says, are provided by businesses such as Vital Ingredient, Avocado and Pod, which offer apparently healthy meals and which, often based around offices, cater to both the lunch-time and "all-day grazing" businesses.

In the way an increasing amount of our food budget is being spent on eating out, the UK is slowly starting to catch up with the States. "We've been on a long-term trend," says Backman. "In the States, 50 percent of every food dollar is spent on eating out. In this country, it's only about 30 percent. Although I don't think we'll ever reach the level of the Americans, we are adopting things like brunch, for example."

But will restaurants will be able to endure such levels of expansion in the long run? "Clearly, growth can't continue forever," Backman answers. "However, the population is growing at half a percent a year, so that says that every restaurant should be able to grow at half a percent a year, and then add onto that changing lifestyle issues and the propensity to eat out. There's a lot of this sort of incremental growth around. It's not going to influence the overall market for the foreseeable future. There's still growth there and there's change as well, so it's not 'everybody does well'; there'll always be some sectors and certain types of operations that are doing badly."

It's possible, then, to see these trends move back and forth, and it's likely the supermarkets will boomerang right back into profit – the absurd price cuts and redundancies will end and the admittedly convenient "big weekly shop" will come back in vogue. And it'll be outlets of Nando's – not Morrisons Local – being shuttered.

For now, one thing the supermarkets could avoid is launching their own in-store eateries and "artisanal" coffee shops. "Over the years, supermarkets have not proven very adept at developing restaurants or food-to-go offers," says Backman, understatedly (ever had a meal in Morrisons?) "They've all tried it over the years. My view is that supermarkets can try, but it's not in their DNA to run restaurants. It's all a little bit systematic and lacking in soul."

@HuwOliver

More stuff like this:

I Spent 20 Hours Inside a London Asda

The Leader of the New 'Reducetarian' Movement Questions the Morality of Eating Meat

This Man Thinks He Never Has to Eat Again