As food prices surge 17.5%, Waitrose just needs to be better at retail

Signs of life from Waitrose? That was one of the takeaways from the trove of data released in Kantar’s monthly grocery market survey. (The biggest, inevitably, was food price inflation at an eye-popping 17.5 per cent, adding £837 to the average household’s annual bill assuming no change in shopping behaviour such as buying more cheaper own-label produce.)

John Lewis Partnership’s struggling grocer turned in 2.1 per cent sales growth, which Kantar noted was its “best performance since September 2021”.

Waitrose has found its business model buffeted by the cost of living crisis. Put simply, it’s too pricey.

John Lewis might once have claimed to “never knowingly undersold” but that was never true of Waitrose, as surveys conducted by Which? make clear. The supermarket’s middle-class clientele in the prosperous parts of the country where it is most often to be found, have hitherto been willing to pay a modest premium because of what it is and what it does.

It is good at luxuries. The fine wine selection is quite impressive. Once, while waiting for assistance there, I was brought a cup of tea.

Trouble is, you have to pay for service like that, and many shoppers no longer can – especially if they have big mortgages with fixed rates coming to an end.

The market-wide growth of own-label items in preference to expensive branded goods is one demonstration of that. Sales of the former were up again, by 15.8 per cent during the most recent four weeks when compared with last year. The continuing growth of Lidl and Aldi, with their limited ranges and goods priced to the bone, is another. Their sales grew by 25.8 per cent and 25.4 per cent, respectively. What the German pair don’t stint on is quality; shoppers from all demographics have taken note.

Waitrose’s 2.1 per cent might represent the fastest growth in more than a year but it is a mark of how low expectations are that it is worthy of any sort of note. Inflation flatters sales; if you sell fewer items at a higher price, you can still show impressive growth and 2.1 per cent isn’t anything like that. Market share fell from 4.8 per cent to 4.5 per cent.

Ocado, its similarly pricey former partner, has also had a miserable time of it recently but still posted sales growth of 7.3 per cent – on a par with Asda, ahead of Tesco and Sainsbury’s (both 6.9 per cent). Outside the embattled independent sector, only Morrisons showed a poorer sales performance than Waitrose, turning in a miserable 0.1 per cent increase.

Is Waitrose at risk of getting swept aside? Does its business model work in this chilly consumer environment? Can it recover some lost ground when the inflationary surge eases? The Bank of England is still forecasting a sharp decline in the headline rate, partly down to the energy price shock washing through the system.

Business model and structure are problems the loss-making John Lewis Partnership is grappling with; the annual bonus its partners have come to rely on is absent this year for only the second time in its history.

There has been talk of seeking an external investor with the right “values” to help with business transformation, but diluting the partnership structure has generated considerable controversy.

Is this because critics – including former boss and now West Midlands mayor Andy Street – don’t appreciate how inflation has hit the group (like a “hurricane” in the words of current chair Sharon White)? Or is it because John Lewis Partnership has endured a fair bit of management turmoil already and would be better off concentrating on improving its core offering?

These latest numbers show this business needs to get better at retail, regardless of its structure; that has been true for a while now.