Executive Summary

The grocery multiples are fiercely competitive, with J Sainsbury, Tesco, Safeway and ASDA all fighting for market share. Additionally, low-cost bulk grocery retailers such as Kwik Save and Dales (ASDA's low-cost superstore chain) have captured market share. At the other end of the market, high-end grocery retailers such as Marks & Spencer are also retaining competitiveness.

Sales by supermarkets and superstores reached £62.11bn in 1997 with annual growth above that of the retail price index (RPI).

Increasing concentration of grocery retailing in the hands of the big players has meant tough times for the smaller operations. Sainsbury's, Tesco, Safeway and ASDA have increasingly captured customer loyalty leaving little for the rest. Kwik Save, Iceland and Wm Morrison Supermarkets have all seen their market share eroded by the key players in 1996/1997. Similarly, superstores, with their ever-widening range of purchases, have become convenient one-stop outlets for groceries, personal care products, electrical goods, music and books. Retailers such as Woolworths, WH Smith, Boots and Superdrug have all seen sales going to the superstores in the last year.

The major reason for this has been the success of the loyalty cards issued by the leading supermarkets. After a flurry of launch publicity, loyalty cards have become part of the British landscape, with most adults having one or more cards, and the supermarkets using the cards to leverage sales and launch banking, insurance and travel services. All this adds up to highly sophisticated marketing from the supermarkets and superstores.

Supermarkets have become increasingly diverse in the 1990s, an increasing number now housing pharmacies, dry cleaners, cafés and crèches alongside an increasing array of food and non-food goods, both branded and own label.

By the year 2001, total grocery sales will reach over £80bn, of which over £75bn will be accounted for by supermarkets and superstores.

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