Christmas. Love it or hate it it’s approaching fast. As the annual Christmas Day feasting approaches grocery retailers are vying for our business. With Kantar predicting that each UK household will spend an average of £380 on groceries in December and an overall spend of £11bn up for grabs, the stakes are high.
With a backdrop of political uncertainty at home and abroad predicting who will come out on top this Christmas is like trying to predict the outcome of the General Election. Our panel of experts find it hard to agree as you will see below.
Matthew Nobbs spent 22 years at Lidl before moving to Holland & Barrett, he has spent his whole career immersed in the grocery sector.
Peter Ridler has worked in global retail for over two decades with companies such as Tesco, Bodyshop, White Stuff and most recently Feather & Black.
Christine Cross started her career at Tesco and is now an experienced FTSE NED, international multi channel retailer and buying director with a passion for the consumer.
Tom Hardiman, UK retail lead, Egremont Group, the breakthrough transformation consultancy based in London and Chicago.
Traditional competitors: who is pulling ahead?
With each of the usual culprits commencing their pitch to fill our stomachs come December 25th, our panel differ in their views of the overall winner.
Matthew Nobbs: Sainsbury’s is in good shape running into Christmas
Matthew thinks the data points to a great year for Sainsbury’s: Based on the last 12 weeks’ Kantar data*, Sainsbury’s seems to have the best momentum amongst the Big 4, followed by Asda and Morrisons, then Tesco.
*Grocery market share vs last year 12 weeks ending 3 November 2019 ).
Christine Cross points to the Co-op, and says they will be the traditional grocery winner
Christine thinks the convenience retailer will also do well this festive season, predicting overall figures up like for like by 3%*.
“Co-op have reconnected with their customers and have the best convenience offer by a country mile.They really have put the C back into customer.”
Peter Ridler: Tesco, who have led the pack this year will have the best Christmas
Peter says that the sluggish economy and uncertainty over Brexit are continuing to impact consumer confidence. This means that the Grocers who will triumph in the sector over Christmas have already been determined. Customers will not be promiscuous over this period and will invariably stay with the retailers that they know and trust. They may scale up to a larger store to benefit for a greater product range, but their loyalty will not change.
“Tesco have made all the right moves in terms of price, customer service, product range plus the new Clubcard initiative. Their multichannel offering allows customers to benefit from home delivery while also providing a great customer experience in-store for those that want to taste, touch, feel and see the products.”
Egremont’s Tom Hardiman also believes that Tesco will be the strongest player out of the big four this year.
“Christmas shopping is stressful, and that stress means consumers are drawn to the convenience of a store where everything is ‘all under one roof’.”
Tom says that in this aspect Tesco is favoured the strongest player, having a loyalty system that sends coupons and vouchers at the end of November to lock in its most valuable customers plus stores that offer the full Christmas range at a reasonable price point. The ability to buy the toys, gifts, decorations, food and drink in one place with less hassle favours Tesco over its big 4 competitors. With Morrisons and Asda being more limited in the toys and gifts ranging, and many Sainsburys branches providing these services via Argos (which likely incurs wait times).
What about the discounters?
We all love a bargain. How big a slice of the Christmas-pie can we expect the discounters to take this year? On this, our experts unanimously agree – a big one!
Matthew Nobbs: we can count on Lidl and Aldi continuing to increase their market share
Matthew thinks these two discount powerhouses will take organic gains from the Big 4 supermarkets as a result of heavy-weight marketing campaigns and via their respective traditional increased store opening tempo in the run-up to Christmas.
Christine Cross: Lidl will achieve double digit like for like growth (+8.5%) but Aldi will top the tree (+9.5%)
Christine says that Lidl offer good innovative products and good fresh produce which will drive sales but still have some odd brands in the mix. Aldi, however, she says “offer fantastic brand ‘look alike’ staples and have an innovative and differentiated Specially Selected Product. The general merchandise rummage gets better and better she adds. But finally and most importantly she stresses…
“…the middle classes have discovered Aldi !!”
Peter Ridler: Aldi and Lidl will be helped by the sluggish economy and customers’ desire to shop economically.
Peter agrees that Aldi and Lidl will continue their double digit growth. He cites their ability to deliver specialist items in their seasonal product ranges.
“The simplicity of offering makes them attractive in the festive season.”
A Christmas splurge?
While the discounters have our attention for great value, what of the quality market?
Matthew Nobbs: This is an “M&S” Christmas
“We must not forget M&S.”
Matthew points out that in spite of widely reported performance woes in the media, the Food arm at M&S has reported strong growth under its new MD Stuart Machin, and with its heavy celebrity supported “Christmas Market” brand presence and new “Re-Marks-able” value proposition, it is very well positioned to do well as the public trades up in December.
Tom Hardiman: The quality market will be a battleground
“Tesco are challenging the quality market by making a push into this space”
Tom adds that by introducing dining experience pop-ups in central London and other cities for its finest food range TESCO has shown a clear aim of capturing the M&S and Waitrose customer and converting them to the TESCO brand, but adds that it is hard to say how effective this will be.
He reflects that Marks and Spencer’s have shown in the past few years how strongly their own brand food can perform over the Christmas period because of its connotations of high quality. Waitrose are of the biggest concern in this space, for the first time John Lewis focused its Christmas advert on the food side of its business fearing a further drop in its market share which shrunk 1% in the past 12 weeks according to Kantar.
But it’s not all Christmas cheer
What are the watch-outs this festive season for our Grocery players?
Christine Cross: Christmas will come later than ever this year.
Christine points out that Christmas’ mid-week appearance could cause problems with availability for the big Grocers.
She has a less than rosy outlook for the big grocery players. She predicts that Tesco and Sainsbury’s will remain flat in terms of sales with Morrisons, Asda and Waitrose all slipping back and feels less positive than some of our other commentators about M&S’ chances.
“The biggest loser will be M&S with like for like sales down 2.8%. Unless you are serving roast jumpers for Christmas, what a superb advert! Same old, same old at double the price of Aldi.”
Peter Ridler: Forecasting is crucial
Peter agrees that the timing of Christmas this year will have a big effect. He says that falling mid-week, the forecasting of fresh food and the ability to get the correct range in-store is crucial.
“The risk of getting it wrong will have huge implications for sales in the final week.”
So a mixed picture with a variety of differing views. It looks like a happy Christmas for the discounters with the big four grocers playing catch up. Only time will tell whether Tesco’s early voucher distribution will boost Christmas sales, or how the political climate will impact consumer confidence. The picture is unclear for M&S too, expensive yes – but enough brand association with luxury perhaps that they’ll seem worth it for families looking to trade up from their normal weekly shop destination over the festive season? Time will tell. We’ll be checking back in mid January to see who fared best.
* All figures used by Christine Cross fully costed like for like % to 6 January 2020.