GROCERY sales volumes are unlikely to be hit by Brexit, but supermarkets may be forced to raise prices if the current economic uncertainty continues in the longer term.
The warning comes as Kantar Worldpanel reported that grocery sales declined for the first time since January in the weeks leading up to the EU referendum.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “With an estimated 40 per cent of the food we consume sourced from overseas, any long term change in exchange rates may threaten the current period of cheaper groceries.”
Mr McKevitt said that historically, higher prices have led to consumers looking for less expensive alternatives, shopping on promotions or visiting cheaper retailers.
The insight firm reported a 0.2 per cent drop in like-for-like sales for the 12 weeks ending June 19 as prices declined by 1.4 per cent.
The drop in prices, and subsequently sales, was down to supermarkets cutting prices on everyday items to prevent leaking market share to the discounters.
The tactic does not seem to be working as the combined share of Lidl and Aldi has hit a record high of 10.5 per cent, with each holding 4.4 per cent and 6.1 per cent of the market respectively.
As with recent trends, the losers in the rise of the discounters are the traditional big four supermarkets. Overall sales at Tesco dropped by 1.3 per cent, while at Morrisons sales fell by 2.4 per cent, both reflecting the ongoing impact of store disposals.
At Sainsbury’s sales fell by 1.4 per cent, while at Asda saw the biggest drop, falling 5.9 per cent.
The period saw the recently rebranded Co-op grow its share by two per cent.
Meanwhile, online grocery firm Ocado has delivered a 15.1 per cent increase in revenue to £584.2m, with profit before tax increasing 17.5 per cent to £8.5m.
The first grocery company to post following the Brexit vote, chief executive Tim Steiner also said the weak pound would lead to price increases in the sector.
However, Mr Steiner said the group had seen no impact so far from Brexit on trading and consumer demand.
"We don't believe Brexit will have a significant impact on the business, but we're waiting to see what happens to pricing," he said.
On fears for consumer spending and UK retail, he added: "We're not expecting the whole thing to suddenly collapse."
The company, which operates Morrisons online grocery platform, grew its active customer base by 14.9 per cent to 541,000, with the average number of orders per week increasing to 225,000.
Its chief executive said that ongoing price competitiveness and deflationary pressure combined with changing customer behaviour, in particular with continued shifts to discount stores and online, have been reflected in declining store volumes at large supermarkets and continued margin pressure across the industry.
Kantar reported that grocery inflation currently stands at -1.4 per cent, the 23rd consecutive period of deflation.
Mr McKevitt added: “The decline is a continuation of the slow sector growth dating back to summer 2014, primarily a result of cheaper everyday groceries brought about by a retailer price war.”
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