Supermarkets are trying to regroup and it isn’t easy. Once they were top retail dog in any town, and your property was worth more depending on how close it was to the nearest big grocer.
But that easy supremacy has been over for a while and the performance of the sector is down and difficult to predict.
For a start, in the UK what customers want has changed. They like shopping online, workers like nearby smaller outlets. A rising over-60s demographic means that there is less demand for a big shop.
Shoppers are more health aware, they like healthier food, organic and exotic produce. They like value-added items such as cut up fruit or salads in a plastic box. They like more ready prepared and ready to eat foods.
The slings and arrows of supermarket misfortune
More people shop online so those-out-of-town grocery outlets are less visited. Online shopping took a while to become established but now even M&S has indicated it plans to offer online food for its customers.
In the UK supermarkets battle against a decline in sales, unexciting returns and dividends, as well as increased competition thanks to the recent thrust of cheaper chains such as Lidl and Aldi.
The market share of these two German firms together has risen by 80% since mid-2013.
Reasonable food prices, indeed cheap for the consumer for so long, are now rising with inflation.
According to US market researcher Kantar Worldpanel, British supermarkets recorded their highest sales growth in five years at 5% over the last 12 weeks to mid-June largely on the back of growing inflation. Morrison did best of the Big Four with a 3.7% rise.
However, greater sales on the back of inflation is two-edged because shoppers’ incomes haven’t risen in the same way and they may cut back on groceries or call on Aldi and Lidl.
The oligopoly – how it breaks down
Unlike like sectors where there are plenty of players, there are just a handful among supermarkets. They are described by economists as an oligopoly where a small number has a large majority share (as opposed to a monopoly).
Do you remember Bejam? Carrefour? Gateway? Presto? Kwik Save? Somerfield? They are some of the many supermarkets in the past 40 years that have been swallowed up.
Booker, owner of smaller chains like Londis, Budgens and Premier stores, looks set to be bought by Tesco £3.7bn. The Competition and Markets Authority is checking out the deal.
The old style Co-op still has lots of stores
The venerable, and some say vulnerable, Co-op grocery chain, dating back to 1844 has a distinctive ethical stance.
In 1948 the Co-op was the first in Britain to set up a full self-service store in Southsea, Portsmouth. Although it has around 2,800 stores, it has had lots of problems.
The importance of market share
In the UK the Big Four’s market share was mid-June: Tesco (27.8%), Sainsbury’s (16%), W M Morrison 10.6%. All are quoted. Asda (15.1%) is part of the quoted US Walmart. Aldi took 6.9% share and Lidl 5%.
Then there are the two popular upmarket chains: unquoted John Lewis’s Waitrose, and in addition to its in-store groceries, the quoted Marks & Spencer continues to expand its M&S Simply Food.
The unquoted German kids -on-the block Aldi and Lidl are a threat to all the supermarket companies. In 2015 Aldi overtook Waitrose as the sixth biggest supermarket. Lidl is closing on Waitrose for 7th place.