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Updated: 14th April 2020

Harnessing Consumer Christmas Spending

For many of us, Christmas is synonymous with the food and drink central to so many of our gatherings and celebrations at this time of year. All this eating must be fuelled by a whole lot of shopping – and supermarkets are only too happy to help consumers stock up on the goods they need to celebrate in style.

The importance of seasonal spending

Seasonal spending is hugely important for supermarkets throughout the year; by far the most lucrative of such events is Christmas. With Britons set to spend an average of £567 on celebrating the festivities – far more than any of our European counterparts – Christmas is a crucial period for all retailers, not least our supermarkets. With the average household earmarking £380 to spend on groceries during December alone this year, supermarkets are keen to ensure this money passes through their tills rather than those of their competitors.

While supermarkets have not been as badly hit as the high street with falling footfall and the seemingly unstoppable online shopping trend, they are still facing challenges. Increases to the National Living Wage, Brexit uncertainty, as well as aggressive competition from the German discounters, Aldi and Lidl, have lead to the ‘big four’ hoping for some festive relief and to grab a slice of the £29.3bn which rang through supermarket tills during the festive period last year.

A disappointing year for the big four

Over the past 12 weeks, Asda and Morrisons have seen sales fall by 1.2 per cent and 1.7 per cent respectively, while the other players of the so-called ‘big four’, Sainsbury's and Tesco, have fared slightly better yet have also experienced drops of 0.2 per cent and 0.6 per cent. For supermarkets keen to reverse recent disappointing sales figures, Christmas cannot come soon enough.

Keen to extract as much value out of Christmas as possible, supermarkets have made an early start on getting festive goods out on the shelves; mince pies and selection boxes have been in the shops for several weeks, jostling for space amongst Halloween themed treats and bonfire night sparklers. However, now we are deep into November, Christmas can fully take over and the supermarkets are only too happy to oblige.

Retailers will be pleased to hear that as November draws to a close, Christmas spending has already started in earnest as shoppers begin to stock up for the upcoming holiday season. While it may be too early to buy many components of the traditional Christmas dinner, this hasn’t stopped shoppers making a start on filling the cupboards with less perishable products to put away for the big day.

More than £17 million has already been spent on mince pies, while shoppers have parted with over £3 million to secure a Christmas pudding, demonstrating that it is never too early for retailers to start their Christmas campaign.

"With customers spoilt for choice, the pressure is on the supermarkets to make their offerings stand out within a crowded marketplace."

A taste for luxury

While we spend in supermarkets all year, it is Christmas and New Year when shoppers loosen the purse strings a little and splash out on certain food and drink items that they otherwise would not consider adding to their weekly shopping basket. Shoppers are more likely to ‘trade up’ to more premium or luxury brands at this time of year – whether to impress friends, family, and other guests, or simply just as a treat – and supermarkets are in prime position to exploit customers’ incremental spending.

This willingness to splash out on premium ranges may, on the face of it, put the ‘big four’ ahead of their cheaper rivals, such as Aldi and Lidl, when it comes to winning a share of the festive food pound.

Looking at sales from last year, for three of the so-called ‘big four’, Christmas turned out to be a welcome present as far as their bottom lines were concerned. Tesco enjoyed its best Christmas for over a decade last year, while Asda also experienced a 0.7% boost in sales, with spending on its ‘Extra Special’ range the fastest growing premium line of any of the major retailers. Morrisons grew their sales by a more modest at 0.1%, yet it was Sainsburys who failed to capitalise on the opportunity, suffering a 0.4% drop in sales during this crucial trading period.

However, the story does not end there. The discounters have been adaptive to this growing appetite for luxury versions of traditional Christmas food, and are now stocking an ever increasing range of premium labelled products. Indeed sales of Lidl’s ‘Deluxe’ range rocketed an astonishing 33% during December last year. In fact two thirds of households in the UK visited one of the German discounters at least once in the twelve weeks leading up to Christmas last year, contributing to them taking a combined 12.8% market share. It will be interesting to see whether they are able to capture even more of the market this time around. 

New areas of opportunity

With customers spoilt for choice, the pressure is on the supermarkets to make their offerings stand out within a crowded marketplace. While all of our major supermarkets have picked up on the trend for luxury food products, the challenge now is to carve out a new niche to capture a targeted market.

One avenue which is likely to see a boom this Christmas is the ‘free from’ market. This relatively young but rapidly growing area is ripe for retailers to deliver big on. With the awareness of food intolerances on the up, and vegan diets becoming more and more mainstream, for many families the Christmas dinner they will be serving up next month will be far removed from the traditional turkey and all the trimmings.

The large family gatherings which are common at this time of year see us catering for guests with increasingly diverse dietary requirements and/or preferences. When faced with preparing a meal for a group which may include individuals who are gluten-free, dairy-free, pescatarian, vegetarian, vegan, as well as omnivores, most of us will head to the supermarket for inspiration.

When it comes to servicing this more niche market, the larger supermarkets, where shelf space is more plentiful, may have the advantage of being in a better position to experiment with these products which have a relatively limited appeal. However, this has not stopped both Aldi and Lidl from introducing their own permanent ‘free from’ ranges in recent years.

However, offerings at the smaller retailers are much more limited and as the wider selection offered at larger superstores can make putting together a menu which caters for varying tastes much simpler, it may be the case that the big four remain the first port of call for those in this market.

A happy new year?

With Christmas preparations now in full flow, supermarkets are hoping their efforts will pay off once the tills stop ringing on Christmas Eve and results are announced in the New Year. Unlike high street retailers who are staving off competition from online channels, the biggest threat to the nation’s largest supermarkets is likely to come from their smaller rivals from the German discounters who are competing not only on price but quality too.

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