Tesco's share of the UK grocery market, according to till roll data analysed by TNS Superpanel, increased to 28.1 per cent in the 12 weeks to 18 July, with an 11 per cent increase in turnover despite widespread price cuts, validating the company's Every Day Low Price (EDLP) stance.
Tesco and the other major EDLP operator in the UK (Asda) have been systematically cutting prices ahead of a perceived threat from Safeway as Morrisons works to bring its prices down into line with those of its main rivals. But the TNS data shows that while the Yorkshire-based retail group continues to outperform all its rivals - sales at the Morrisons fascia grew by 16 per cent during the period - it is still struggling to contain the flood of customers deserting Safeway, with the result that combined sales from the two fascias were flat and the group's market share fell to 13.9 per cent from 14.7 per cent.
"It is only to be expected that the Safeway share will decline as store conversions to the Morrisons fascia get underway, but the fact that the combined share is declining increases the urgency of reversing the situation and establishing Morrisons as a national retailer," commented Edward Garner, communications director, TNS Superpanel.
Nonetheless, data from analysts Goldman Sachs suggests that Safeway is beginning to close the pricing gap with the EDLP operators. under Morrisons' ownership, the price differential between Safeway and Asda (the cheapest UK grocer) has reduced from 25.6 per cent in February to 9.4 per cent in July on a non-promotion adjusted basis.
Asda improved its situation slightly in the 12-week period, with sales up 7 per cent and market share up marginally to 16.5 per cent, while Sainsbury's lost ground, seeing its share fall from 16.3 per cent in 2003 to 15.5 per cent this year - although TNS Superpanel noted that this was a slight increase compared with the decline exhibited in the previous three 12-week periods, a result of price cutting activity.
Waitrose, meanwhile, put in an excellent performance, lifting its sales by 9 per cent and its market share from 3.1 per cent to 3.2 per cent as a result of extending its store portfolio by 19 outlets (acquired from Safeway). The full impact of these new stores is still be felt, however, and the premium food retailer is expected to grow its share further despite the increasingly price-focused activities in the rest of the market.
Among the smaller chains, Waitrose is a clear exception, with Somerfield, Iceland and Budgens all losing ground during the period. Somerfield continue to struggle with its Kwik Save discount unit - whose raison d'être is being increasingly obscured by the aggressive pricing of the multiples - which saw a 9 per cent drop in turnover. Iceland's recovery is still taking too long, with the chain's sales falling 5 per cent during the period despite more new-style stores being opened, while the Budgens convenience store group saw its sales fall 11 per cent as the multiple players tightened the screw in the high street market.
Ironically given Kwik Save's continuing woes, the no-frills discount chains from the Continent gained substantial ground during the period, with Netto sales up 6 per cent, Lidl ahead 21 per cent and Aldi 7 per cent.