Last month, The Grocer released their Top Products 2022 report in association with Nielsen1, providing a wealth of data that paints a picture of the UK Grocery industry in the year to September 2022, and the nuanced storylines within each category.
In a tumultuous year for the industry, one fact stood out above all others: individual category dynamics continue to vary dramatically across the UK food market.
Contrasting growth performance
At face value, this was not a good year for the marketplace. Values were down -1%, volumes down -7% with average unit prices +6% (a combination of price changes and mix impact) vs the prior year. Just 25 (of 73) sub-categories experienced value growth with even fewer, 7, experiencing volume growth.
However, important context is required. Relative category performance will have been impacted by COVID phasing; 2020 and 2021 saw very high levels of grocery sales due to the pandemic. This, coupled with the inflationary pressures in the last 18 months, make year-on-year comparisons dangerous without the required scrutiny.
Categories that benefitted significantly within Grocery from lockdown periods, such as Beers, Wines & Spirits, are now experiencing the flip side of the coin as we fully unwind from restrictions. Values declined -9% and volumes -11% as consumers returned to out-of-home venues and experiences. All sub-categories were in volume decline with Beer particularly badly hit; Lager -15% and Ale & Stout -16%.
Conversely, in Soft Beverages, Energy Drinks, led by the strong performance of Red Bull and Monster, experienced +16% value growth and 5% volume growth, as many consumers returned to their busy, on-the-go, lifestyles which characterised the decade prior to COVID.
The price rise impact varied substantially
Price (and mix) was the primary driver of value growth (vs volume growth) in 71 of the 73 sub-categories analysed. This is hardly surprising in a year that began with already high inflation in the UK and was further catalysed by the War in Ukraine. Overall, the market experienced a +6% price/mix impact, albeit this number would be higher if the data stretched to year-end where we saw record levels of inflation. This again varied dramatically across categories.
Staple products including Water, Pasta and Milk were some of the most impacted with Home Baking, Alcohol, Sugar Confectionery & Gum less impacted. Exact drivers will vary by category but the sourcing of inputs, energy & direct labour intensity in production, as well as pack size shifts (mix impact) in the aftermath of COVID will all be having an impact. These factors will continue long into 2023 and beyond.
In addition, we witnessed no clear relationship between the degree of price rise and volume growth / declines.
Private label share differential remains vast
Private label share of the market was 34% last year but the differential between the most and least concentrated categories was over 90 ppts.
The UK Fresh Meat, Fish & Poultry categories remain private label driven, a notable difference to many Western European countries, and the US. Other commoditised products, including Eggs, Pasta, and Milk also have a high private label presence.
At the other end of the scale, Beverages, Snacking and Confectionery products are typically brand-driven. Beer, Gum and Energy Drinks all had just ~1% private label share in the last year. Brand investment tends to be stronger in categories that have a high degree of value-add and geographical stretch.
Whilst this data did not show a significant share gain over the period, there is clear evidence that private label share has grown in the last quarter of 2022 as the cost-of-living crisis deepened and consumer’s search for value. In addition, Aldi and Lidl – whose sales are not captured in this data and have a high private label share – have been growing overall grocery share notably in the last year.
The UK grocery market is diverse and complex, particularly in this time of high inflation, declining real disposable incomes, supply challenges, and intense retailer competition. Given the nuances outlined above, it is increasingly important to understand the dynamics at play within categories.
Food Strategy Associates is a specialist consultancy only focused on food & drink, our partners and associates have direct experience across the grocery marketplace. Email us at firstname.lastname@example.org to discuss your specific category challenges and to get a free copy of our full analysis.
1Nielsen IQ data covers UK Grocery and Impulse channels but excludes Discounters