Analysis of the Uk Grocery Retail Industry

Analysis of the UK grocery retail industry

Table of contents

Page

1.0 Introduction 3

2.0 Terms of references 3

2.1 The question 3

2.2 Methodology 3

3.0 Identification of main competitors 3

4.0 Assessment of relative market share 3

5.0 Relative significance of each competitor 4

5.1 Tesco 4

5.2 Sainsbury's 5

5.3 ASDA 6

6.0 Potential for each competitor to capitalize on Internet technologies 7

6.1 Tesco 7

6.2 Sainsbury's 7

6.3 ASDA 7

7.0 Potential threat on new entrants into the retail sector 8

8.0 Conclusion 9

9.0 Bibliography 10

Figures:

Figure 1. Market share 4

Figure 2. Sainsbury's mission 5

Figure 3. Porters Five Forces model 8

1.0 Introduction

The Authors has conducted this report to inform a North American retail group about the UK grocery retailer of the condition of the sector. The report will present an analysis on the three largest grocery retailers to help the North American group to have a clearer understanding about the market in Britain.

2.0 Terms of references

2.1 The Question

The Authors have been assigned to analysis the retail grocery sector in the UK, the following statements will be answered; identification of the main competitors, assessment of relative market share, relative significant of each competitors, potential for each competitor to capitalise on internet technologies and potential threats of the new entrants into the retail sector.

2.2 Methodology

This report has been conducted by using secondary source in form of textbooks, Internet, journals, annual report and a video. The main resources of information were taken from Internet and the annual reports for Tesco and Sainsbury's. This has provided the writers with a clear understanding of the UK retail grocery market.

3.0 Identification of main competitors

According to the internet site Kamcity (2003) which have conducted a research on the UK grocery retailers, the five largest grocery stores in 2001 was as followed;

1. Tesco

2. Sainsbury

3. ASDA

4. Safeway

5. Somerfield

The Authors have decided to focus on the top three of the largest grocery stores and these will be examined throughout this report.

4.0 Assessment of the relative market share

The approximate value of the food retail market is Ј65,3bn in the UK. Of them 16,5% belongs to Tesco who has the largest market share (Tesco, 2003). At second place comes Sainsbury's who has 11,6% market share, ASDA has 9,6%. The five largest grocery retailers have 38,9 % of the total market, see figure 1.

Figure 1. Market share

(McGregor 2002)

5.0 Relative significance of each competitor

The UK is a country where many grocery retailers operate. The three largest retailer of the market will now be described in more detail.

5.1 Tesco

Sir Jack Cohen founded Tesco in 1924. He used his gratuity from his Army service in the First World War to start selling groceries in London East end market in 1919. The brand Tesco first appeared on packets of tea in the 1920s. The first store was opened in 1929 in Burnt oak, Edgware.

Tesco is the UK's biggest retailer chain who sells everything to satisfy customers' needs such as books, grocery, household equipment, flowers, wine etc. (yahoo finance 2003) Tesco have stores in UK, republic of Ireland, France, Hungary, Poland, Czech Republic, Thailand, South Korea and Taiwan. Through these stores they employ 260 000 people which 65,000 of these are employed overseas that giving them access to a population of 280m across 10 markets. Their goal is to create 21 000 new jobs in the coming year. Their main market is in the UK where 55 new Tesco stores where opened in 2002, which results in 729 stores now. Their profit in 2002 was Ј 1,221m before tax compared to previous year when the result Ј1,070m.

The Tesco group are also offering a non-food division and retailing services. The non-food division consists of their own opticians. In order to make it easier for customers for that reason they can buy both their grocery and medicine at the same time. Tesco are also the owner of gas stations. The retail services are offering