Retail analyst Verdict predicts that the growth of Tesco's Express format means the supermarket will take the lead next year. Tesco is joint second at the moment, together with Musgrave, the owner of Budgens and Londis. Each has a 5.4 per cent market share.
Verdict Research retail analyst Nick Gladding said: 'The arrival of the major grocers in the neighbourhood arena is driving improved sector performance, as players transfer their expertise in superstore retailing, enhance ranges and make prices more competitive.
'Existing convenience store operators have been forced to fight back by increasing their own standards in order to remain competitive. What's more, with Tesco's formidable track record of growth, it is hard not to see Spar being forced to relinquish its crown during 2006.'
According to the report, Neighbourhood Retailing 2006, Tesco has achieved the largest market share increase of any retailer in the neighbourhood sector this year.
The research estimates that Tesco increased its VAT-inclusive neighbourhood sales by£200 million to£2.4 billion this year - lifting its market share by 0.4 per cent to 5.4 per cent.
According to the report, the retailer has made considerable inroads into local shopping since entering the market five years ago, as it built share through a combination of strong organic growth of its Express format and acquisition-based growth.
However, the rapid growth of Tesco has concerned the Association of Convieniece Stores, which believes competition from the big grocers is hurting independent retailers.
In November, the Office of Fair Trading decided to review its decision not to refer Tesco to the Competition Commission.