British grocery retailing has for decades been dominated by a small number of large and powerful retailers. That remains the case. Over the period however the number of firms involved has altered.
In the 1980s we talked about the “big 5”. This became the “big 4” when Morrisons and Safeway merged and has remained that since. Until this month when the Kantar market share data for Aldi (9.3%) overtook that of Morrisons (9.1% – the smallest of the big 4). Is this a new “big 4” or a smaller “big 3”?
Regular readers will know that I tend to look at such market share data on an annual basis and see long term change as more critical that monthly swings. This though seems a big moment. It has been coming for some time and as indicated in my latest annual check, the Aldi-Morrison gap was closing rapidly, but also the Aldi-Lidl combined market share was larger than either Asda or Sainsbury on their own (and this market share stagnation/erosion was one of the reasons why there was a proposal to merge the two four years ago, which was blocked by the CMA). This reflects the sea change in British grocery retailing since 2008 and the ongoing switch to discount and smaller formats from larger supermarkets.
The monthly Kantar data that showed Aldi overtaking Morrisons tells a particular story. We might, given inflation, expect large monthly sales growth figures, but the disparities are stark (YoY change, based on the last 12 weeks):
Lidl +20.7%, Aldi +18.7%
Others (Farmfoods etc) +11.6%
Iceland +5.8%, Ocado +5.2%
Co-op +2.7%, Asda +2.2%, Tesco +1.9%, Sainsbury+1.8%
Symbols/Independents -3.1%, Morrisons -4.1%, Waitrose -4.7%
Morrisons are having a bad time and the discounters are having a field day as the cost-of-living rises. It is hard not to see the latter trend continuing given the pressures on consumers (inflation still c10% and food inflation higher, with both predicted to rise further), though discounters, as all retailers, will need to reflect carefully on price rises and how much they are able to pass on of their own cost increases. In that regard the report in Retail Week this week states that Aldi are raising prices faster than other food retail stores, which shows the tensions and pressures for retailers and consumers. Nonetheless it is hard not to think that Lidl (7.1% market share in these figures) will also overtake Morrisons at their current rate and the gap from both discounters to Asda and Sainsbury will narrow.
Asda did the best of the “big 3” and this is being attributed to their expanded Just Essentials range (the replacement for Smart Price), though so successful has this been that they are introducing purchase limits for individuals (It seems as though reactions to the colour yellow were outweighed by the low price). Sainsbury have had increased pay again (as have other retailers) reflecting pressures in the labour market. With energy costs for businesses unclear and price inflation remaining, retailers are under extreme pressure (as are many consumers) and managing this is a new challenge for many.
Breaking my long term rule, these monthly Kantar data will be worth watching in the coming months as significant shifts in spending appear to be underway.
And a final thought; if Aldi is bigger than Morrisons and Lidl closing in, what would the CMA reaction be now to any merger amongst the previous “big 4”?