Credit: Andrew Abbott/Geograph

Sainsbury's momentum will be tricky to maintain

It's the only big supermarket that's growing, but there are big challenges ahead.

by Jack Torrance
Last Updated: 21 Dec 2015

Can Britain's big supermarkets find an answer to the low prices and intense competition that have hit them hard? All signs of life so far have been short lived. First Tesco looked like it was in recovery, as its share price drifted back up and sales creeped back into growth at the start of this year. Then Morrisons enjoyed a sales revival, up 0.6% in the 12 weeks to June 21.

But both have returned to decline according to Kantar Worldpanel's latest market analysis. It's worth keeping that in mind when looking at the resurgence Sainsbury's seems to be enjoying. The supermarket is the only one of its major competitors in growth, with sales up 0.9% in the 12 weeks to September 13.

That's in line with the broader grocery market, meaning Sainsbury's has done enough to maintain its 16.9% market share while its rivals have foundered. Compared to this time last year, Tesco's share has slipped from 28.8% to 28.2%, and Morrisons' share has fallen from 10.9%  to 10.7%. Asda is in especially big trouble - its sales slipped 2.9% in the period and its market share has slipped from 17.3% to 16.7% over the past year.

'Sainsbury’s has grown sales by 0.9% compared with a year ago, attracting 250,000 new shoppers through the door in the last 12 weeks,' said Kantar Worldpanel's head of retail and consumer insight Fraser McKevitt. 'The retailer has held its share steady at 16.2%, helped by the continued expansion of its Sainsbury’s Local outlets.'

Read more: Sainsbury's boss Mike Coupe - 'I'm not especially anxious when things don't go well'

The question is how sustainable that will be. Though it has cancelled a rash of planned store openings, Sainsbury's is still lumped with a lot of big supermarkets that aren't pulling their weight, and convenience stores can only pick up so much of the slack. The same goes for discounting - food inflation was -1.7% in the period but supermarkets can't keep on cutting forever, regardless of how desperate they are.

At the smaller end of the market it was very much business as usual. The consumer shift to convenience stores delivered a much needed 1% sales boost to the Co-op, while revenues at Waitrose were up by a respectable, if uninspiring, 2.9%. German discounters Aldi and Lidl are still booming – sales were up by 17.3% and 16% respectively, and they now enjoy a combined market share of almost 10%.

In the face of such competition it's unlikely Britain's 'Big Four' supermarkets will ever dominate the market in the way they have in the past. Next week we will should get some indication of whether Sainsbury's is genuinely back on track when it releases its official results for the past three months. But it will be a long time before we find out if it has successfully weathered the storm. 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events