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Supermarkets and Superstores Market Report 2003


Description: The UK grocery market was valued at an estimated £103.4bn in 2001. The market is led by a few companies that trade nationally through larger supermarkets and superstores. At the head of this league table are the 'big four' - Tesco, Sainsbury's, Asda and Safeway. Food sales are the core business of the supermarkets and spending on food in the UK has been growing year-on-year for over a decade. During the recession of the late 1980s and early 1990s, the market proved itself to be relatively recession-proof and subsequently spending has grown even more. The increase in travel and cookery media has gone some way towards educating consumers in food and encouraging them to be more experimental. The supermarkets and food suppliers have eased this transition through the provision of a wide and growing range of convenience foods, which take the pain and much of the time out of food preparation. This added value can then be retailed at a premium. One of the strongest features in the supermarket sector since the late 1990s has been the growth in the own-label offer. In order to target specific niches of food demand more successfully, premium, healthy eating, value and other sub-brands have been developed. Sub-brands based on regional and geographical cuisines have been taken a step further by some. Sub-branding has also been an important point of differentiation that has maintained and added to market values. The large chains have managed to boost their share of the retail grocery market over the past decade. Larger stores, wider product ranges, increased branding and competitive pricing have been some of the tools used to achieve this. However, the strength of the multiples' position in the food chain has given rise to concerns and, in 1999, the Competition Commission began an investigation into the sector. Overall, the major multiples were vindicated, although a new Code of Practice was introduced at the end of 2001 to clarify their dealing with suppliers. At the end of the 2001, a slowdown in the economy was widely forecast, and this will have an effect on the grocery sector. Food sales have proved to be relatively recession-proof in the past, although any reduction in consumer spending will have some impact. Non-food items are more vulnerable and the change in the product mix towards these products will have a negative effect. However, the supermarkets tend to operate at the discount and better value end of these markets, which are less open to downturns. In addition, the multiples are developing interests in the convenience sector, where factors such as price are less of a consideration. Overall, spending in the grocery sector will continue to rise in the short to medium term.




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