Pair are closing in on Tesco

Apr 1 2009 by Iain Laing, The Journal

ASDA and Morrisons appear to be gaining ground on supermarket sector leader Tesco’s dominance as shoppers seek bargains in the face of rising prices.

A late Easter and consumer focus on cost has kept growth in the supermarket industry muted in the first months of the year, according to separate studies by industry researchers TNS Worldpanel and Nielsen.

Both reports show Tesco saw its slice of the supermarket sector slide in a continued retreat for the grocer, which has seen rivals Asda and Morrisons encroach on its market share.

The TNS data also showed that firms are increasingly passing the cost of a weaker pound on to consumers as grocery price inflation rose to 9.3% for the 12 weeks to March 22, compared with 8.7% seen four weeks ago.

Both TNS and Nielsen said consumers were becoming more sensitive to prices, with more turning to own-brand products.

Chris Longbottom, director of TNS Worldpanel, said: “Shoppers trading down to lower-priced products, especially within the retailers’ own label ranges, is the main way they are seeking to contain this.”

The figures come in the wake of Tesco’s worst Christmas in almost 20 years, with like-for-like sales growth of just 2.5%.

TNS research suggested its market share was down to 30.4% in the 12 weeks to March 22, from 30.8% in the same period last year. It was below the sector average growth rate of 5.8%, with a 4.3% rise. Asda increased its slice of the supermarket sector to 17.5%, while Morrisons rose to 11.8%.

Both supermarkets grew at a year-on-year rate well above the industry average, with Asda rising 8.5% and Morrisons up 7.2%. Sainsbury’s retained its 16.1% share with steady growth of 5.7%. The Nielsen data painted a similar picture, with Tesco losing out to gains for Asda and Morrisons.

It suggested sales growth for the sector as a whole had slowed to 2.7% in the 12 weeks to March 21 compared with the same period last year, with Tesco’s market share down to 27.6% from 28%.