How will price inflation impact Discounters

Many things change during a periods of high inflation. Last week we learnt about Private Label share and this week we cover Discounters.

1. Significant and sudden price inflation does not appear to drive discounter shares
   In the 2008 ‘credit crunch’ period Food price inflation also spiked in W Europe from around 2% to 8%. This sudden change and its magnitude made shoppers think about their product choices (see last week’s Pick of the Week) but had no impact on their choice of retailer – Discounter share trends did not change although the environment was right for continued growth.
2. Discounter growth tends to come in categories where they are slightly weaker – even in hard times
   As some shoppers start relying on discounters for more of their needs and discounters expand ranges, growth comes from categories where discounters are relatively weak. In contrast, higher recent growth in stronger categories in Italy, Spain and UK is likely due to new shoppers entering the channel.
3. Working with discounters is important to brand growth
   Whether Discounters benefit or not from upcoming increases in inflation, it is important that brands work with this channel. Nearly 1 in 3 brands that have gained share overall in the last 5 years have also increased Discounter listings whereas net listings for losing brands have dropped. This may be ‘chicken & egg’ but still shows the importance of working with this channel.