Grocery deflation continues to tumble as Aldi and Lidl ramp up supermarket price war

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The supermarket sector has nudged back into growth after the surprise decline recorded last month. 
 
Figures out today from Kantar Worldpanel show that for the 12 weeks to December 7, the grocery market grew 0.1 per cent. The data company said this was down to “shoppers putting slightly more in their baskets compared with the same time last year”, as prices continue their downwards trajectory. 
 
The sector has now had 15 successive declines, and prices are 0.7 per cent lower for this period than they were last year, meaning they stand a record low, with discounters Aldi and Lidl driving prices down, as well as deflation in categories such as vegetables, milk and bread. 
 
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “Britain’s supermarket price war is ramping up ahead of the all-important Christmas period.  Retailers are selling more items on promotion, leading to like-for-like prices falling by 0.7 per cent compared with this time last year.  
 
“Cheaper groceries are an early Christmas present for shoppers, saving them £182 million in the past 12 weeks alone but this puts pressure on the supermarkets. We expect grocery deflation to continue well into 2015 as the price war rumbles on.”
 
The bad news continues for the big four. Consumer spend at Tesco dropped 2.7 per cent year-on-year, while Morrisons recorded a 3.2 per cent decline. Asda and Sainsbury's fell one per cent and 1.8 per cent respectively. 
 
All four have lost market share – Tesco took 29.1 per cent of the total, down from 29.9 per cent; Asda dropped from 16.9 per cent to 16.7 per cent; Sainsbury's went from 16.8 per cent to 16.5 per cent and Morrisons from 11.6 per cent to 11.2 per cent. 
 
Meanwhile Waitrose, Aldi and Lidl continue to rise, with sales up six per cent, 22.3 per cent and 18.3 per cent respectively. 
 
McKevitt said: “At the discount end of the market the two German retailers Aldi and Lidl have reached a record combined market share this period with 8.6% of the market, up 1.5 percentage points over the past year.  Aldi recorded the fastest growing sales of any retailer at 22.3% and is followed closely behind by Lidl with 18.3% sales growth.”