Discount grocers poised to double share of market

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The Independent Online
DISCOUNT stores are set to increase their share of the food market from their present 9 per cent to 17 per cent within the next four years.

The forecast comes from a report to be published shortly by the Institute for Grocery Research, which undertakes research for leading companies in the food business such as Tesco, Sainsbury and Argyll - rivals to the discounters.

The forecast is even more bullish than that issued last year by Verdict, the market research firm, which said sales would double in the next five years.

In the past 10 years the discounters have doubled sales, from pounds 2bn to their present pounds 4bn, and their market share has increased from 7 to 9 per cent in the past couple of years.

Previously the growth has been attributed to bargain-hunting during the recession. But, as Michael Bourke of the brokers Panmure Gordon points out, the new forecast shows that the rise of the discounters 'is part of a major structural change, since the growth is expected to continue when the recession will be a thing of the past'.

The growth will help all three types of discounter: those like the German Aldi, which sell a narrow range of perhaps 600 products;the big warehouses, like those being introduced to Britain by Carrefour, the French giant; and the middle-sized discount supermarkets in the high street.

Despite the foreign competition, and the fact that many retail chains have introduced their own discount chains - such as Lo-Cost, part of the Argyll Group - the biggest beneficiary is expected to be Kwik Save, which is already the third biggest retailer of packaged groceries in Britain.

Kwik Save is already adding one store a week to its present chain of 780, and is planning to double the rate. According to Jonathan Smith, a director: 'Only half the population has reasonable access to one of our stores. We've only just started opening in Scotland, and there are considerable gaps in the South-east and, more particularly, in Greater London.'