Merger partners Sainsbury's and Asda lag rivals: Kantar

Sales at number two ranked Sainsbury's rose 0.2 percent, while Asda, owned by Walmart, saw growth of 1.4 percent, Kantar Worldpanel said.

Both Sainsbury's and Asda dropped market share compared to a year ago - down 0.3 percentage points and 0.1 percentage points respectively, Kantar said.

Current market leader Tesco posted sales growth of 2.1 percent while sales at fourth-placed Morrisons were up 2.2 percent. Market share for both was flat at 27.6 percent and 10.5 percent respectively.

"This is a pivotal moment for the British grocery market," said Fraser McKevitt, head of retail and consumer insight at the research company.

"A merger between Sainsbury's and Asda would transform the traditional landscape placing nearly a third of market share in the hands of the joint supermarket giant, though the march of the discounters – and any enforced store closures – could impact this figure."

The strongest growth in the "bricks and mortar" supermarket sector continued to come from the German discounters Aldi and Lidl.

Sales at Aldi rose 7.7 percent, giving it a market share of 7.3 percent, while growth at Lidl was 9.1 percent, taking its share to 5.4 percent.

Online supermarket Ocado took the crown, however, with sales up 12.7 percent. Its share of the market rose 0.1 percentage point to 1.2 percent.

(Reporting by Paul Sandle, editing by Sarah Young)