|FOOD SPENDING FALLS FOR FIRST TIME AS STORES COMPETE AND REAL WAGES DROP|
Aruba, September 4, 2014 - Britain's food bill drops for first time as supermarkets wage price wars and consumers fail to feel effects of economic recovery
Spending in food stores fell for the first time on record in July amid intense competition between Britain's biggest supermarkets – while consumers have yet to feel the benefit of recovery in their pockets.
Britons spent £11.7bn on food during the month, a 1.3% drop compared with July last year. It was the first annual fall in the value of food sales since the Office for National Statistics started collecting the data in 1989. The volume of food sales was also down last month, by 1.5% on an annualized basis.
The ONS put the fall in the value of food sales down to "prolonged discounting and price wars". Britain's leading supermarkets have all slashed prices on basic items to fight off competition from Aldi and Lidl, the German discount food chains that have become increasingly popular among cash-strapped UK shoppers.
At the same time, a prolonged fall in real wages has encouraged consumers to shop around more for bargains, opting for cheaper alternative products such as own-brand labels, and buying fewer premium-brand goods. Consumers are also focusing on wasting less food, buying little but more often.
Neil Saunders, managing director at retail consultancy Conlumino, said the unprecedented fall in July was significant. "It is an indication of the issues occurring in the food and grocery market at the moment. We have too many players chasing not enough sales.
"[The drop] is significant because it underlines the real pressure within that segment of the market, and it underlines an economic shift in the way the industry works. That's obviously very painful for some of the players in that market."
Prices in UK food stores were 0.2% higher than a year ago – the lowest food-price growth rate since December 2004. Prices of goods sold across the retail sector were 0.9% lower than a year ago, the strongest rate of deflation since 2009.