David Prosser: Grocers battle back

Outlook Back to the drawing board for Aldi and Lidl, the discount grocers that seemed poised to break through in the UK as recession-stretched shoppers turned to supermarkets offering the lowest prices. The latest TNS data on the groceries market, shows that while both are still expanding in the UK, their rates of growth have slowed markedly. Or, to put that another way, neither group is hanging on to all the shoppers that flooded into their stores at the end of last year.

Indeed, the big supermarkets are mostly now ahead of Aldi and Lidl on growing sales, while Waitrose, at the most expensive end of the groceries market, is currently the sector's top performer. Its attractively priced Essentials range is one reason for this, but still, it's quite a turnaround.

It helps the more expensive stores that food prices are now rising much more slowly than even a few months ago, so cost-conscious consumers have less reason to shop around.

What's also clear, however, is that the size and scale of the big supermarket chains enables them to fight back when threatened, offering heavily advertised price cuts of their own, plus other incentives, such as Tesco's recent loyalty card enhancements. More work for the discounters to do then.

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