This year promises to be a tough one for grocery retailers because they are faced with the prospect of falling inflation and lower oil prices, a report released today by Verdict Research said.
According to the company, the added threat of discounters such as Aldi and Lidl is pushing prices further downwards.
Improved harvests have depressed prices and oil now costs just a third the amount it did a year ago, Verdict said, meaning grocery stores will not see the success they did in 2008.
And becuase of other problems related to the recession, such as a stagnant housing market, the non-food sector will struggle to offer retailers support, the company argued.
The report comes after the British Retail Consortium said shoppers focussed on value over the Christmas period.
Verdict European Retail Analyst Daniel Lucht said: “While grocers are to a certain extent insulated against the downturn that is severely hurting the rest of the retail sector, the effects of the credit crunch and the onset of the global recession will still be felt across the European grocery market.
“Real estate bubbles have burst, credit availability is curbed and unemployment is rising again.
“As a result customers have become cautious. The result has been an overriding focus on value from a consumer’s point of view.”
He added the pace of international expansion will have to be slowed in the current climate, while innovative ideas will be put on the “back burner”.
The organic market, however, should bounce back quickly when the credit crunch ends, the report suggested.
Last week’s exclusive research conducted by Empathy found organic food has become less important to shoppers during the credit crunch.
