British grocery oligopoly
The British grocery/retail market is may be heading to a death match between the two leaders: Tesco and Asda. According to a BusinessWeek article ("Europe's Grocery War That's Not About Food" (10/20)03), the battle has come down to higher-margin nonfood articles. The kicker is that while Tesco is company that grew up in England, Asda is a branch of US retail megalith Wal-Mart. It's adding new stores rapidly. The question is, can any retailer contend with Wal-Mart for long?
So what happens when the Wal-Mart of America goes after the Wal-Mart of Europe? A classic battle of titans, right in the shopping centers of Britain. Wal-Mart-owned Asda Group Ltd. recently overtook J. Sainsbury PLC to become Britain's No.2 grocer. Now it's on a mission to knock Tesco from its perch.
Both companies have similar discount strategies, with a strong emphasis on the sale of such items as CDs to clothing to cookware.
Asda offers Tesco-like low prices. In fact, Tesco takes Asda so seriously that at its larger stores, the shelves are dotted with little cards that list the prices for goods -- and what consumers would pay if they were to shop at Asda or Boots [a drug chain] instead.
The context for this price war is the recent merger of two other grocery companies, William Morrison and Safeway PLC. Safeway (not a part of the US supermarket chain), the #4 grocery chain, went bankrupt, and while Asda, Tesco, and Sainsbury all vied to acquire it, anti-trust officials in Britain awarded it to the #5 grocery chain, Morrison, to make for a new powerhouse.
The other big story is the continuing decline of Sainsbury, which until 1995 was the UK's largest grocery chain, It recently slipped into #3 spot behind Asda, and seems to be dropping market chare fast. All three of its rivals have built their reputations as discount chains, and the notion of Sainsbury as the high-price alternative is hurting the company.
What is also remarkable is the extremely high concentration in the business in the UK, with 72.5% of the market belonging to four companies, a much tighter situation than in the US.
Grocery market share
Tesco 27.1%
Asda 16.9%
Sainsbury 16.1%
Morrison/Safeway 12.4%
Sept 2003 rankings, Source: The Guardian
