Penny-Pinching Britons Fuel Surge in Budget Grocers' U.K. Sales

(Bloomberg) -- U.K. sales at discounters Aldi and Lidl are rising at their fastest pace in more than two years as accelerating food-price inflation leads Britons to seek savings on their grocery shopping.

Aldi and Lidl's sales rose by 19.8 percent and 18.3 percent respectively in the 12 weeks ended May 21, researcher Kantar Worldpanel said Wednesday in its regular monthly report. That's the strongest growth for the German-owned budget chains since January 2015.

The figures are likely to send ripples across the industry, suggesting that higher prices fueled by sterling's post Brexit-vote weakness and rising commodity prices are driving more customers towards the discounters. Tesco Plc Chief Executive Officer Dave Lewis said last month that the U.K. market leader would “reconsider its approach to trading" if the discounter resurgence continued after Easter.

“Consumers are starting to feel the pinch as prices continue to rise,” Chris Hayward, consumer specialist at Kantar Worldpanel, said in a statement. “If inflation continues at its current rate over the course of a year that would mean an extra 119 pounds ($152) spent on groceries per household.”

Tesco's shares fell 1.1 percent to 183.25 pence at 9:10 a.m. in London.

Food price inflation accelerated by 0.3 percentage points to 2.9 percent during the past 12 weeks, Kantar said. Aldi and Lidl -- who together now account for a record 12 percent of the U.K. grocery market -- aren't the only discounters benefiting from the squeeze on Britons' living standards. B&M European Value Retail SA, which sells everything from dog toys to screwdrivers, boosted its store-opening targets last week after a surge in sales.

Other highlights from the Kantar report:

• Overall U.K. supermarket sales rose 3.8% YoY, best performance since Sept. 2013
• Tesco sales +1.8%, Sainsbury +1.7%, Asda +0.9%, Wm Morrison +1.9%

To contact the reporter on this story: Sam Chambers in London at schambers7@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Paul Jarvis, Thomas Mulier