If we are what we eat, then how we eat makes us who we are. If the way the UK ate over Christmas is anything to go by, we are splitting into two nations faster than ever. Research from consumer expert Kantar WorldpanelUK, shows that almost half the country spent less on food this Christmas. The other half of the population increased its spending by 4.5 per cent, which happens to be the rate of food inflation.
The latest supermarket results also showed our eating habits are changing. A growing number of people are gobbling up more premium food from shops such as Waitrose and Marks & Spencer but a bigger chunk are spending more with discounters such as Aldi, Lidl and Iceland. Indeed, the discount chains had their best-ever Christmas – sales at Aldi rose a staggering 30 per cent and Lidl grew 10.8 per cent. Sales at Iceland, which has only 2.2 per cent of the overall market, rose to a record 9.7 per cent.
Discounters' sales usually fall at Christmas because people treat themselves and trade up. This year, those discounters were clever, offering customers more premium products such as geese, venison and fine wines at budget prices. Smart – it keeps people in the stores.
Even though they have enjoyed such good Christmas sales, retailers at the top and bottom ends of the food chain are still relatively small in market share. Although it has such a great profile, Waitrose has only about 5 per cent of the market while the discounters between them are about 6 per cent so they've far to go to catch up with the big boys. Sainsbury's, Tesco, Asda and Morrisons still dominate the market with 77 per cent between them. But ironically they are the ones being the most squeezed as their middle-income customers are suffering the biggest drop in real income for decades. You could see how fierce competition is becoming between Sainsbury's and Tesco after they posted their figures.
In an entertaining move, Sainsbury's sent emails to the City's food retail analysts, claiming that Tesco had flattered its own figures by using Clubcard vouchers to bulk up its sales. It is splitting hairs to say which one had the better festive season as it is difficult to compare like-with-like sales, and they have different trading periods. Tesco, which has 30 per cent of the market, will have hated that Sainsbury's is the only one to have increased market share over Christmas and is now at about 17 per cent. Tesco will be delighted sales were up after last year's disastrous performance. It is easy to chuckle at the rivalry between the two – they are like two tuck-shop bully boys slugging it out at the school gate. However, their competition tends to keep prices down, which has to be good news for the consumer.
Of much greater concern is the threat of soaring food prices in the UK and worldwide. The cost of bread, fruit and vegetables is this year set to shoot up well above inflation because the wet weather has led to shortages. Some analysts predict inflation could rise by 6 per cent. So how will the food retailers react?
Competition will get tougher as retailers try to keep prices down, tightening up on suppliers as they did with the milk industry. Expect Germany's giants, Aldi and Lidl, to continue expanding into Middle England as shoppers continue to trade down. Aldi has just 3 per cent of the UK market with 421 shops but is opening a shop a week in the UK and is looking at the high street now that there is so much empty space.
If politicians – both left and right – are serious about their One Nation credentials, they should keep an eye on this widening food gap as its effects may be too much to stomach.
Cameron cannot continue to act the reluctant bride with Europe
David Cameron must be feeling sore. He's just had one of the worst weeks ever in the UK's tortuous relations with Europe; and that was just from his friends.
First to give him a whipping were some of the UK's most pro-European businessmen ranging from the CBI's Sir Roger Carr to Sir Richard Branson. They told him to leave Europe alone, that our interests are best served by being at the centre.
Then came the telling off from the Obama administration when the US's secretary for European affairs, Philip Gordon, said the UK risked being isolated if it were to go ahead with an "in-out" referendum. More menacing, perhaps, was his warning that the US would not consider a Brexit as enhancing our special relationship.
If that were not enough, Cameron was then told by one of Angela Merkel's closest allies not to blackmail his fellow member states with threats of a public vote.
So it will be fascinating to see how Cameron reacts to the publication this week of a "Manifesto for Change" from the Fresh Start Project, a cross-party research group set up by three eurosceptic but pro-Europe Tory MPs. Fresh Start wants a fundamental renegotiation of some of the most basic EU policies. This includes five treaty changes and another 12 reforms that can be carried out under existing treaties.
Their suggestions present Cameron with a great opportunity to either put up or shut up. They should be debated in the Commons immediately and given a good airing otherwise the European question will continue to tear apart the Tory party, if not the country.
The PM is known to be privately sympathetic to many of the FSP's reforms but what he says publicly will be leapt on by friends and foes alike. What is certain is that Cameron must get to grips with the EU before relations are damaged further. We can't keep being the reluctant bride; being half-married or half- pregnant isn't possible. If we stay in then let's do it properly. Let's say we want to renegotiate – not every member state has the same obligations – with our heads held high and take the lead. And tell the US to stuff it.