UK Grocers Enjoy Record Sales Growth But Virus-Induced Buying Set to Fade

By Matteo Castia

The U.K. grocery industry market the highest sales growth ever on record in the four weeks to March 22, according to a report by Kantar on Tuesday.

The research agency said British grocers experienced 21% sales growth year-on-year in the period, driven by more frequent shopping sessions and larger baskets as concerns about the new coronavirus mounted.

The average household spent an extra 62.92 pounds ($77.97), spending in aggregate a total of GBP10.8 billion in the four weeks.

"That's even higher than levels seen at Christmas, the busiest time of year under normal circumstances," Kantar analyst Fraser McKevitt says.

A particularly strong boost came from the alcoholic beverage sector, which saw sales rising 22% year-on-year, as consumers stocked up for virtual gatherings on apps such as FaceTime or Houseparty in light of the closure of pubs and restaurants.

As consumers gain trust in the grocers' ability to maintain shelves well-supplied, the relatively low number of panic-buying episodes will further lower, the analysts said.

Sales won't suffer from that though, as prolonged closures in the hospitality industry will keep sustaining the grocery sector's growth. "An extra 503 million meals, mainly lunches and snacks, will be prepared and eaten at home every week for the foreseeable future," Mr. McKevitt said.

The U.K.'s big grocers have outperformed the FTSE 100 index's roughly 16% fall over the last month. J Sainsbury PLC and Wm. Morrison Supermarkets PLC are largely flat over the month, while market leader Tesco PLC has lost close to 5%. Online delivery specialist Ocado Group PLC has outperformed strongly, gaining 9%.

However, grocers' momentum lies on shaky foundations, as it is largely dictated by a temporary necessity, with consumers potentially pulling back as economic concerns mount.

British investment group Shore Capital notes that the U.K. consumer confidence index published by market-research institute GfK showed increasing concerns among shoppers over the spread of the pandemic in the first two weeks of this month, before government lockdown started.

"The index has fallen and breaks the optimistic view that consumers had begun the year with," Shore analysts say, adding that they expect it to continue dropping as restrictions continue to be in place.

Write to Matteo Castia at [e-mail]

(END) Dow Jones Newswires

March 31, 2020 11:08 ET (15:08 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.