Morrisons set for Sainsbury assault

The latest till roll data from TNS shows that Morrisons/Safeway's combined market share reached 15.3 per cent in the 12 weeks to 29 February, barely 1 per cent less than Sainsbury.

The situation for Sainsbury would have been even worse if not for the steady decline in Safeway's market share over the last year. The company's business has suffered as a result of the delays to the approval procedure for the bid, and its market share dropped from 9.6 per cent in the equivalent three months of 2003 as sales fell 3 per cent.

In contrast, Morrisons' sales have risen by a whopping 15 per cent over the last year, according to the TNS data, while Sainsbury managed just a 2 per cent increase. Morrisons expects to lift Safeway's sales per store to the same level as its own stores within 18 months, but even a minor improvement could have a serious impact on Sainsbury if it continues to grow at such relatively low rates.

Sainsbury is pinning its hopes on a major upturn in sales this year as it completes a massive restructuring programme which has had a serious impact on turnover per outlet. But Sainsbury has lost a lot of its traditional customer base as a result of the in-store chaos caused by trying to revamp its entire portfolio at the same time, and the big question is whether its new look will be sufficiently interesting to win them back again - let alone steal custom from arch rival Tesco.

An 11 per cent improvement in sales over the last year - second only to Morrisons - has helped Tesco stretch its lead even further, with a 27.4 per cent share of the UK grocery retail market. Asda, with a 9 per cent gain, also widened the gap between itself and Sainsbury, ending the three months with a share of 17 per cent, the TNS data showed.

As for the medium-sized chains, Somerfield improved its sales by 3 per cent year-on-year but saw its market share drop slightly from 5.3 per cent to 5.1 per cent as a result of the strong gains elsewhere. Waitrose, meanwhile, saw its share rise slightly (from 3.2 per cent to 3.3 per cent) on the back of an 8 per cent gain in sales. Iceland's sales remained flat year-on-year, resulting in a slight erosion of its market share to 2.2 per cent.

Given the rapid growth of the discount sector in much of Continental Europe, where downturns in the economy have depressed spending, it is interesting to see the changes in the UK discount sector over the last year. Traditionally a format which does not work well with more sophisticated British shoppers, discount stores have nonetheless posted solid gains in sales there over the last year as some consumers at least become more price conscious.

Both Aldi and Netto, for example, saw a 12 per cent rise in year-on-year sales, although Lidl's sales growth was a more modest 3 per cent. Aldi's market share of 2.1 per cent is only just behind Iceland, and the three main discount chains have a combined market share of 4.3 per cent. Including Somerfield's Kwik Save unit, the discount sector now accounts for around 6 per cent of grocery sales in the UK - a larger share than might be expected given the traditional antipathy towards this 'pile it high, sell it cheap' format.

The flurry of activity around the Londis symbol group - reportedly coveted by Iceland and Somerfield, among others - disguises the fact that independent food retailers continue to find it tough in the UK market. Total sales by independent grocers dropped by 5 per cent year-on-year, with symbol group operators registering a 2 per cent drop.

Symbol groups such as Londis, Costcutter and Nisa-Today's have just a 1.2 per cent share of the UK grocery market, while the independent sector as a whole accounts for 3.5 per cent.