Morrisons has reported its first month of sales growth in more than nine months as the supermarket's efforts to slash prices appears to be bearing fruit.
The Bradford-based chain saw sales rise 2.4% in the four weeks to 17 August, according to figures from Kantar Worldpanel, after cutting prices on 1,200 products in a high-profile campaign as well as launching online and opening a string of convenience stores in an effort to stem a loss of customers to the likes of Aldi and Lidl.
The performance was boosted by a big voucher promotion on meat and fresh produce, but analysts suggested that it could mark the beginning of a fightback by the leading grocers against the rise of the discounters.
Aldi, Lidl and the much smaller Farm Foods continue to grow at a very rapid pace with sales up by 29.5%, 18.3% and 8.3% respectively in the 12 weeks to 17 August, but that was a slowdown in pace from previous quarters.
With shoppers' available cash gradually increasing, Tesco likely to sharpen prices further under its new boss and price cuts at Asda are now well under way.
Clive Black, an analyst at Shore Capital, said the discounters might find it tough to keep up their pace of growth this year. "The discounters have had perfect trading conditions but the big retailers have finally woken up. The free lunch may be coming to an end," he said.
But the grocery market remains tough, growing at the slowest pace in almost a decade, increasing by 0.8% in 12 weeks to 17 August, according to Kantar. Meanwhile, the supermarket price war meant prices rose by only 0.2% over the summer.
Grocery price inflation fell for the 11th consecutive quarter to its lowest level since October 2006, according to the latest figures from Kantar.
The battle to cut prices on staples such as vegetables, milk and bread all drove down inflation. Lower prices also reflect easing in food commodities such as cereals and dairy thanks to better weather conditions and harvests this year.
Of Britain's biggest six supermarkets, only Asda and Waitrose managed to increase their share of the market in the 12 week period while Tesco, Morrisons, Sainsbury's and the Co-op all lost ground. Tesco was the biggest loser as sales fell 4% in the 12 weeks to 17 August driving it down to a market share of 28.8%, more than 1 percentage point less than a year before. The figures mark out the scale of the challenge for the incoming chief executive, Dave Lewis, who takes charge of the UK's largest retailer in October.
Edward Garner, director of Kantar Worldpanel, said that Asda and Waitrose had achieved their market growth with very different strategies: "Asda has pushed its 'price lock' strategy to keep prices on everyday essential items low, while Waitrose is running competitive offers on home delivery alongside offers for myWaitrose card users allied to its overall quality and provenance positioning."
Waitrose's strong pace of growth meant it managed to hold off Aldi which hovers just 0.1 percentage point away from drawing level as the UK's sixth largest grocer, according to Kantar.
Rival market analysts Nielsen say Aldi has already overtaken Waitrose.
Supermarket shares (12 weeks to 17 August)
• Tesco 28.8%
• Asda 17.2%
• Sainsbury's 16.4%
• Morrisons 11%
• Co-operative 6.4%
• Waitrose 4.9%
• Aldi 4.8%
• Lidl 3.6%
• Iceland 2%
Source: Kantar
