M&S winning as inflation softens - but remains in double digits

According to our friends at Kantar UK grocery inflation 'slowed' to 12.7% in the four weeks to 6 August 2023. Whatever the grocery buying teams will say, that's not deflation. In fact, we'd argue that some of the deflationary product groups such as milk are being driven by the retailers' own margins and shopper targeting than realistic market movements.

There is much to show the tightening of belts. Own Label growing faster than Branded sales (9.7% compared to 6.4%), average basket values not keeping inline with inflation so volumes are continuing to drop, Aldi continuing to grow by over 20%. Tesco have also announced a swap in Express stores of higher value branded items for lower value own label in staples.

None of this bodes well for brands. In fact some retailer behaviour (see below example from the excellent Steve Dresser) is downright antagonistical to those brands who have traditionally supported own label through higher category margins and promotional support.

Don't forget, we have extensive experience in helping brands win and keep space, through end-to-end NPD planning, shopper research, brand development, commercialisation and category management. Drop us an email here if you'd like us to work with you on ensuring you don't go down the rabbit hole of margin or space erosion!

So let's talk about M&S, who are never split out in Kantar retailer share data, but release their results themselves. They have announced today that LFL food sales are up 11% with rest-of-store up 6%. By our fat maths that put them third in terms of food sales growth behind Aldi and Lidl. An impressive feat when wallets are being closely guarded.

Why have they done so well? By focusing on what a large percentage of UK shoppers want - a good experience in buying and consuming food. Yes, many people see food just as fuel, but the majority enjoy looking for, buying and experimenting with food, be it in the store, home or restaurant.

Take a look at the lead photo in this post, their new Liverpool One store (with thanks to M&S for the photo). For a few years now, M&S have been refurbishing stores and transferring locations to this new format. Low height shelving so you can see across the store, a focus on high quality in-store bakery, dark colours so the food sings, and yes - more focus on bigger basket family shoppers with a wider range of value propositions.

We always say shoppers will pay the right money for the right experience. This is the Value Proposition, which isn't just about price. M&S are doing this really well and staying well out of the race to the bottom which the majors seem to be fighting.

Even in dramatically pressurised times such as these, differentiation is still paramount. This isn't just any differentiation, this is M&S differentiation!