Supermarket Price Wars: A response to the rise of discount retailers

Grocery retail in the UK is dominated by four competitors. Recently there has been a surge of popularity in discount retailers, Aldi and Lidl, who are being seen as a threat to the 'big four' supermarkets. The big four are attempting to fend off this competition with price wars. This case study examines the structure of the UK market, the rise of Aldi and Lidl, and the response of the big four.

Scope

  • This case study details the development of the food and grocery retail market in the UK, and examines the structure of the market over time.
  • This case study looks at the rise of Aldi and Lidl in the market, and the impact they are having on the big four supermarket chains.
  • This case study looks at the response of the big four to the rise of Aldi and Lidl, and examines how price wars are impacting their businesses.

Reasons to buy

How has the structure of the UK grocery retail market changed over the years?

What impact has the recession had on the structure of the market?

What market conditions have led to discounters being able to thrive?

What impact is the growth of Aldi and Lidl having on the dominant companies in this market?

How are the dominant companies responding to the increased competition from discounters?

Companies mentioned

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Table of Contents

OVERVIEW

Catalyst

Summary

GROCERY RETAIL HAS DEVELOPED INTO AN OLIGOPOLY IN THE UK

End of rationing in the 1950s enabled growth of UK supermarkets

Market ...

OVERVIEW

Catalyst

Summary

GROCERY RETAIL HAS DEVELOPED INTO AN OLIGOPOLY IN THE UK

End of rationing in the 1950s enabled growth of UK supermarkets

Market has become increasingly consolidated

Sainsbury's spent many years as the market leader in the UK

Tesco dominates the UK grocery retail market

Asda overtook Sainsbury's in 2003 to become the second largest grocery retailer

Morrison's 2004 acquisition of Safeway led to it becoming one of the 'big four'

Market share of the big four has grown, while independents have declined

RISE OF DISCOUNTERS IMPACTING THE 'BIG FOUR'

Recession has led to a shift in consumer behavior

Market share of Aldi and Lidl has risen in recent years

The impact on the big four is evident

THE BIG FOUR RESPONDING WITH PRICE WARS

Price wars have traditionally been beneficial for the big four

New round of price wars are having a detrimental impact on the big four

CONCLUSIONS

The big four enabled the rise of discounters by focusing on price

Focus is going to have to shift from price

APPENDIX

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