Return of inflation to UK grocery sector imminent - Kantar Worldpanel

* Grocery deflation 0.1 pct in 12 weeks to Dec. 4 - Kantar

* Some categories already seeing price rises

* Tesco (Frankfurt: 852647 - news) sales up 1.6 pct in 12-week period, market share up

(Recasts, adds detail, shares)

LONDON, Dec 13 (Reuters) -

Britain's grocery industry is edging closer to a return to

inflation after more than two years of falling prices, industry

data showed on Tuesday.

Researcher Kantar Worldpanel said grocery deflation was 0.1

percent in the 12 weeks to Dec. 4, having been 0.5 percent and

0.8 percent respectively in its November and October reports.

It noted that some categories were already seeing price

increases, with fresh fish up 5.3 percent year-on-year, chilled

ready meals up 2.3 percent and beer up 2.1 percent.

Though the Brexit vote pulled down the value of the pound,

increasing import costs, deflation in the grocery sector has

been easing since December last year, well before June's

referendum.

"The rapid improvement implies inflation is positive on a

four week basis. We expect inflation to increase further next

year when (the) Brexit forex shock starts to feed into food

prices," said Bernstein analyst Bruno Monteyne.

Separately, official data, also published on Tuesday, showed

consumer prices rose by 1.2 percent, the most in more than two

years, pushed up by more expensive clothing and technology

goods.

Kantar said Tesco, Britain's biggest supermarket

group, recorded sales and market share growth for the third

monthly data set in a row.

It said Tesco's sales rose 1.6 percent year-on-year in the

12 week period, taking its UK market share to 28.3 percent from

28.0 percent this time last year.

Conversely the other three major players in the sector -

Sainsbury (Amsterdam: SJ6.AS - news) 's, Asda and Morrisons - saw

sales fall 0.6 percent, 4.7 percent and 1.4 percent respectively

and all lost market share.

Morrisons' fall is, however, partly explained by store

closures.

Sales growth at discounters Aldi and Lidl

slowed to 10.0 percent and 5.7 percent respectively.

Tesco, under boss Dave Lewis, has lowered prices, improved

product availability and bolstered customer service.

"Tesco's volume sales are growing faster than its value

sales, particularly in the meat and fresh produce categories,"

said Fraser McKevitt, head of retail and consumer insight at

Kantar Worldpanel.

Tesco's shares have increased 38 percent so far this year.

However, they were trading down 3 percent at midday on Tuesday.

Analysts noted that Kantar's data for the four weeks to Dec.

4 was less encouraging for Tesco than the three months data it

publishes.

Barclays (LSE: BARC.L - news) analysts said over the later four weeks Tesco's

sales fell 0.9 percent and it lost 2 basis points of market

share.

"Tesco's headline performance seems to be being depressed by

weak alcoholic drink sales - its sales on a 'food and drink'

basis were actually very strong versus peers," they noted.

Sales and market share (percent)

12 wks to 12 wks to pct change

Dec 4, 2016 Dec 6, 2015 in sales

Tesco 28.3 28.0 1.6

Sainsbury's 16.5 16.7 -0.6

Asda 15.3 16.2 -4.7

Morrison 10.8 11.0 -1.4

Co-operative 6.3 6.2 2.0

Aldi 6.2 5.6 10.0

Waitrose 5.1 5.1 1.1

Lidl 4.6 4.4 5.7

Iceland 2.2 2.0 8.6

(Reporting by James Davey; editing by Sarah Young and Susan

Thomas)