ALDI has broken into the UK grocery industry’s top four for the first time, underlining consumers’ appetite for more competitive pricing as the cost-of-living crisis deepens.

The German discounter expanded its share of the UK grocery market to 9.3 per cent over the 12 weeks to September 4, allowing it to displace Wm Morrison as the country’s fourth largest supermarket, figures from retail analyst Kantar have shown.

It breaks the long-term stranglehold of the supermarket sector by the industry’s traditional giants, Tesco, J Sainsbury, Asda and Morrisons, leading Kantar to declare that the “big four is no more”.

The move by Aldi up the rankings will come as no surprise to industry watchers, as consumers increasingly show signs of shifting their shopping habits as surging inflation puts household finances under strain.

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Kantar said UK grocery inflation stood at 12.4% in August, implying a £571 annual increase in the average UK grocery bill, from £4,610 to £5,181. According to the analyst, the prices of milk, butter and dog food are growing especially quickly, and climbed by 31%, 25% and 29% respectively last month.

Annual consumer prices index inflation increased to 10.1% in July amid elevated energy prices and is forecast by the Bank of England to rise just over 13% in the fourth quarter, though it is expected to be tempered by the support announced by the UK Government last week to limit household energy bills.

Aldi, which now has 103 stores and about 3,400 employees in Scotland, saw its sales increase by 18.7% over the 12-week period, Kantar found.

Fellow discounter Lidl also grew in August and increased its share of the UK grocery market to 7.1% after expanding sales by 20.9%. It was the strongest sales performance by Lidl since October 2014, and the fourth month in a row the German company was the UK’s fastest-growing grocer.

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Morrisons, which earlier this year was acquired by New-York-based private equity firm Clayton, Dubilier & Rice, saw its share of the UK grocery market fall by 4.1% to 9.1% in August. Tesco retained its position as the UK’s biggest grocer with a share of 26.9%, up 1.9%, with Sainsbury’s at number two with a share of 14.6%, up 1.5%. Asda, the third-biggest player, increased its share by 2.2% to 14.1%.

Fraser McKevitt, head of retail and consumer insight at Kantar, said: “Back at the start of the 2010s, Tesco, Sainsbury’s, Asda and Morrisons together accounted for over three quarters of the sector but that traditional big four is no more.

“The discounters have seen dramatic sales increases in recent months, bringing more and more customers through their doors. Aldi has done well to expand its shopper base, supported by consistent store openings, and with 14.2 million consumers visiting the grocer in the past three months. Meanwhile, for the fourth month in a row Lidl was the fastest-growing grocer and recorded its strongest sales performance since October 2014.”

Russ Mould, investment director at AJ Bell, said: “The latest Kantar data on the supermarkets made for grim reading for Morrisons which lost its status as the UK’s fourth largest supermarket to Aldi in what feels like a symbolic moment.

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“The appeal of the German discounters continues to grow as household budgets are increasingly squeezed. This presents a challenge to Tesco and Sainsbury’s too.

“The fact that Aldi and Lidl offer not only bargain prices but also decent quality products and produce makes the established players jobs much harder.”

Kantar found that Iceland and the Co-operative Group also grew their market shares, by 5.8% and 2.7% year-on-year to 2.4% and 6.5%, in the 12 weeks to September 4.

But upmarket grocer Waitrose saw its share fall by 4.7% to 4.7%.

Overall take-home grocery sales increased by 3.8% over the period. Kantar said it was the third month in a row that the sector’s sales have grown after more than a year in decline as a consequence of comparisons with the pandemic.

Sales of supermarket own-label products surged as consumers responded to the inflation crisis, and spent more of their money in discounters such as Aldi and Lidl, Mr McKevitt said: “In what is a fiercely competitive sector, supermarkets are reacting to make sure they’re seen to acknowledge the challenges consumers are facing and offer best value, in particular by expanding their own-label ranges. Their efforts seem to be well-received by consumers with sales of the very cheapest value own-label products up by 33% this period versus a year ago and nearly one in four baskets containing one of these lines. Overall spending on all retailer own-label lines was £393 million higher during the latest four weeks, pushing own-label’s share of the market to 51.1%.”