Analysis: Christmas and Brexit double bill put strain on UK supermarkets

Analysis: Christmas and Brexit double bill put strain on UK supermarkets

© Reuters. A shopper passes christmas trees for sale at Tesco supermarket amid the spread of the coronavirus disease (COVID-19), London, Britain © Reuters. A shopper passes christmas trees for sale at Tesco supermarket amid the spread of the coronavirus disease (COVID-19), London, Britain

By James Davey

LONDON(Reuters) – For Britain's supermarket groups Christmas 2020 will be like no other, with the challenge of unprecedented demand due to the COVID-19 crisis followed by the risk of disruption to supplies at the end of the Brexit transition period on Dec. 31.

Queues are already forming outside UK supermarkets at peak times and shoppers should expect them to lengthen in the run-up to Christmas as the big four players – market leader Tesco (OTC:TSCDY), Sainsbury's, Asda and Morrisons – and their smaller rivals wrestle with meeting a jump in demand whilst adhering to social distancing requirements.

Then, from January, shoppers face the prospect of gaps on shelves if supply lines from the European Union are disrupted.

Market researcher Nielsen forecasts UK shoppers will spend 2 billion pounds more in supermarkets in the quarter to Dec. 26 than in the same period last year, or a total of 33 billion pounds. Some analysts believe that could prove a conservative estimate.

While a forecast increase in demand is not unique to Britain – in the U.S., for example, researcher IRI expects a near one fifth jump in quarterly food and beverage spending – the added dimension of Brexit adds to the operational difficulties UK supermarket groups are facing.

In Britain, demand beyond the normal seasonal pick-up is being driven by a large chunk of the population still working from home and tight restrictions on cafe, pub and restaurant openings in many parts of the country.

Supermarkets also have more mouths to feed — with many of the five million or so Britons who normally travel abroad for Christmas staying in the UK, and the early return of university students to the family home.

Britons are also keen to indulge over Christmas after such a miserable year.

"Frankly people have had enough (of COVID) and I thinkthey're going to have a big blow out," said Shore Capitalanalyst Clive Black.


Sainsbury's said on Thursday its sales since early November had exceeded expectations.

"That's why we're working really hard to make sure that wecan expand the capacity in the supermarkets, that's why we'reasking customers to shop on their own…to make sure we can get more into the store," said Simon Roberts, CEO of Britain's second largest grocer.

Roberts, like Tesco CEO Ken Murphy, is tackling his firstChristmas in the top job.

Supermarkets are asking customers to shop forseasonal products early to spread volume out, encouragingthem to use handheld devices that bypass checkouts and extending trading hours. They are also lobbying government to relax strict Sunday trading laws and allow all-night deliveries.

Another industry executive observed that when queuing Britons snaked around supermarket car parks at the outset of the pandemic in March the sun was shining and a wartime "Dunkirk spirit" prevailed.

"When it's pouring down that will go less well," he said.

To try and keep spirits up in the December cold, Asda and Sainsbury's are trialling virtual queuing apps where customers can wait in their cars until there is room for them in store, while Morrisons and Asda have constructed canopies to protect waiting shoppers from the rain, with the latter also making 25,000 umbrellas available.

Online home deliveries have been ramped up and click & collect capacity expanded.

Market researcher Kantar reckons online now accounts for about 13% of all UK grocery spending versus 7% before the pandemic. But that means more than 85% of the market still needs to be served by stores.


With nearly one third of Britain's food coming from the EU, grocers fear significant disruption to their "just in time" supply chains when the Brexit transition period ends shortly after the Christmas rush.

Delays of even a few days as post-Brexit customs checks come into force at ports could make fresh produce unsaleable and lead to shortages of some products.

Supermarket groups have stockpiled where they can but warehouse space is scarce with most required to service Christmas. And although they will seek to build stocks further once Christmas is over, fresh produce such as salad and fruit simply can't be kept for long periods.

Grocers will seek to utilise alternative routes to the main Dover-Calais crossing but options are limited.

"The reality is that we're leaving Europe, so whetherthere's a trade deal or not there's going to be a level offriction at borders that there historically wasn't," saidanother industry director.

Original Article

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