Aldi overtakes Co-op to become UK's fifth largest grocer

German-owned Aldi has overtaken the Co-operative as Britain's fifth biggest supermarket, industry data shows.

Aldi's sales rose 12.4% year-on-year in the 12 weeks to 29 January, taking its market share to 6.2% and ahead of the Co-op's 6%, according to research firm Kantar Worldpanel.

It underlines the challenge the big retailers have faced from discounters such as Aldi and its German rival Lidl.

Sales at Lidl rose 9.4%, taking its market share to 4.5%.

"Underpinned by an extensive programme of store openings, the past quarter has seen Aldi attract 826,000 more shoppers than during the same period last year," said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.

Healthier ranges

Ten years ago ago Aldi was only Britain's 10th largest food retailer, accounting for less than 2% of the grocery market.

Despite being overtaken by Aldi, Co-op's 2% sales increase was well ahead of the market, continuing a run of growth stretching back to July 2015.

Mr McKevitt said: "A significant own label sales increase of 7% was behind [Co-op's] strong performance, with healthier ranges successfully catering to consumers' good intentions for the new year."

Tesco remains the clear leader with more than 28% of the UK market. Its sales rose 0.3% over the 12-week period, which included the busy Christmas season.

Analysis: Emma Simpson, business reporter

Aldi will open its 700th store later this month and is planning to open a further 300 over the next five years.

Along with Lidl, it has caused huge disruption in the supermarket aisles, stealing market share form the traditional "big four" grocers.

But they've been fighting back so the discounters are having less of an easy ride these days. Aldi's growth, whilst still impressive, is slowing.

And the more it tries to offer its customers, in terms of range and in store experience, the greater the danger that it strays from its low cost, efficient business model which has proved so effective.

Rising prices

Morrisons, the smallest of the "big four", increased sales by 1.9%, gaining market share for the first time since June 2015.

Sales were flat at second-ranked Sainsbury's, but fell 1.9% at Asda, owned by US giant Wal-Mart.

Overall, supermarket sales were up 1.7% year on year, Kantar said.

The market researcher noted that well-publicised supply issues due to poor weather in southern Europe had affected sales of fresh produce.

Mr McKevitt said: "Eleven million households buy courgettes annually, but supply issues contributed to 759,000 fewer shoppers buying them this January - that's a 31% drop in spending compared with the same month last year.

"Sales of spinach also fell by 12%, in a clear sign that the poor weather in southern Europe has had a tangible impact on British shopping baskets."

Kantar said rising prices continued into the new year, with inflation on a basket of everyday groceries climbing to 0.7%.

"If prices continue to rise at the same rate for the rest of 2017, shoppers will find themselves around £27 worse off," Mr McKevitt said.