Reviewing grocers’ 2019 festive performance & retailers’ grand plans for 2020

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Associate Consultant Lucy Victoria Herriot reviews the performance of the UK grocery sector over the crucial 2019 festive period and looks to retailers’ plans for 2020.

Happy New Year! Welcome to This Week in Retail 2020. This week was a busy one as retailers revealed details of their performance over the crucial holiday season and their grand plans for 2020.

There were pronounced festive winners and losers in retail, particularly in grocery. Overall grocery sales growth slumped to a four-year low over the past four weeks. The Big 4 grocers all reported disappointing festive figures – at Tesco, stronger takings in the two weeks just before Christmas softened its sales decline in the 19 weeks to 4th January which bottomed-out at 0.2% lower than the same period last year. Sainsbury’s LFL sales in the 15 weeks to 4th January were down 0.7% on the same period last year, hampered by falling demand for toys and games at Argos (which it owns). Asda meanwhile saw sales fall 1.9%; and a 2.9% fall in sales in the 12 weeks to 5th January gave Morrisons the poorest festive trading performance among the Big 4, citing ‘challenging’ trading conditions and its shunning of Black Friday, which in previous years has acted as a ‘springboard for Christmas’.

Political uncertainty dampened consumer sentiment in the run-up to the UK election, and there was no sign of the ‘Boris Bounce’ post-election rush many had anticipated. Tesco is said to have suffered less than its Big 4 rivals as consumers’ chose to do fewer, bigger shops at its ‘hypermarkets’ rather than doing several smaller shops in rivals’ standard-sized stores. Deep price cuts and a ‘race to the bottom’ on promotional activity also left the Big 4 grocers with little choice other than to face weaker sales and cut prices simultaneously. On top of facing frugal Christmas shoppers, an early start to Dry January seems to have hit alcohol trading as a sober Christmas saw sales in several types of alcohol drop across the sector compared to the festive period in 2018. Sales of Christmas puddings and seasonal biscuits also stood out as each fell 16% and 11% respectively.

While the traditional supermarkets suffered, challenger grocers made big gains during the festive period. Aldi reached a big milestone when its UK festive-period sales topped £1 billion for the first time in its history, which marks a 7.9% increase on the period in 2018. Mince pies and pigs in blankets drove the impressive sales figures – Aldi sold 55 million and 22 million of each! Also among the festive winners was Lidl which saw outstanding YOY sales growth of 10.3%, and Co-op fared well with sales growth of 3%. M&S – which will be looking for a fresh start in 2020, following a bumpy 2019 which culminated in its demotion from the FTSE 100 – reported its first sales rise since 2017. Its grocery departments had a ‘standout’ performance in the fortnight leading up to Christmas, pushing like-for-like sales up 1.4% in the 13 weeks to 28 December. Online retailer Ocado however claimed the top spot as Britain’s fastest-growing grocer over the holidays when, according to Kantar, sales rose by 12.5%.

As we digest December figures, attention turns toward retailers’ plans, aspirations and expectations for 2020. This week Harrods revealed its plan to open its first store in China this year. The luxury department store has been dabbling in China for 10 years already with events and pop-up stores, but now is looking for a more long-term presence to target the country’s expanding middle class. Farfetch this week announced exciting plans to launch its latest start-up incubatorDream Accelerator 4’ in Q1. Farfetch is looking to work with start-ups ‘building a unique solution for the fashion and retail space’ which will give it access to innovative ideas before they reach the marketplace and ahead of its competitors. Debenhams has embarked on its make-or-break year by announcing the closure of 19 stores this month, as the first stage in a rescue plan which will see it cull 50 of its worst-performing stores throughout 2020. This comes as figures are released showing that the UK High Street shed 140,000 jobs in 2019 – as this continues into 2020 we can only hope that the worst is over for the British High Street.

Restaurants and other food outlets usually look to refresh their offerings at the turn of a new year and as big restaurant brand names launched their 2020 menus this week a clear running theme emerged – significant expansion of vegan and ‘clean eating’ offerings. Restaurants, cafes and grocers experimented heavily with vegan products in 2019 and as the number of people pledging to go animal-free grows, they’re wising-up to this new niche in consumer demand. After an explosion in the number of outlets offering vegan products in 2019, it seems that the trial phase is over and 2020 will be the year that vegan options become a staple at food outlets.

Waitrose will double its vegan range in January, adding more than 30 new branded and own-label products – many of which it says will be ‘first-to-market’. Pret A Manger, Costa and other High Street outlets have also significantly expanded their menus to invest in the UK’s growing appetite for plant-based alternatives. Even fast food has jumped on the bandwagon with KFC offering a vegan burger for January (‘Veganuary’), and McDonalds, Greggs, Pizza Hut, Subway and others bringing out new vegan items. And finally, if you’ve ever wondered what a steak made of fruit would be like, TGI Friday’s has got you sorted with its new vegan-friendly watermelon ‘steak’ launched this week…!

Thank you very much for reading and enjoy the weekend.

Lucy

 

Author


Lucy Herriot

Associate Consultant

 

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