Battle lines draw
As the ‘Top 4’ players in the grocery market come under increasing pressure, there has been much speculation that the UK supermarket sector may be poised to embark on a ‘price war’, the like of which has not been seen since the mid-1990s
Speculation has run rife in the press in recent weeks that a major ‘price war’ was about to break out in the UK grocery sector.
The pressures on many of the leading supermarket groups came to the fore during February and March as they continued to struggle in what has essentially become a flat market place.
Since the arrival of the economic downturn five years ago, many factors have conspired to put pressure on the market for food purchased via the traditional supermarket model.
Consumers have become increasingly ‘savvy’ in their passionate quest for ‘value for money’. Many more have become far more astute in seeking out bargains and adopting more promiscuous and ‘segmented’ shopping habits. This has been the major factor behind the astonishing growth of discounters, such as Aldi and Lidl but, perhaps more remarkably given the economic climate, Waitrose have grown strongly and continued to outperform the market in recent years.
Other factors, such as consumers wasting less food and turning to online food shopping in greater numbers, have also added to the pressures on the more traditional retail formats
Declining sales and profits at Morrisons attracted many headlines in recent weeks. It was also widely reported that Asda and Tesco were already sharpening their knives for the difficult battles ahead. And Sainsbury, who have performed impressively in the difficult market circumstances in recent years, declared their first ‘like for like’ decline in sales since 2005.
In his presentation at the City Food Lecture in February, Bookers CEO, Charles Wilson, referred to the supermarkets as the ‘tortoises’ rather than the ‘hares’ in the current food market and challenged food suppliers to invest in the growing sectors of the food market such as foodservice, convenience stores, discounters and online.
And, finally, BHS re-entered the food grocery market in March with the opening of its first convenience food hall within an existing BHS outlet – with the promise of a further openings in up to 150 of its retail estate.
All this speculation above will undoubtedly have caused a degree of trepidation further down the food supply chain – never a dull moment has become ‘business as usual’ in the UK grocery market.