Brits navigate rising inflation in produce retail

With one in five shoppers feeling under financial pressure, we look at how produce in faring in grocery retail, how shoppers are coping and the response of retailers.
28 April 2022
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UK households are feeling the strain as the price of groceries is now 5.9% higher than it was a year ago – the highest level in 11 years. The competing forces of the release of COVID-19 restrictions and the current spike in cost-of-living are making the situation much more complex as the expansion of freedoms clashes with the constriction of budgets, making the environment harder to navigate for produce and the wider grocery market.

The full impact of squeezes on income and expenditure have not been experienced yet. Past periods of high inflation tell us shoppers will want to mitigate through buying cheaper products, choosing their retailer carefully and buying more on promotion. We have not yet seen any increase in percentage on deal, but this is something to keep an eye on and see if promotions are still relevant in 2022 or whether everyday low prices will prove to be a more popular strategy.

Impact of inflation varies by product

Average prices in fresh produce grew nearly 1% vs last year, led by fruit which grew 1.3% whereas vegetables fell 0.7%. This suggests many price increases being requested by manufacturers are either being absorbed or rejected by retailers. The categories seeing their average prices rise fastest include double digit growth for coconuts (41%), bean sprouts (25%) and watercress (17%). Meanwhile, many staple categories are seeing prices decrease as retailers battle over value perception with carrots and old potatoes both falling more than 5%.

Tiering performance is beginning to show a nation divided; premium and value own label produce are gaining share while standard is declining, reflecting the one in five shoppers who are feeling under financial pressure and two of five who are comfortable spending a bit more on groceries.

Shoppers turn to own-labels and discounters for savings

Own-label sales are performing ahead of brands with 51% of total, which suggests shoppers are looking to save money. While some shopper groups are already increasing spend at the discounters, it’s not solely due to price. Discounters are also benefiting from the behavioural shifts that have resulted from the lifting of pandemic restrictions, with shoppers starting to shop around more and dividing their spending across multiple retailers.

Aldi’s switching losses in fresh produce during the pandemic have reversed and they have now gained back over £2m more than they lost in the first quarter of 2022, compared to first quarter of 2021. The same goes for Lidl, who have now gained back over £7m more than they lost in the first quarter of 2022, compared to first quarter of 2021*.

Some people have changed their way of buying groceries, shopping or consuming food. Considering the inflation layer, we can expect more changes and a consumer who is more than ever aware of his choices and very informed about how retailers are behaving as well.

All data 4w/e 20th March 2022 unless marked *, in which case 12w/e.

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