By Kristy Dorsey

Consumer demand for a treat-filled Christmas and resurgent grocery price inflation kept UK supermarket spending near record levels in December, with sector leader Tesco outperforming its rivals during the key festive period.

Individual retailers found it challenging to secure year-on-year growth against the highs of 2020, when Covid health restrictions severely limited bar and restaurant trips and boosted take-home grocery sales. However, every major grocer increased sales compared to 2019 as this year’s emergence of the Omicron variant led many to celebrate at home despite a lack of extensive formal restrictions on hospitality venues.

Market research from Kantar recorded take-home sales of food and drink of £31.7 billion during the 12 weeks to December 26. This was down by 3 per cent compared to 2020 but was 8% higher than during the same period prior to the pandemic.

December spending hit £11.7bn – down just 0.2% on 2020’s record – all but halting the downward trend from March to November when sales were falling by an average of 2.5% against 2020.

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“Christmas this year was always going to be hard to call,” said Fraser McKevitt, UK head of retail and consumer insight at Kantar’s Worldpanel division. “It looked likely that people would celebrate at home more than they did last year, when socialising was at best difficult and at worst illegal.

“On the other hand, we anticipated that a fair bit of food and drink spending would return to restaurants and bars. We also didn’t know what the Covid situation would be, and the Omicron variant has not helped the out-of-home sector at all.”

The net effect was that supermarket sales just missed out on last year’s record by £24 million, he added.

Tesco regained its highest share of UK supermarket spending in nearly four years, gaining 0.6 percentage points to 27.9%. Its sales during the 12 weeks to December 26 were down 0.9% against 2020, but were 10.1% higher than in 2019.

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Tesco raised its full-year profit forecast in October, saying the depth of its supplier network was helping to weather supply chain disruptions and maintain product availability. Some analysts believe it may raise its outlook again when it updates on trading on January 13.

Its next three closest rivals – Sainsbury’s, Asda and Morrisons – recorded sales declines of 4.4%, 3.9% and 6.5% during the 12-week period to December 26. They now respectively account for 15.7%, 14.2% and 10.1% of the UK market.

Online specialist Ocado was the only retailer to buck the trend and grow versus 2020, increasing sales by 2.5%. Ocado’s tie-up with Marks & Spencer led to a resurgent performance by the latter last year, with total M&S food sales up 10.4% in the first half.

However, online sales by all retailers in December fell by 3.7% against 2020 to account for 12.2% of the market.

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Looking at demand for individual products, Kantar said spending on many traditional Christmas dinner items was broadly similar compared to last year though there was “ample evidence” of people treating themselves and guests.

Overall sales of mince pies grew by 7% to £62m, while that of Christmas chocolates was 21% higher at £61m. Sales of sprouts dipped by 3%, though almost half of all UK households continued to serve them up during December.

Plant-based foods also proved particularly popular, with chilled vegetarian ranges up 6% and frozen equivalents up by 4%.

Along with Christmas indulgence, rising prices helped to push up shopping budgets. Grocery price inflation reached 3.5% in December, adding nearly £15 to shoppers’ average monthly grocery bill.

Kantar noted that apart from a brief period of price rises in the spring of 2020 – when retailers cut promotions to maintain product availability – December’s price inflation was the highest since January 2018.

Shoppers spent £627m on supermarkets’ own-label upmarket lines during the four weeks to December 26, an increase of 6.8% on 2020. Sparkling and still wine sales in this category grew by 22% and 18% respectively, while crisps surged by 31%.