‘Value’ brands help strong supermarket growth

Two of the country’s biggest supermarkets – Tesco and Sainsbury – have both announced strong first quarter sales growth, despite the ongoing recession.

Tesco said its group sales (excluding petrol) were up 12.6% in the 13 weeks ended 30 May, with “solid, stable growth” in the core UK business. Like-for-like retail sales for the quarter increased by 4.3% (3.3% growth including VAT).

Sainsbury’s today (17 June) announced a similarly strong 7.6% increase in total sales for the 12 weeks to 13 June, with like-for-like sales up 7% (excluding fuel). Customer numbers continued to increase, to over 18.5m transactions each week.

The expansion of lower-priced ‘value’ product ranges was a key factor in the sales growth for both supermarkets, eager to attract cash-strapped consumers away from budget retailers such as Aldi and Lidl.

Sainsbury’s chief executive Justin King said customers remained cautious about their spending and the supermarket had cut over 7000 prices since January 2009 in response. Sales of its ‘basics’ range continued to grow strongly, at over 50% year-on-year.

“Consumers are spending more cautiously, but continue to look to trusted brands to act responsibly on ethical and environmental concerns on their behalf,” he said. Indeed, sales of Sainsbury’s RSPCA Freedom Food ranges had quadrupled compared with quarter one last year, he said.

“While we expect the economic environment to remain challenging during 2009, our wide customer base and focus on great products at fair prices means we are well positioned to continue our progress,” Mr King said.

Tesco boss Terry Leahy said the supermarket would keep a strong focus on its “long-term strategic objectives” through the recession and continue to invest in its offer for customers and adjust to changing needs.

Farmers will hope that the ongoing growth of ‘value’ products does not come at their expense.