Over the past five years, Britain’s supermarkets have been looking over their shoulder as the German discounters continue to gain ground and win more sales and market share.
Changing shopping habits has meant most shoppers no longer have allegiance to one supermarket, while ultra-low pricing on offer at Aldi and Lidl has won them an increasing number of customers.
The discounter threat has seen the UK’s "big four" supermarkets resort to drastic action in recent years. Sainsbury’s and Asda were forced to abandon an ambitious £7bn merger last year after the deal was blocked by competition authorities, while Tesco even experimented with own discount chain Jack’s in an attempt to play Aldi and Lidl at their own game.
But industry figures published by Kantar on Wednesday suggest that the balance finally appears to be tipping back in favour of the bigger grocers.
Supermarkets enjoyed their fastest rise in sales in more than a quarter of a century in the 12 weeks to May 17, as the closure of pubs and restaurants during the coronavirus lockdown forced more people to eat at home.
Of the big four, which also includes Morrisons, Tesco claimed highest growth over the period with a 12.7pc rise in sales, closely followed by Sainsbury’s on 12.5pc.
Sales increases were slower at Asda and Morrisons but they still rose by 6.5pc and 9.8pc respectively.
Growth among the big four has been fuelled by the acceleration of online grocery sales, particularly among Tesco and Sainsbury’s that have more established services. Consumers have been slow to switch to online grocery shopping, but analysts believe this trend will only gain momentum as more become used to the convenience it offers.
Online grocery sales were three-quarters higher than a year ago, according to Kantar, with nearly one in five households placing an order in the most recent four weeks.
Sales at Waitrose, which had been investing heavily in its online business as its contract with online supermarket Ocado comes to an end, rose by 12.5pc over the past 12 weeks.
Meanwhile, Ocado’s reputation for leading the way in online grocery shopping helped it bag even bigger growth than the supermarkets during the period as sales soared by almost a third compared with the same period last year.
This shift to online has contributed to a sharp reversal of fortunes within the sector.
Aldi and Lidl have failed to regain their title as the fastest-growing retailers despite clocking up double-digit rises.
While Lidl emerged strongest of the pair with 16.5pc growth compared with Aldi’s 10.4pc, a lack of online presence combined with a switch by consumers to buying more on each trip but going shopping less often meant the discounters lost almost 5 percentage points of market share between them.
Reduced support from new store openings also appears to be hampering the discounters’ growth.
According to analysts at Jefferies, Aldi and Lidl have opened at least 45 new stores over the past six months - a notable reduction from the previous average of 60 every half year.
Convenience has continued to play an increasingly important role in how consumers shop for groceries, demonstrated by the soaring growth across Co-op’s stores over the past 12 weeks. The convenience store chain notched up a 30.8pc sales increase, second only to Ocado’s growth during the period.
Co-op now has a 7pc slice of the grocery market – its highest share since 2011. Meanwhile, stockpiling of frozen foods and cupboard essentials contributed to a 28.6pc sales increase at Iceland.
While normal trading patterns are anticipated to return as the impact of the pandemic subsides, observers are in agreement that the crisis will lead to a permanent shift in how and when consumers shop. As Clive Black, analyst at Shore Capital, points out: “The disease has left an indelible mark upon the British supermarket scene.”