UK grocery gets tougher

The growth rate of grocery sales in the UK is in decline. The most recent market share figures from TNS Worldpanel show that the UK grocery market grew only by 3 per cent in the 12 weeks ending August 12. By contrast, in the preceding 12 week period ending May 20, 2007 the growth rate showed a three year peak of 6 per cent. According to a TNS statement, the climate in the UK grocery sector is impacted by increased price competition.

Especially Tesco and Asda are competing on price and TNS refers to Tesco’s ‘Swingometer’ advertising – instore bill boards that show competitors’ products that are priced higher than at Tesco’s – as a prime example. Furthermore, Tesco offers its customers a tool dubbed ‘Price Check’ to compare prices between Tesco and its rivals Asda, Sainsbury’s and Morrison’s.

Despite the shrinking market growth, UK’s top 3 retailers Tesco, Asda and Sainsbury’s outperformed the market and account now for nearly 65 per cent of the UK grocery market. The discounters Aldi and Lidl were growth leaders in the UK’s tough market climate with growth rates of 10 and 9 per cent respectively. The hard discounter Netto by contrast, only managed to match the average 3 per cent market growth.

Somerfield is the main loser with a sales decline of 8 per cent, reducing the chain’s market share to 3.9 per cent (a year ago it was 4.4 per cent). Somerfield is owned by the property tycoon Robert Tchenguiz, whose consortium has also shown interest in acquiring Sainsbury’s. TNS refers to Somerfields owners who hope to improve the chain’s situation by refinancing and a store acquisition plan.