Update on the UK’s grocery landscape
City Index April 8, 2014 9:59 PM
<p>The challenging conditions faced by some of the UK’s food retailers (specifically the so-called “big four”) are well known and respite, in the near-term at […]</p>
The challenging conditions faced by some of the UK’s food retailers (specifically the so-called “big four”) are well known and respite, in the near-term at least, was hardly expected.
So, figures published today (8th April) by research firm Kantar Worldpanel, which indicate further sales declines for the ‘big four’ supermarkets, haven’t come as a complete surprise.
Indeed, the declining sales faced by Tesco, Sainsbury’s, Asda and Morrisons have persisted over the last three months, according to Kantar.
Amid an overall market slowdown in the 12 weeks ended 30th March, Morrisons, which was the hardest hit among the ‘big four’, lost 3.8% of its market share. Tesco, Sainsbury’s and Asda lost 3%, 1.7% and 0.5% respectively.
Bearing in mind the current conditions, which continue to dampen consumer spending, there are no prizes for guessing the companies which have continued to gain market share. Yep, you guessed it: discount retailers.
Discounter, Aldi, enjoyed the strongest sales growth over the period – at 35%, and is now boasting an overall market share of 4.6%. Aldi’s compatriot, Lidl, also revelled in decent growth of 17% with a current market share of 3.4%.
In addition to the discounters, sales at Waitrose also grew (4.5%), and frozen food retailers fared well, too. Farmfoods now claims a market share of 0.8% having grown 37%, while Iceland’s sales grew 2.8%.
This latest news has, naturally, stirred some reaction from investors.
At time of writing, Sainsbury’s shares are down 1.7%; Morrisons down 1.2% and Tesco down around 1%.
The companies have certainly been hammered over recent times, on the back of these changes across the competitive landscape. And, despite the fact that the companies have embarked on initiatives to turn their fortunes, jitters unsurprisingly remain.
That’s fuelled further by fears of a potential price war, which would invariably eat into profit margins. Indeed, it’d certainly take a steely stomach to stay focused on the long-term potential.
Of course, it could be argued that the companies’ mid-long-term turnaround approach simply gives the discounters a chance to gain further momentum. Sure, that’d make reclaiming market share from them tougher, but if they execute effectively, it won’t be impossible.
That said, it’s worth noting that some have more firepower than others to push ahead with their strategy and ensure they deliver in the long-term.