Although Alliance Boots retains the top spot, with a 26 per cent market share last year, its share advanced only 0.4 percentage points, while Tesco - the number two - advanced 5.3 points to claim an 18.2 per cent slice.
Morrisons' entry into the top five led to the ousting of Superdrug, which slipped into sixth position, Verdict's UK Health and Beauty Market 2007 report revealed.
Verdict said that the bid interest in Boots was 'not helpful' because it diverts the retailer's attention away from retaining and extending its position.
'It continues to have a lead over Tesco, but needs to capitalise on its merger with Alliance to leverage its health credentials and its brand trust without delay,' Verdict noted.
Superdrug lost 1.4 points of market share. Its conversion of sister chain Savers outlets to the Superdrug fascia would be important to retaining its position, Verdict said.
However, the report cautioned: 'Morrisons is committed to expanding its health and beauty offer much further, so while it may lose a place in the rankings short term, we expect it to continue gaining share of the health and beauty market.'
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