A chain of independent and franchised shops has traditionally controlled the Italian food retail sector, currently the fourth largest in Europe with a market value of more than €95.8 billion.
But a weak economic environment is forcing small chains to rationalise costs while competitive interest from sophisticated foreign retailers increases market drive.
According to Fitch Ratings, the London-based international ratings agency, these factors are pushing marketplace consolidation.
They warn that existing smaller chains may be compelled to work closer with international firms or face acquisition, as multinationals are turning from other saturated Western European markets attracted by relatively low property costs and opportunities afforded by existing market fragmentation.
"Because Italy is a large country with one of the highest levels of GDP it appears like an attractive prospect to international food retailers," said Fitch's corporate director Giulio Lombardi.
"It's still a very disjointed market which makes it look, on paper at least, like a market fit for consolidation and acquisition."
And foreign interest has intensified in recent weeks as international retail giants bid for one of Italy's top four chains, Esselunga - the country's fifth largest food retailer, with net sales predicted to top €4.3bn in 2005.
Lombardi explained: "In reality it is a fractured sector and only names of a certain size are worth buying."
"The Esselunga chain is a one-off opportunity - no one really ignores this type of offer. This would be the best opportunity for a retailer to enter the Italian market, as most others are very small, operating in a slow-moving world."
Until recently Italy's grocery sector has been dominated by autonomous fragmented groups. Around 60 family-owned chains own a 17 per cent share.
And the largest independent national grouping, working under the Coop Italia banner, controls 30 per cent of the food retail market.
Over the years Coop Italia has worked to consolidate purchasing power and increase profit margins, maintaining their position through customer loyalty and local knowledge.
But each store remains distinctly individual, affected by disorganised regional variations of stock and fascias.
Now the Italian market is braced for a period of deep transformation - and smaller retailers will lose out unless they can improve their infrastructure and branding.
"The smaller chains will have to become more sophisticated. Their chances of survival are linked to their ability to upgrade themselves," Lombardi said.
But French groups Auchan, which already holds the number two position in Italy, and Carrefour, number three, currently maintain a 10 per cent share each and are both expected to increase expansion activity.
Wal-Mart, Delhaize, and the UK's leading player Tesco have also indicated interest in gaining a foothold in the Italian market through the northern Esselunga chain.
"There is far more potential for development in Italy, it is far less developed than [France, Germany and the UK]," said Mintel data analyst Richard Perks.
"But the country is in deep recession, and short-term statistics, which should be treated with some caution, indicate that food retailers in Italy were down 0.3 per cent in the seven months to July."
Until recently a large number of small homegrown companies have served Italian consumers, typically hindering entry by foreign investors who prefer to take over a mixed format of hyper- and supermarket stores and local convenience outlets.
And enduring economic instability has added to foreign traders' prudence.
But this trend is reversing as big name retailers realise that fragmentation and economic instability can work to their advantage - inevitably impacting small supermarket chains that cannot compete on the price, quality and selection that larger multinational companies offer.