Tesco's price strategy widens market lead over Sainsbury's

CITY ANALYSTS yesterday predicted that the market share gap between Tesco and Sainsbury's will continue to grow.

Their comments came after new industry figures showed that Tesco has increased its share of the UK grocery market by almost 60 per cent over the past decade, while Sainsbury's share remained virtually static.

The end-of-year figures for 1998 produced by the Institute of Grocery Distribution (IGD) are a graphic illustration of Tesco's increasingly strong leadership of the sector.

The IGD figures, which are produced twice a year, show that by the end of 1998 Tesco had grabbed 15.4 per cent of the grocery market, up from a share of 9.7 per cent in 1990. Sainsbury's share was 12.2 per cent at the end of last year, only marginally higher than its 11 per cent market share 10 years ago.

Tesco overtook Sainsbury's in 1995 with a huge jump in its market share, helped by the takeover of William Low.

The figures also confirm Asda's meteoric rise, overtaking Safeway in 1996 to end last year with a 8.6 per cent market share compared to Safeway's 7.6 per cent.

Mike Dennis, food retail analyst at SG Securities, said Sainsbury's profit performance has been "actually worse than the IGD figures suggest". Sainsbury's profits have sunk from pounds 1.25bn in 1995 to just pounds 752m last year.

Mr Dennis said: "The gap will continue to grow because Tesco has said it will keep close to Asda on price while Sainsbury's is focusing on choice. It is bound to lose more share."

Among other supermarket chains, the IGD's figures show that Somerfield had lost share every year between 1994 and 1997 before its takeover of Kwik Save.

Marks & Spencer has also been drifting and accounted for just 2.9 per cent of the grocery market last year, compared with 3.4 per cent at the start of the decade.

But while M&S's niche position in the sector has been steadily eroded, Waitrose's figures have held firm with a steady 1.8 per cent share.

Morrison's, the Bradford-based supermarket operator, has enjoyed a steady rise in share throughout the decade, growing from 1.4 per cent of the market to 2.6 per cent.

t Safeway has launched an office shopping trial for staff at its headquarters building in Hayes.

Workers will use handheld devices containing their personalised shopping lists to submit orders via a modem. Safeway is also exploring how mobile phones can be used for grocery shopping.