The discounters are gaining market shares due to the rising food prices.
(Photo: AFP/Getty Images)
Dusseldorf The bad news doesn’t stop for supermarket customers. Not only did Aldi increase the prices for hundreds of products, food prices across the industry rose again by more than six percent in March, for fresh vegetables it was even more than 14 percent and for cooking oil 17 percent.
But according to experts, this is far from the end of the price spiral. “We are experiencing an inflationary shock in the food retail sector,” observes Chehab Wahby, consumer expert and partner at the consultancy EY-Parthenon. “The lower income groups will be hit particularly hard.”
And Aldi and Co. will set the pace. “The discount is the impetus for prices in the market,” explains industry expert Wahby, and he predicts: “The discounters will continuously raise prices, in the private label area and for branded articles.” The price movement will have a broad effect. Because the supermarkets will then follow suit.
The major concerns of consumers are reflected in the current figures from the market researchers at GfK: 85 percent of consumers expect that the prices for everyday goods will continue to rise. Before the start of the Ukraine war, this value was still 77 percent.
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At the same time, the consumer climate is falling. For May, GfK is forecasting a value of minus 26.5 points – this is the lowest value ever measured. It is also well below the previously measured low of spring 2020 during the corona lockdown.
Aldi and Lidl gain market share
“There is huge uncertainty among the population, which is surprisingly reflected in purchasing behavior,” says Robert Kecskes, industry expert at GfK. The strongest effects can be seen in meat and sausages. The entire meat industry is struggling with a drop in sales, Tönnies reported a drop in sales of almost one billion euros on Wednesday.
>> Read here: Meat company Tönnies loses almost one billion euros in sales
“The customers’ budgets have fallen due to the general cost increases,” explains Kecskes. People are also spending more money in restaurants again, which is then also missing for expenses in the food trade.
Consumers were looking for cheaper alternatives. This is reflected in the figures from GfK: The share of retail brands in total sales rose again in the first quarter of 2022 for the first time in years and is now 34.6 percent.
This is particularly evident in the case of breakfast products, where own brands increased their share by 3.6 percentage points. But they also increased by 2.9 percentage points for staple foods.
However, the clear winners of inflation in food prices are Aldi, Lidl and Co. While supermarkets with a full range of products were able to increase significantly during the corona crisis, discounters are now expanding their market share. According to figures from GfK, they only lost four percent in sales in March, while the overall market collapsed by eight percent. In specialist shops, such as butchers, sales in March fell by an average of 14 percent.
Sales of organic branded items collapse
The experts are not surprised. “In every economic crisis, the share of discounters has increased by three to four percent – and it has not decreased significantly since then,” reports consumer goods expert Wahby. The supermarkets are now under enormous pressure.
Discounters like Aldi enjoy enormous basic trust among consumers. That’s why they could afford the current price increases, Wahby estimates.
Retailers with a full range, on the other hand, have a lot to lose. “If you raise prices too much, customers will very quickly take offense at them,” says the consultant. GfK expert Kecskes takes a similar view: “It is now a Herculean task for the supermarkets to keep their customers,” he warns. But it is possible. Edeka and Rewe will probably try to distract customers from the inevitable price increases with discount campaigns and strong advertising for their own brands.
But many consumers are also in a dilemma in view of the skyrocketing prices. During the corona crisis, the trend towards a more conscious diet intensified. Organic goods and veggie products were extremely popular. But now many customers can’t or don’t want to afford these things anymore.
Here, too, most people make do with the store’s own brands – to at least calm their conscience a little. According to GfK figures, sales at brand manufacturers in the organic segment fell by 11.4 percent in the first quarter. However, the trade’s own organic brands were able to increase by 9.3 percent.
More: In this way, artificial intelligence can prevent rising prices and empty shelves in supermarkets.