A recent report conducted by Moody's has led to questions on whether the Big Four grocers are losing their dominance and becoming part of the ‘big six' in the UK grocery market?
It’s anticipated that the Big Four's share of the UK grocery retail market is to fall by 4% by 2020. While rival discount retailers Lidl and Aldi are taking a larger slice of the UK market as they continue to open new stores across the country. Tesco, Morrisons, Asda and Sainsbury’s margins are unlikely to recover over the next 12 to 18 months due to further price cuts and ongoing like-for-like sales declines.
Analysts at Moody's noted that Aldi and Lidl continue to present their success through gaining around 1% market share every year supported by their store expansion plans. This counteracts the Big Fours' closures of unprofitable stores in order to save costs.
Although greater price slashes have encouraged larger amounts of footfall, this has not aided Sainsbury's, Morrisons and Tesco's profitability. With the exception of Asda, it has been suggested that none of the other three Big Four players will be able to engage in many more rounds of price cuts due to their limited financial capacities.
“We expect Aldi and Lidl’s combined share of the UK market to reach 12%-15% by 2020. Although the discounters’ sales densities have caught up with the Big Four retailers, Aldi and Lidl could continue to gain around 1% market share every year supported by their store expansion plans at a time where the Big Four selectively close unprofitable stores in order to save costs”, said Sven Reinke, Sven Reinke VP and Senior Analyst at Moody's.
“However, the UK’s economic growth, rising real wages and improving consumer sentiment could support the Big Four's gradual recovery from fiscal 2016/17”, added Renkie .