Analysis: World Cup could be a nightmare before Christmas for UK supermarkets

  • Food retailers are under severe pressure from cost inflation
  • Usually the World Cup and Christmas give sales prizes
  • Events coincide with the complexity of logistics and spending patterns

LONDON (Reuters) – The Winter World Cup has added a new level of uncertainty to the Christmas trading outlook for British supermarkets: how to convince cash-strapped shoppers to buy logs and fancy biscuits at the same time as beer and biscuits. Pizza?

The football tournament in Qatar takes place between November 20 and December 18, and is located right in the main festive commercial quarter where the fiercely competitive segment usually generates a large portion of its annual profits.

Likewise, the World Cup, traditionally held in the summer in the northern hemisphere, usually provides a big boost to British supermarkets where families stock beer, wine and spirits, barbecue food and snacks and host large gatherings.

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However, levels of confidence among shoppers were at record lows even before the government’s new economic plan, which is now being reversed, lifted mortgage rates and raised fears of a sharp drop in home prices to exacerbate the cost of living crisis.

This means that joint spending is likely to be lower than if the two events were months apart.

Retail executives say the World Cup, which has moved into winter to avoid the sweltering Qatari summer temperatures, has completely dumped the algorithms they are increasingly using to forecast trade and plan their logistics.

“It’s nightmare timing from getting any positive side out of it,” said one grocery industry veteran, who spoke on the condition of anonymity.

“It’s also an executive headache, because when you want everything to be apart of Christmas, you have to somehow mirror tiles of booze and World Cup snacks,” he said.

There is also a risk, he said, that people distracted by football will not feel festive and not turn their attention to spending Christmas until after the tournament, leading to a final week of frantic trading.

Ken Murphy, CEO of Tesco, said: (TSCO.L)Britain’s largest retailer, told reporters this month.

Another factor is the continued poor form of the England team and their failure to get past the preliminary group stage of matches.

At the moment, department stores are opening their stores with the understanding that England and Wales, who also qualified, are doing well.

plan B

But they have a Plan B where space for beer, snacks and soccer merchandise can be quickly exchanged for Christmas champagne, Prosecco, gifts and decorations when states exit.

However, executives say planning is further complicated by legislation that took effect in England on October 1, which restricts location to food stores that are high in fat, salt or sugar.

The new rules mean that products deemed less healthy, such as sweets, cannot be displayed at major store locations, such as entrances, checkouts, aisle ends and online equivalents.

Tesco plans custom signage in stores to alert customers to the products and deals on offer for soccer celebrations. This will be separate from the space for Christmas products.

During the last World Cup in July 2018, which coincided with a prolonged period of hot weather, shoppers visited supermarkets in the UK an additional 13 million times, according to market researcher Kantar.

Excluding the Christmas and Easter weeks, the July 2018 week in which England beat Colombia and Sweden saw more alcohol spending than ever before – around £287m.

Similarly, shoppers spent 1.2 billion pounds ($1.4 billion) on alcohol in supermarkets during last year’s European Football Championship, which was delayed by the coronavirus pandemic, as England reached the final at Wembley Stadium in London.

Of course, customers who visit stores to buy festive items can purchase World Cup supplies at the same time. But as household budgets shrink, supermarket chains are preparing to reduce the wealth of sales.

home view

UK food retailers are already under severe pressure from cost inflation and changing shoppers’ habits. Earlier this month, Tesco cut its earnings forecast, while Morrisons, Co-operative and Aldi UK last month reported a drop in earnings.

It’s not going to be as big as the summer World Cup, that’s clear,” said Fraser McKevitt, Kantar’s head of retail and consumer business.

But he said the potential silver lining for supermarkets could be that Britons are avoiding pubs and instead watching more matches at home, with refreshments needed.

For now, the executives are wearing a brave face.

“If one of the home countries does a really interesting celebration,” said Giles Hurley, chief executive of competition specialist Aldi UK.

“I am very confident that the British people will celebrate Christmas this year.”

Much will depend on how deep England are in the tournament.

“What we know from other events and most recently the Women’s Euro, is that it depends very much on the performance of England,” said McKevitt from Kantar.

“If England does a good job, the viewing, the celebration and the buying will increase.”

As always, market leader Tesco appears to be in its best position, with a foothold in both the retail and wholesale market.

“Whether (people) choose to party at the pub, we serve them through (the wholesaler) Booker, or celebrate at home, and we serve them through Tesco, we don’t mind as long as they are having fun. That’s what we plan,” Murphy said. = 0.8814 pounds)

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James Davey reports. Editing by Alison Williams

Our criteria: Thomson Reuters Trust Principles.

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