Squeeze forcing shoppers to cut back on groceries

Britons are cutting back on groceries as their disposable incomes are squeezed, and there is little prospect of conditions getting easier anytime soon, some of the country’s top retailers warned.

“I don’t think I’ve ever seen consumers squeezed so much,” Peter Marks, chief executive of the Co-Operative Group, told the annual conference of grocery industry group IGD.

“Normally food sales are pretty robust. For the first time that I’ve witnessed we’re actually seeing ... the consumer spending less on food because they can’t afford to spend what they normally do,” he said.

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Household incomes in Britain are under pressure from rising prices, muted wages growth and government austerity measures.

“The government is running out of economic levers to pull,” Mr Marks said, noting that interest rates were already at record lows and the country needed to reduce its deficit.

“We are going to have to grit our teeth and I think all businesses are going to have to get used to this as pretty much the norm for the next few years,” he added.

Market researchers Kantar Worldpanel said yesterday grocery sales in Britain rose 5.1 per cent year-on-year in the 12 weeks to October 2. But with grocery prices rising 5.7 per cent, that suggests shoppers are cutting back.

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“The gap between inflation and growth has become a major feature of the grocery market as shoppers trade down to cheaper products and retailers strive to convince consumers they are combating inflation,” Kantar Worldpanel said, pointing to soaring sales at hard discounters Aldi and Lidl.

Tesco said last month it was investing £500m in cutting prices of staple products like milk and carrots in a bid to kickstart demand and stem market share losses.

Last week, it warned that would lead to flat profits in Britain in the second half of its fiscal year.

“Sometimes you have to put aside just the pursuit of profit in the market in order to get back in tune with the nation,” Tesco chief executive Phil Clarke told the conference.

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Dalton Philips, chief executive of Morrisons, said there was a new professionalism in the way consumers were shopping, as they compare prices online and swap money-saving tips on social networks.

“It used to be time is money. Now it’s time saves you money,” he said.

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