Wm Morrison most at risk from discount stores, research shows

Of Britain's big four supermarkets, Wm Morrison is the most exposed to the no-frills German discounters and the growing ranks of pound and bargain shops, according to new research.

The Local Data Company, a retail information provider, found that nearly half (49 per cent) of Morrison's 500 or so stores were in towns with an above average number of discounters.

Those close to Morrison's stores included the German supermarkets Aldi and Lidl, the frozen food specialists Iceland and Farmfoods, and pound and bargain stores such as B & M.

Tesco faced the second highest level of competition, with 41 per cent of its stores in towns with an above average number of discounters, according to the analysis.

For Asda and J Sainsbury, the two supermarkets least at risk from the discounters, the figure was 35 per cent.

"For the last five years the discounters have essentially been ignored as a sideshow, while the big four have slugged it out among themselves," said Matthew Hopkinson, director of the Local Data Company.

"During this time of fighting among the big four, the network of discounters has grown massively. The consumer trends have gone in their favour and therefore the big four have not only lost out to each other, but in the wider market."

The Local Data Company's findings correlate with the performances of Britain's big supermarkets, underlining the pressure on the grocers from the march of Aldi and Lidl across the UK. Both companies, the British arms of German retailers, have set out aggressive expansion plans for the UK. Other discount formats, such as some of the pound and bargain stores, have begun adding groceries to their ranges.

According to industry data from Kantar Worldpanel and Tesco were the worst performing of the big four supermarkets over the past 12 months, followed by Morrison.

In contrast, Sainsbury's and Asda's sales have held up, despite the overlap between Asda's customer base and that of the discounters.

Morrison and Tesco did not comment. But people close to Morrison indicated that the situation reflected current locations, rather than where the discounters planned to open stores in the future. People with knowledge of Tesco also pointed out that as Britain's biggest grocer by market share, with stores across the whole country, it was bound to have a significant overlap with competitors.

The findings come days after Sainsbury said it thought Aldi and Lidl were "saturating" in the UK, because they were reaching the limit of how much extra business they could squeeze out of their existing stores.

They also coincide with evidence from Kantar Worldpanel that the growth of Aldi and Lidl is slowing. However, both are expanding faster than the big four supermarkets, only one of which, Morrison, increased its sales over the past three months.

The Local Data Company also found that the growth of the discount retailers over the past five years had outstripped that of traditional supermarkets, excluding their fast-growing convenience store estates. The number of discount stores has increased by almost 50 per cent over the past five years, with 1,367 units opening during that period. Traditional supermarkets added 582 units, excluding convenience stores, an increase of just over a third.

In 2014, discount stores grew twice as quickly as the big four supermarkets, adding an average of 33 units each; the big four supermarkets added 16 units on average, excluding convenience stores.

According to the Local Data Company, Queenborough, on the Isle of Sheppey in Kent, has the highest density of supermarkets and discounters in the country, calculated by the ratio of population to stores, with 852 people per unit. In contrast, Shoreham-By-Sea, in West Sussex, has the lowest density of stores and discounters, at 48,487 people per unit.

Over the past decade, Britain's big supermarkets have been engaged in a frantic race for space, opening stores to prevent rivals colonising areas of the market. However, over the past three years they have all scaled back their ambitions, hit by a combination of overcapacity and a fall in the amount of food being bought - for the first time in living memory.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation