Archive: Shopper needs drive long term retail change

Published 15 October 14

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Over the last few years there has been much focus on the rise of Aldi and Lidl, the ‘hard discounters’. Having entered the UK market in the 1990s, the discounters have recently been reporting double-digit sales growth. Yet a look back over the past 40 years demonstrates how market shares have been changing. There has been rapid expansion in the Top 4 and as their total market share has grown, so has their relative strength.

Retailer shares long term

In the GB retail market, currently 73% of cheese and 65% of milk is sold through the Top 4 retailers. Retailer gross margins for milk and Cheddar, as estimated in the DairyCo Supply Chain Margins report, have been on an overall upward trend for more than a decade. In the 2010/11 milk year, the retailer gross margin for milk was one third of the total retail price – up from 23% ten years earlier, with a similar increase observed in the retailer gross margins for mild Cheddar.

Heightened retail competition, particularly from the discounters, appeared to have an impact on retailer margins in the 2013/14 milk year. The estimated gross margin for mild Cheddar experienced the largest year-on-year fall in percentage terms since 2007/08, as it was squeezed by the combination of retail competition and higher wholesale prices.

Changing shopper needs have shaped this development and more recently, the large weekly shop has started to fall out of favour, with shoppers instead making smaller, more frequent ‘top-up’ shops at convenience stores. IGD expects this trend together with internet grocery shopping to accelerate over the next five years.