Despite growth in convenience and online retail, the big four grocers continue to struggle to maintain share in a competitive market.

The UK grocery market had barely caught its breath from the latest round of difficult trading statements from the big four when it was hit by further bad news. Data this week showed that the sector has slumped into decline for the first time since records began in 1994.

Kantar Worldpanel figures showed that overall sales fell 0.2% in the 12 weeks to November 10.

Food deflation is being accelerated by the price war ignited by the discounters, who have once more claimed market share at the expense Sainsbury’s, Morrisons and Tesco. Asda was the only one of the powerhouse grocers to maintain share – although its sales still fell in line with the declining market.

Kantar added to the misery by forecasting the grocery market is expected to shrink until the middle of next year, echoing comments by Sainsbury’s boss Mike Coupe last week that we should be braced for a sustained period of declining like-for-likes.

Since Tesco sent shockwaves through the industry with its first profit warning in 20 years in January 2012, grocery has faced significant structural change. But the events and negative statistics that have plagued it in the second half of this year point to a restructuring that is more profound than anything imagined two years ago.

Coupe revealed last week that up to 25% of Sainsbury’s estate would have underutilised space in the next five years. Waitrose boss Mark Price has suggested that supermarkets could start to close – he pointed out that in the past five years, 12% of non-food space has been taken out of the market while food space has increased by 3% to 5%.

“Grocery remains one of the most innovative and resilient sectors of retail”

Chris Brook-Carter, Editor-in-chief

It is a sentiment borne out by forecasts this week by Goldman Sachs that the big grocers must close one in five of their stores in order to return to profit growth.

Where the industry is eking out growth in convenience and online, there are as many questions as answers including how these channels are cannibalising other parts of the retail estate and the high costs involved in servicing customers through them.

But grocery remains one of the most innovative and resilient sectors of retail. From product to online, sourcing strategies to click-and-collect, the grocers have often led the way in seeking new ways in which to engage consumers.

Grocers will weather what Coupe has described as a “once-in-a-generation combination of cyclical and structural change in the industry”.

The businesses in the vanguard will be transformed in the process – undoubtedly smaller, but more agile, once more in growth, but operating on margins that are unlikely to ever again match the highs that fuelled a golden age of growth.

  • Chris Brook-Carter, Editor-in-chief