0945 Tuesday 11 December 2018
Supermarkets are gearing up for one of their busiest times of the year as household prepare themselves for Christmas and New Year’s celebrations and this morning, Kantor Worldpanel have released data on their performances over the last quarter.
The report showed that Asda maintained their 15% of market share in the sector and saw sales rise in the 12 weeks running up to 2nd December, whilst rivals Tesco, Sainsbury’s and Morrisons all lost ground to German supermarket chains Lidl and Aldi. In terms of sales, Tesco’s fell by 0.1% and Sainsbury’s by 0.2%, whereas Morrisons rose by 0.5%.
Asda, Sainsbury’s Merger
This data in the Kantor report showed that over the last quarter, Asda outperformed Sainsbury’s which is an interesting development ahead of the impending merger of the two companies. It is widely expected that Sainsbury’s will purchase Asda from their US parent company, Wal-Mart, and the Sainsbury’s CEO, Mike Coupe, recently stated that he expects the deal to go through in the second half of 2019. The deal has come under much scrutiny since it was first touted and regulators have also weighed in to prevent monopolisation of certain areas of the UK. The Competition and Markets Authority are currently looking into the merger as there are concerns that certain towns and areas that are currently only serviced by the two firms would see customers lose out on a lack of competition. Rival supermarkets, such as Morrisons and Waitrose, have also announced their concerns over the deal because the combined buying power of Sainsbury’s and Asda may force other chains to raise prices.
Another one of the biggest headwinds and cause for uncertainty in the supermarket sector is of cause Brexit. Much of the fear of any Brexit outcome is that trade routes, let alone prices, may become bottlenecked between the UK and mainland Europe. This has caused many supermarket chains to stockpile goods for safekeeping. In a recent communication from the government, it expected businesses to expect up to six months of delays in ports, especially over the Dover-Calais route. As we learned yesterday, nothing is certain in the Brexit negotiations, but supermarkets cannot take any risks and have heeded the warnings. This has had two knock on effects. Firstly, stockpiling goods is a disruption to regular cashflows of businesses as they are purchasing ahead of schedule and they are also having to layout for additional storage space, and in the case of frozen goods, paying for refrigeration. The second knock on is that the UK is running out of existing storage units. With businesses from all sectors stockpiling goods, both regular and refrigerated storage spaces are becoming full with remaining spaces coming at a premium. However the silver lining on this effect is that jobs are being created in the building of additional storage space.
Petrol Pump Promotions
With so much competition in the market, as well as discounting products, supermarkets have also been competing against each other on the petrol pumps too. While wholesale petrol prices have been falling due to the oil cost, retailers have so far refrained from passing these savings on to customers until now. This weekend marked the fourth consecutive weekend of cheaper fuel at supermarket petrol pumps as Asda cut both petrol and diesel by 2 pence per litre, a move that was matched by both Morrisons and Sainsbury’s. The cut was the sixth reduction made by supermarkets since late October.
With an ever savvy client base, supermarkets are having to pull out all the stops in the final run up to Christmas and deals, discounts and offers are out there to be had.
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