20-year low: Sales plummet as Tesco loses out to Aldi

Tesco has suffered its worst three-month sales period in 20 years as customers abandoned the supermarket at record speed, according to data.

Kantar Worldpanel said that the UK's biggest supermarket lost around one million, with its market share falling from 30.5 per cent to 29 per cent in the 12 weeks to 25 May compared with a year earlier - the fastest fall since records began in 1994.

It is still ahead of rivals Asda, which has 17.1 per cent, and Sainsbury's with 16.5 per cent, but the 1.5 per cent fall at Tesco will add to fears that the supermarket is losing out to the discounters and its more traditional rivals.

Sales also dropped 3.1 per cent over the period - another record fall - with only struggling Morrisons performing worse. By comparison, discounter Aldi's sales soared 35.9 per cent and upmarket Waitrose rose 6.1 per cent.

Today's results put extra pressure on chief executive Philip Clarke, who will today reveal the latest quarterly figures to the stock market, which are expected to be down by about 4 per cent.

He has attempted to pump new life into the brand by launching a £200m price-cutting plan on many basic lines and attempting to improve the image of his stores.

However, though both Asda and Morrisons have also introduced price cutting, most agree that even with the discounts, the traditional supermarkets cannot compete with the prices at Aldi and Lidl.

Investors and analysts are also concerned by Tesco's performance, suggesting the company must do more to adapt to the changing sector as its share price continues to trade at a 10-year low.

Bruno Monteyne, retail analyst at Bernstein Research, and a former Tesco employee, explained that the supermarket had already raised prices before this latest round of discounting.

He said: “By raising prices faster than anybody else, we think Tesco has lost its differentiation, giving a free ride to the targeted retailers at both ends of the spectrum (value and quality). The 'accelerated' strategy is unconvincing; it is still trying to be everything to everybody and the only thing that has accelerated is market share losses.”

Edward Garner, director of Kantar Worldpanel, appeared to agree and pointed out Waitrose's success despite its image for high-end products.

He said: “By differentiating its offer, Waitrose has maintained its all-time record share of 5.1 per cent.”

The so-called price war between the Big Four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - is also starting to impact food inflation levels, according to Kantar.

It rose just 1.2 per cent, while the grocery market grew just 1.7 per cent - the lowest level for at least 11 years.