EXECUTIVE

SUMMARY
SUPERMARKETS
UK, NOVEMBER 2015

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SUPERMARKETS, UK - NOVEMBER 2015

THE GROCERY SUPERSTORES ARE LOSING MARKET SHARE AND THE MAIN FOCUS OF THIS REPORT IS TO EXAMINE
WHY. WE THINK THAT THERE ARE UNDERLYING SOCIO-ECONOMIC CHANGES TAKING PLACE WHICH ALLIED
TO THE GROWTH OF THE HARD DISCOUNTERS, ALDI AND LIDL, IS LEADING TO GROWTH IN MORE FREQUENT
SHOPPING TRIPS AND SMALLER BASKET SIZES. THESE CHANGES ARE NOT REVERSIBLE IN THE FORESEEABLE
FUTURE AND WE THINK THAT THE UNDERLYING DECLINE IN SUPERSTORES WILL CONTINUE.
Richard Perks, Director of Retail Research

The market

FIGURE 1: CONSUMERS: STATE OF FINANCES, 2009-15

Consumer confidence has stabilised, even

though real incomes have been rising.
Source: Lightspeed GMI/Mintel

Inflation has been falling. The food

retailers are having to cope with deflation.
The main drivers for that are a succession
of good harvests, falling oil prices and the
strength of sterling. None of those are
likely to reverse in the short term and we
think there will be deflation in the market
for several months.
Spending on food and drink has held up
well, though in value terms it has fallen as
inflation has fallen.
Food retailers sales
Food retailers sales are expected to be
some 158 billion in 2015.
We forecast that growth will be muted
over the next five years as the growth in
convenience stores and hard discounters
is offset; perhaps more than offset
because of falling non-food sales, by the
decline in superstores.

Base: 2,000 internet users aged 16+

FIGURE 2: FOOD RETAILERS: BREAKDOWN OF SECTOR, 2015 (EST)

We estimate that food and drink account

for 69% of all food retailers sales and
that the superstores of the market leaders
account for just over half of all food and
drink sales.

Source: Office for National Statistics/Companies/Mintel

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SUPERMARKETS, UK - NOVEMBER 2015

Socio-economic changes

FIGURE 3: ALL FOOD RETAILERS: SALES, 2010-20

The major change in the market is the

growth in renting and the trend back
to living in inner cities. This is seen
most clearly in the proportion of people
renting their homes. The speed of this
development for what one would think of
as a long-term socio-economic trend is
unprecedented seven percentage points,
an increase of a quarter in just 10 years.
Prices
Following a complaint by Which? (a
consumer magazine) about supermarket
pricing practices, the Competition and
Markets Authority (CMA) produced a
report. It left open the possibility that some
retailers may be open to prosecution and it
went some way to agree with Which? that
some pricing practices are misleading.

Source: Office for National Statistics/Mintel

FIGURE 4: CHANNELS OF DISTRIBUTION FOR FOOD AND DRINK, 2014

The first result which could perhaps be

traced back to the report is Tescos relaunch
of its Price Promise (Brand Guarantee)
with any discount given directly at the till
rather than through vouchers.
Online
Online may attract a lot of media attention,
but it is still only 5% of food retailers sales. It
is growing steadily, by around 0.5 percentage
points of market share each year, but it is still
very small and we estimate that over 95% is
through the websites of the market leaders
(and specialists such as Majestic), if one
treats Ocado as an online arm of Waitrose.
Leading retailers
We make much in this report of the
beginnings of a decline in the superstores,
but they are still absolutely dominant in
the marketplace. We can see the growth
of Aldi and Lidl, but the majority of main
grocery shops are still done at one of the
Big Four and that will not change, even
though the trends in the market place
favour smaller, convenience stores and
that includes Aldi and Lidl.
The problems of the superstores are
evident in the sales per square metre
statistics. All have seen a decline with
Morrisons now almost 20% below its peak

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Source: Mintel

level and even the best performer (Asda)

4% below.
Market shares

M&S which are not included in the ONS

data). But their share has been slipping
and we estimate that in 2015 it will be
three percentage points below the peak
level of 2012.

The Big Four account for almost 60% of

sector sales (after adjusting for Ocado and

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SUPERMARKETS, UK - NOVEMBER 2015

Space allocation and product mix

We have surveyed the leading retailers
and used the space allocation data to
help estimate the retail product mix for the
majors. We estimate that food accounts for
just over 60% of sales of all of the market
leaders. Of the remainder, fuel is by far the
largest single element over 20% in the
case of Morrisons. Non-foods are important

as an attraction to the stores and as

products in their own right, but their share of
sales is small compared with food.

The consumer

the groups to have put on most growth

in the last year are Aldi and Lidl. Lidl
breached the 5% penetration level for the
first time this year.

Tesco dominant
Tesco still attracts more main shoppers
than Asda and Sainsburys combined, but

FIGURE 5: LEADING FOOD RETAILERS: SALES MIX, 2014

Note: Food includes drink

Source: Mintel

FIGURE 6: RETAILER MOST MONEY SPENT IN DURING THE LAST MONTH, AUGUST 2015
In a typical month, which grocery retailer do you think you spend the most money with? Please select one.

Base: 1,823 internet users aged 16+ who are responsible for grocery shopping
Source: Lightspeed GMI/Mintel

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SUPERMARKETS, UK - NOVEMBER 2015

Main shop vs convenience

While we know that superstores are losing
market share, only 10% of the population
only do top-up shopping and they are
predominantly older and from lower socioeconomic groups. But this chart clearly
illustrates the trend in the market.

What do people want from their

supermarket?
In this question people could choose
five factors, though they had to list them
in order of importance. Lowest prices
received the highest response, though

overall convenience (in the sense of being

the closest store on one that is passed
regularly) got more. After those two,
promotions, availability (products being in
stock) and speed of getting in and out are
the most important.

FIGURE 7: PROPORTIONS OF GROCERY SHOPPERS WHO HAVE CHANGED THE WAY THEY SHOP IN THE LAST YEAR,
AUGUST 2015
Do you think you are doing more, the same or less of the following types of shops compared to a year ago? Please
select one per type of shop.

Base: 1,823 internet users aged 16+ who are responsible for grocery shopping
Source: Lightspeed GMI/Mintel

FIGURE 8: MOST IMPORTANT FACTOR IN CHOOSING WHERE TO SHOP, AUGUST 2015

Which of the following, if any, best describes why you spend most at the following grocery retailers? Please select up to 5
and rank in order of importance where 1 = most important and 5 = least important.

Base: 1,823 internet users aged 16+ who are responsible/jointly responsible for grocery shopping
Source: Lightspeed GMI/Mintel

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SUPERMARKETS, UK - NOVEMBER 2015

Key factors by supermarket used

Looking at what those who use a particular
store think is most important highlights
some of the retailers strengths and
weaknesses. It is an indictment of Tesco
at the moment that its highest rating is for
its loyalty card. Sainsburys is highly rated
for the quality of its fresh products. Asda is
rated for low prices, but its profile is very
similar to that of Aldis and it should be
doing more to differentiate itself.

FIGURE 9: OVERALL NET SATISFACTION WITH MAIN RETAILER BY CRITERIA,

AUGUST 2015
To what extent are you satisfied or dissatisfied with each of the following at [the
retailer you spend most money with].

Satisfaction
A similar picture emerges from asking
people how satisfied they are with key
aspects of supermarket operations. In
general people are reasonably satisfied
with their usual supermarket, because if
they were not they would go elsewhere.
But they are more satisfied with some
aspects than others.
One can go on to examine how retailers
perform on each measure. Sainsburys
does well on fresh food, but Asda
does worst and Aldi comes second to
Sainsburys. Aldi outperforms Lidl on all
the key measures. Tesco does best on
speed at the checkout, but is beaten by
Aldi there as well.
Opening hours

Base: 1,823 internet users aged 16+ who are responsible for grocery shopping
Source: Lightspeed GMI/Mintel

FIGURE 10: ATTITUDES TOWARDS SUNDAY OPENING, AUGUST 2015

The Chancellor has proposed allowing
local councils to relax trading hours, so
we asked people whether they would like
that. The reaction was overwhelmingly in
favour.

Thinking about grocery retailers, to what extent do you agree or disagree with
the following statements? Please select one option per statement.

Base: 1,823 internet users aged 16+ who are responsible for grocery shopping
Source: Lightspeed GMI/Mintel

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SUPERMARKETS, UK - NOVEMBER 2015

Pricing

What we think

We also asked about supermarket pricing

in the light of the Competition and Markets
Authority (CMA) report. Two conclusions
stand out people want everyday low
pricing ( EDLP) (in spite of the evident
popularity of promotions) and people think
that supermarkets charge much the same
price anyway.

Superstores are still the dominant force in

the food retail market and they will continue
to be so. They face an uncomfortable few
years until their market share stabilises,
but that will happen in due course. There is
some evidence to suggest that the changes
in trading style at the hard discounters has
led to a step change in their market share
and over the next few years growth will slip
back to be more in line with store openings.

Non-foods
Theres no doubt that non-foods are
important and half of the sample said that
they sometimes make a special trip to the
supermarket just for non-foods. But it is
clear from the key factors that non-foods
come well down the list of priorities in
choosing a supermarket.

The present focus on price is self-defeating.

The cost base of the superstores does not
allow them to compete head on with the hard
discounters. The future of the superstore
lies in capitalising on what they are best
at breadth of range, great service and
a more pleasant shopping environment.
It is significant that the worst performer at

present is the most price focused Asda. The

consumer research hints at why this might be
so satisfaction is weak in the quality of fresh
food, store dcor and cleanliness, speed at
the checkout and availability. All these are
areas where Asda could have cut costs in
order to finance lower prices.
On the other hand Tescos performance
is improving and all these areas that Asda
is weak in are known to be the focus for
investment at Tesco, though the effects
of that do not yet show up clearly in the
consumer research.
We think that the most important factor for
food retailers is to offer value for money.
That is what Aldi and Lidl have in common
with M&S and Waitrose and those four are
the best performers in the marketplace at
present.

FIGURE 11: ATTITUDES TOWARDS GROCERS PRICING, AUGUST 2015

Thinking about grocery retailers, to what extent do you agree or disagree with the following statements? Please select
one option per statement.

Base: 1,823 internet users aged 16+ who are responsible for grocery shopping
Source: Lightspeed GMI/Mintel

FIGURE 12: ATTITUDES TOWARDS BUYING NON-FOODS AND SERVICES FROM GROCERY RETAILERS, AUGUST 2015
Thinking about grocery retailers, to what extent do you agree or disagree with the following statements? Please select
one option per statement.

Base: 1,823 internet users aged 16+ who are responsible for grocery shopping
Source: Lightspeed GMI/Mintel

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