The data from market researcher Kantar Worldpanel showed UK grocery sales fell 0.2 percent year-on-year to 24.88 billion pounds in the 12 weeks to Nov. 9, the first decline since Kantar's records began in 1994.
The drop reflected a price war led by fast-growing German discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL], which have small market shares but whose growing popularity is highlighted by their increased sales of 25.5 and 16.8 percent respectively.
With austerity-era shopping habits becoming entrenched among British consumers, the discounters have been stealing share from market leader Tesco (>> Tesco PLC), also mired in an accounting scandal, Wal-Mart's (>> Wal-Mart Stores, Inc.) Asda, Sainsbury (>> J Sainsbury plc) and Morrison (>> Wm. Morrison Supermarkets plc).
All four have responded by cutting their own prices but only Asda has stemmed the flow of shoppers to the discounters.
"The fight for a bigger share of sales has ignited a price war which means an average basket of everyday goods such as milk, bread and vegetables now costs 0.4 percent less than it did this time last year," Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said in a statement.
"This is bad news for retailers but good news for shoppers, with price deflation forecast to continue well into 2015," McKevitt said.
STRUCTURAL CHANGE
Last week Sainsbury CEO Mike Coupe said the UK grocery industry was facing into a "once-in-a-generation combination of cyclical and structural change" and cautioned that like-for-like sales in the supermarket part of the sector would be negative for the next few years.
The big four are having to deal with a combination of price deflation, customers shopping around and a post-recession trend of people eating out more often. Their big out-of-town stores selling clothing and fridges as well as food have also lost appeal among consumers preferring to use local convenience shops, or shop online for big-ticket items.
On Monday a research note from investment bank Goldman Sachs said Britain's three listed supermarket chains had 20 percent too much space and needed to close stores.
Kantar said Tesco's sales fell 3.7 percent over the 12-week period, though the rate at which it is losing market share slowed. Asda's sales fell in line with the market and it held its market share at 17.2 percent, but Sainsbury and Morrison both recorded a decline in share compared with last year, with sales down 2.5 percent and 3.3 percent, respectively.
Aldi took a record market share of 4.9 percent, while Lidl achieved a share of 3.5 percent.
At the premium end, sales at Waitrose, part of John Lewis [JLP.UL], rose 5.6 percent, taking its share to 5.1 percent.
(Additional reporting by Neil Maidment; Editing by Jane Baird and David Holmes)
By James Davey
