This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The ‘big four’ UK supermarkets – Tesco, Sainsbury’s, Walmart Stores-owned Asda, and Wm Morrison supermarkets, had it their way for more than two decades, fighting it out among themselves to capture huge shares of the UK grocery market. But the financial crisis changed everything by making consumers incredibly price driven. This meant German discount chains Aldi and Lidl soared in popularity and it ushered in years of grocery price deflation that prompted a margin-sapping price war in the sector.
Separately, consumer shopping habits are changing fast. The UK is experiencing one of the fastest shifts to online shopping of any country in the world, and that’s brought in new entrants like Ocado and US giant Amazon. At the same time, a trend of shopping more frequently for less has meant that the big box stores of the ‘big four’ are becoming less visited. The generic offerings in those stores is also proving less popular, as some shoppers increasingly demand variety and novelty.
All this has put the big-four on the back foot. Tesco is focused on trying to fix its ‘core’ UK retail business, retreating from multiple other geographies and business lines after an epic failure of supply agreements accounting. Asda has gone from being a key driver of new ideas for Walmart to being its sick business. Morrisons, the smallest of the four, has been struggling on every level with its lack of online and convenience store presence.