Sales within the UK grocery retailing market increased by 4% through 2012, hitting a total value of £159.4 billion.
The UK grocery retail landscape is changing with a particular move towards convenience stores which is driving growth, as British consumers look for more convenience, less food wastage and better value for money. Convenience stores are springing up all over the country, generally in areas that are poorly served by larger sized supermarkets.
Each of the “Big Four” (Tesco, Asda, J Sainsbury and Wm Morrison) are driving this growth with J Sainsbury planning to open between 50 and 100 convenience stores a year, and Tesco announcing 150 openings this year. The convenience boom has turned around Tesco’s fortunes in one year. These companies are engaged in such activity as their margins are far greater in the convenience category, but competition is tight and is dominated by loss-leading discount offers.
Convenience is changing the way in which the British shop, in that convenience stores, due to their strategic locations, are on more street corners and town centres than larger grocery stores.
Cost is one of the overriding concerns in grocery retailing in the UK, as inflation continued to rise above target throughout 2012.Prices at grocery retailers are still rising rapidly, which is continuing to put additional financial pressure on consumers.
This is particularly apparent in staples, which have been affected by poor weather patterns throughout the UK in 2012, and by rising import costs. As a result, consumers are becoming more sceptical of supermarket multi-buys and so-called “bargains”.
Tesco remains the top player in grocery retailers the UK, with a 24% value share in 2012. However, 2012 was the first year in which Tesco lost value share following an unimpeded run to the top of the chain of grocery retailers. At some point, this was expected as the competition from the others caught up with the market leader.
Most importantly, Tesco failed to innovate with the same intensity as its competitors. While leading the convenience store experiment, all the other main chains are now catching up and often there is direct competition on high streets between Tesco and one of the other leading supermarket chains.
Through to 2017, convenience stores are expected to see the strongest and fastest constant value compound annual growth rate (CAGR) of 4% to 2017. As the top grocery chains in the UK are moving into convenience stores at a high rate, it is expected that this channel will see strong growth in the medium term.
For more information on the UK grocery retailing market, see the latest research: UK Grocery Retailing Market