Analysis: World Cup could be nightmare before Christmas for Britain’s supermarkets

  • Grocery retailers under severe pressure from cost inflation
  • World Cup and Christmas usually ensure sales miracles
  • Events that coincide complicate logistics and spending behavior

LONDON, Oct 19 (Reuters) – The Winter World Cup has added a new level of uncertainty to UK supermarkets’ Christmas trade prospects: how to persuade defaulting shoppers to buy Christmas and luxury biscuits at the same time as beer and beer? Pizza?

The football tournament in Qatar, taking place between November 20th and December 18th, falls right in the important festive commercial district where the highly competitive sector normally generates a large part of its annual profit.

Similarly, World Cups, which traditionally take place in the northern hemisphere during the summer, tend to give UK supermarkets a big boost as households stock up on beer, wine and spirits, grills and snacks and host large gatherings.

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But buyer confidence was at record lows even before the government’s new economic plan, now reversed, sent mortgage rates soaring and sparked fears that a sharp fall in house prices could worsen the cost-of-living crisis.

This means that the combined expenses are likely to be less than if the two events were months apart.

Retail executives say the World Cup, which was postponed to the winter to avoid Qatar’s intense summer temperatures, has completely derailed the algorithms they are increasingly using to predict trade and plan their logistics.

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“It’s nightmarish timing to take any advantage of this,” said a food industry veteran on condition of anonymity.

“It’s also an execution headache because right when you want to have it all for Christmas, you kind of have to reflect booze and snacks for the World Cup,” he said.

There is also a risk that people distracted from football will not be festive and only turn their attention to Christmas spending after the tournament, leading to a hectic final week of trading, he said.

“This is a bit of a curveball in terms of how to plan for Christmas and a World Cup at the same time,” Ken Murphy, chief executive of Tesco (TSCO.L), Britain’s largest retailer, told reporters this month.

Another factor will be if England’s poor form continues and they don’t get past the first group stage of games.

For now, supermarkets are building their businesses on the basis that England and Wales, who also qualified, are doing well.

PLAN B

But they have a plan B where space for beer, snacks and football gear can be quickly replaced with Christmas champagne, prosecco, gifts and decorations when the home countries are eliminated.

But executives say planning is made even more difficult by legislation that came into force in England on October 1, restricting the location of foods high in fat, salt or sugar in shops.

The new rules mean that products deemed less healthy, such as confectionery, cannot be displayed in key locations such as entrances, checkouts, aisle ends and their online equivalents.

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Tesco is planning special signage in stores to draw customers’ attention to football celebration products and offers. This will be separate from the dedicated Christmas products section.

According to market researcher Kantar, shoppers visited British supermarkets an additional 13 million times during the last World Cup in July 2018, which coincided with a prolonged heatwave.

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

Similarly, buyers gave up £1.2 billion ($1.4 billion) during last year’s Euro 2020 football tournament, which was delayed by the coronavirus pandemic, in which England reached the final at London’s Wembley Stadium alcohol in supermarkets.

Of course, customers who came to the stores to buy festive goods could also buy WM supplies at the same time. But with tight household budgets, supermarket chains brace themselves for less of a sales bonanza.

HOUSE TOUR

UK food retail is already under severe pressure from cost inflation and changing shopping habits. Earlier this month, Tesco cut its profit forecast, while last month Morrisons, the Co-op and Aldi UK all reported falling profits.

“It’s not going to be as big as the Summer World Cup, that’s for sure,” said Fraser McKevitt, Kantar’s head of retail and consumer insight.

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But he said a potential silver lining for supermarkets could be Britons avoiding bars and instead watching more games at home with the necessary refreshments.

For now, the executives put on a brave face.

“If one of the home nations performs it could be a really interesting celebration,” said Giles Hurley, CEO of discounter Aldi UK.

“I’m actually very confident that the British public will be celebrating this Christmas.”

Much will depend on how far England advance into the tournament.

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

“If England do well then the watching, the partying and the shopping will grow.”

As always, market leader Tesco seems to be in the best position as it has a presence in both the retail and wholesale markets.

“Whether (people) choose to party in the pub and we serve them through (wholesaler) Booker, or they party at home and we serve them through Tesco, we don’t mind as long as they’re having fun. That’s what we’re planning,” Murphy said. ($1 = 0.8814 pounds)

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Reporting by James Davey; Editing by Alison Williams

Our standards: The Thomson Reuters Trust Principles.

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