OPINION: Local shop, outlook uncertain

Kantar Worldpanel has revised its market predictions to say that it is likely grocery inflation will reach 5 per cent this year, a view it did not hold just one month ago.

The reason for this change of view is that a small number of categories are seeing very high price rises. “This is putting extra pressure on shoppers’ budgets,” it says. “We expect the market to slow in the coming months.”

Kantar Worldpanel (KW), who use till roll receipts from 25,000 households and measure the prices of 75,000 products, point out that Aldi and Lidl and Waitrose are growing. The growth, it says, is coming at the bottom and the top of the market.

Its figures for independent retailers tend to underplay real sales from local shops as so many do not hand out receipts with purchases. However, they currently show a rise of 9.7 per cent for the past 12 weeks, which beats both the inflation measure and the grocery market sectors growth of 4.6 per cent.

It may sound encouraging but long-term KW figures show that independent shops are flat-lining in the low 2.3 per cent market share. There is not much change in the big four’s market shares either.

Evolution Securities analyst Dave McCarthy says the grocery market is in its worst position in more than 30 years. Falling levels of disposable income allied to increasing levels of investment in new shops mean that trading for the major supermarkets is likely to get tricky, he argues.

In the past, they have always had one weak market participant to pick off. Today, all four major companies are very competitive. Something will have to give, concludes Mr McCarthy, as he advises investors to be cautious.

The outlook for local shops is not necessarily the same. If shoppers are looking to avoid trips to the supermarkets, local shops stand to pick up top up sales. But the outlook will influence suppliers. For example, we may see reduced investment in product innovation by packaged goods companies and an even more cautious approach by banks to funding expansion – or even working capital – for local shops.

One thing local shopkeepers can do is to talk up success, whether it be on your own web pages, with your local suppliers or in the local media.

Take a leaf from the Waitrose play-book. Every week it pumps out good news into the market about its innovations and its sales growth. As a privately owned company, it does not have to do this. But it is part of its strategy to create a good news story around itself.