Who won the supermarket battle of 2012?
Filed under: Shopping & Deals
For Tesco it was a year to forget. Britain's largest retailer has finally thrown in the towel in America, joining a long list of British stores that have tried and failed to break into the US market.
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The company has problems at home too where sales growth and market share have slipped, although it remains market leader by a long way with a share of more than 30% (the next biggest supermarket is Asda with a share of just over 17%). In January, Tesco even issued a profits warning - its first in 20 years.
Tesco's American adventure
Tesco's American adventure ended abruptly despite years of preparation and lots of in-depth research - but that did not stop its Fresh & Easy chain from running up big losses in California, Arizona and Nevada.
For a start, the name Fresh & Easy did not go down well - for some American shoppers it was more evocative of deodorant or women's sanitary products than groceries. Tesco also failed to trade on its Britishness and Americans found its self-pay checkouts confusing.
Aldi, meanwhile, goes from strength to strength in Britain. The German budget chain claims to be about a third cheaper for a weekly shop than its bigger rivals and this is increasingly proving a hit with price-conscious middle-class shoppers. But it's not just price that counts - Aldi has won several prizes for its products.
According to the latest industry figures from Kantar Worldpanel, Aldi lured 10% more shoppers through its doors in the three months to the end of November. They also spent more - the value of each shopping basket shot up by 17%. Fellow discounters Lidl and Iceland also put in strong performances, with sales growth of 11% and 9.2% respectively.
Aldi raised its share of the UK grocery market to 3% from 2.5% and intends to open another 40 stores in 2013, which would take its total to more than 500. It is going head to head with the Big Four supermarkets in the highly-prized convenience store market on the high street.
The days of hypermarkets are numbered
It looks like extra large supermarkets are past their sell-by date. Sainsbury's and Tesco have both reined back their expansion, especially on out-of-town hypermarkets, and are instead focusing on the high street and refurbishing existing stores. Sainsbury's recently opened its 500th convenience store and the format is expected to outnumber its larger supermarkets in the next 18 months.
Sainsbury's was the only supermarket in the Big Four - the other three are Tesco, Asda and Morrisons - that grabbed more market share in recent months. The 143-year-old grocer is trading on its reputation for quality but has also tried to broaden its appeal with ideas like "Feed your family for a fiver" and its Basics range. It is also moving into non-food such as clothes and homewares - areas that Tesco and Asda have already exploited.
Meanwhile, in the middle ground, Tesco, Asda and Morrisons have been squeezed. Morrisons in particular has fallen behind. At a time when online grocery sales are growing strongly - by about 20% - the Bradford-based chain has suffered because it doesn't have a website, apart from its wine-sellng site Morrisons Cellar. It is fighting back with plans to open 50 more convenience stores across Britain.
Perhaps surprisingly, upmarket grocer Waitrose - which is owned by John Lewis - has ridden the recession rather well. Experts talk of polarisation - penny-pinching shoppers are flocking to discount supermarkets but as people are eating out less they tend to treat themselves more at home, which has benefited Waitrose. Its well-off clientele has also been hit less hard by the downturn than those on lower incomes. In addition, one of its smartest moves was to launch a lower-priced Essentials range in 2009 to win consumers over from the discounters.