January 7, 2019 / 7:50 AM / 9 days ago

UPDATE 3-Aldi UK's premium ranges drive Christmas sales growth

* Aldi is UK’s fifth biggest grocer

* December sales up around 10 pct to almost 1 bln pounds

* Morrisons cuts prices on 935 products

* Tesco also announces price cuts (Adds Tesco price cuts, Aldi products)

By James Davey

LONDON, Jan 7 (Reuters) - Aldi UK, the British arm of the German discount supermarket, said its sales increased around 10 percent to almost 1 billion pounds ($1.3 billion) in December, driven by increased demand for some of its premium products.

The Aldi announcement on Monday coincided with further price cuts from market leader Tesco and Morrisons, the number four player in the sector.

Aldi, along with rival German discounter Lidl, has been winning UK market share from Britain’s big four grocers - Tesco, Sainsbury’s, Asda and Morrisons.

The fifth biggest grocery chain in Britain, Aldi has more than doubled its UK market share since 2010 to 7.6 percent, according to industry data.

Having built its business as a discounter, Aldi said its festive sales performance reflected a surge in demand for its premium ranges — Specially Selected and Exquisite. Popular products included beef Chateaubriand, Napoleon 32-year-old French Brandy and Panettone.

“Although we saw strong growth across all key categories, the standout performance was in our Specially Selected brand where shoppers treated themselves to premium products for a fraction of the price they would have paid elsewhere for similar quality products,” said Aldi Chief Executive Giles Hurley.

The march of the discounters has forced the big four to reassess their own strategies. They have cut their own prices to better compete, while Sainsbury’s has proposed a 7.3 billion pound ($9.3 billion) takeover of Walmart-owned Asda to increase buying power - a deal currently being probed by the competition regulator.

Morrisons said on Monday it would cut prices on 935 products, including tinned tomatoes and cereals, by an average of 20 percent.

Tesco also said it would reduce the prices of hundreds of products across the month, tying the move to its 100th anniversary. Examples include 50 percent cuts on PG Tips tea, Cathedral City cheese and Birds Eye fish fingers.

Analysts however played down fears of a new year price war, pointing out that supermarket chains nearly always launch promotions to stimulate jaded consumers after Christmas.

NEW SHOPS

Aldi’s growth is also being driven by its aggressive store opening programme. The firm opened over 65 new stores during 2018, increasing its total estate to 827. It said it remains on course to achieve a long-term target of 1,200 UK stores by the end of 2025.

“We begin the new year with great momentum as the UK’s fastest-growing supermarket and on the back of record Christmas sales,” said Hurley.

Aldi has said its like-for-like sales, which strips out the impact of new space, were positive throughout 2018 though it does not disclose the actual figure.

It maintains like-for-like sales is not a key performance indicator for the business as it is deliberately opening stores to absorb sales from existing ones that are too busy, often with all tills open and the car park full at peak trading periods.

Morrisons has reported 12 straight quarters of underlying sales growth, driven by its wholesale business. However, analysts have forecast a slowdown in growth over the key Christmas period.

The chain is due to update on trading on Tuesday, followed by Sainsbury’s on Wednesday and Tesco on Thursday. Industry data will also be published on Tuesday. ($1 = 0.7846 pounds) (Reporting by James Davey editing by Kate Holton/Keith Weir)

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