Discounters to Take Bigger Bite From U.K. Superstores, IGD Says

The percentage of U.K. grocery shopping done at the biggest stores will slump in the next five years as a shift toward discounters, online providers and convenience shops gathers pace, an industry researcher said.

Spending at British superstores and hypermarkets will fall to less than 35 percent from more than 42 percent now, IGD predicted, potentially adding to pressure on store operators such as Tesco Plc (TSCO) and Wal-Mart Stores Inc. (WMT)’s Asda to compete with upstart rivals.

The researcher’s projection would represent an accelerated shift in U.K. shopping habits as more Britons turn to budget stores such as Aldi and Lidl, online retailers and convenience outlets. The country’s discount grocery market is set to double in size by 2019 to 21.4 billion pounds ($36.5 billion), according to IGD.

“While most food and groceries will still be bought at larger supermarkets and hypermarkets in five years, they are becoming less popular,” IGD Chief Executive Officer Joanne Denney-Finch said in a statement. “Shoppers now expect grocery retailing to organize itself around their lives rather than building their routines around store opening hours.”

Total spending at superstores will drop to 70.8 billion pounds in 2019 from 73.7 billion pounds in the year through April 2014, even as the total outlay on groceries increases 16 percent to 203 billion pounds, IGD estimated.

After years of store expansion, Tesco and competitor J Sainsbury Plc (SBRY) are slowing the pace of openings, marking the end of a space race that defined the industry for two decades. The shift is a function of consumers having more options and placing greater emphasis on price and convenience.

Declining Sales

At Tesco, the U.K.’s biggest grocer, sales declined 3.3 percent in the 12 weeks ended May 24, while its market share dropped to 28.2 percent from 29.5 percent a year earlier, researcher Nielsen Holdings NV said June 5. Aldi and Lidl’s sales during that period soared 33 percent and 23 percent, respectively.

Tesco Chief Executive Officer Philip Clarke asked shareholders last week for more time to complete “radical” changes, from altering shop formats to lowering prices. Asda, Sainsbury and Wm Morrison Supermarkets Plc (MRW) are adapting similar measures -- including price cuts -- to hold on to market share.

Half of British shoppers used food discounters in the last month, compared with 37 percent in 2011, according to IGD.

Discounters will take 10.5 percent of grocery spending by 2019, up from 6.2 percent now, the researcher said. The online shopping proportion will rise to 8.3 percent from 4.4 percent, while convenience will account for 24 percent of the market, up from 21 percent, the researcher predicts.

TSCO LN <Equity> CN SBRY LN <Equity> CN MRW LN <Equity> CN WMT US <Equity> CN

To contact the reporter on this story: Paul Jarvis in London at pjarvis@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net David Risser, Thomas Mulier

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.