Changes in the GRI continued in the 1970s, with multiples achieving 61% of the grocery market in 1980 (43% in 1971). Over this period, multiples took market share, not only from other food retailers, but also from other specialist retailers (Table 7.2). This trend, which started in the 1950s, continued until 1994.
Table 7.2 Share of the Grocery Industry on the UK Food Retailing Industry Years Grocery Total
Sales (£ Mn) Food Total Sales (£ Mn) Percentage of Grocery over Food Sales 1961 2335 4090 57.1 1970 3633 6052 60.0 1980 17342 22858 75,9 1990 40382 48239 83,7 1994 54920 62081 88,5
Source: Our Estimation. Based on data from Retail Businesses (1962, 48; 1971, 165) and Retail Trade Reviews (1988, 8; 1995,36).
Since the 1950s, great progress has continued to be made in “convenience food”. Initially, this group included cooked-canned frozen meat and fish, frozen and canned vegetables, pastries, biscuits, puddings and other pre-cooked or prepared foods, with highly competitive prices. If consumers had previously had to buy recipes singly and prepare specific dishes by combining the recipes themselves, with the development of convenience meals, this task began to be performed by the manufacturer. However, the rapid growth in the demand of convenience food was also due to the growth in families
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owning a fridge, and by the increasing number of women at work. This meant higher demand for convenience goods and a decreasing number of trips for food shopping. Furthermore, grocery retailers, by replacing smaller stores with larger ones, were able to broaden the range of products on offer and take advantage of these trends. What emerges, therefore, is that parallel changes were taking place in the consumer market, food retailing and food manufacturing.
Baden-Fuller (1986) identifies retailers’ market power as the reason behind the increase in concentration in the UK GRI in the 1970s. The argument is that a larger market share would have enabled multiples to improve their buying conditions from manufacturers. According to Baden-Fuller, this is confirmed by the fact that food manufacturers saw their profits going down in the 1970s. However, we might doubt this hypothesis, because multiples would have cashed in the better price bargained against manufacturers and increased their profits. This was not confirmed by the Monopolies and Merger Commission whose report (1981) indicates that lower prices were transferred to customers. In our view, the reason behind the increase in the share of the multiples in the 1970s is the internal expansion by multiples retailers, accompanied by strong price competition. This hypothesis is supported by Howe (1990).
In the 1970s, price was undoubtedly the most important competitive variable being used by grocery retailers (others included market segment positioning, localisation of the outlets, services, and range of products). The 1970s were turbulent years for the UK economy, and were characterised by two economic recessions. In March 1974, the Price Commission introduced stringent gross margin controls upon grocery retailers. Further, after two decades of rising demand, a low growth rate in the UK population means that
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demand for grocery products stagnated in the 1970s. The stagnating demand and recessions, linked with rising prices (due to inflationary pressure), created many uncertainties among consumers. This means that price was an important competitive variable for grocery retailers. The way to increase profitability for companies was to expand the geographic scope of operations and the range of products on offer to customers in search of potential economies of scale and scope. Companies expanded the geographic scope of operations while also replacing smaller stores with larger supermarkets and superstores. The number of grocery outlets continued to decrease, but the number of supermarkets and superstores increased. In 1979, there were 7,130 supermarkets and 276 superstores, compared with 4,400 supermarkets and 24 superstores in 1970(Fiori and Stellatelli 1983).
Table 7.3 Market Share of Main Companies in the Grocery Retailing Industry
1970/71 1980 Tesco 7.2 13.8 Sainsburv 6.1 12.2 Allied Suppliers 7.9 4.8 Fine Fare 4.8 5.2 International Stores 3.2 4.8 ASDA 1.5 7.7 Kwik Save 0.3 5.2 Total 31 53.7 Source: AGB (1996)
At a competitive level, the 1970s witnessed the emergence of significant differences among multiples. After the 1964 Act, which had put an end to RPM in the food industry, a number of discounters appeared on the market. It is possible to distinguish between two price policies in food retailing: average low prices on all the goods and low prices on a limited range of products for a limited period. Kwik Save and ASDA followed a strategy of low prices for all the goods. At the beginning of the 1970s, ASDA
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and Kwik Save had a marginal presence within the market. Within a few years, they had expanded their operations by offering a limited range of products at low prices. ASDA used large supermarkets and superstores, often on the edge of towns, whilst Kwik Save focused on city centre sites. Their success encouraged these companies to expand their operations. Large retailers initially downplayed the emergence of discounters (Fiori and Stellatelli 1983). However, they were later forced to quickly respond. Other grocery retailers, with a much wider range of products (between 2,000 and 3,000, against the 300 averaging discounters), lowered their prices. Later, some companies started to convert smaller units into discount formats (Allied Supplier launched Presto at the discount end of the market, Fine Fare launched Shoppers’ Paradise).
Between 1977 and 1979, a strong price campaign was launched by Tesco and Sainsbury. Because of the price campaigns, these companies significantly increased their market share in the GR1.
Table 7.4 The Co-operative Movement: Turnover and Number of Companies
Y ear Total T urnover of Co-operatives (£ M n ) N um ber of Coops Societies** 1941 N/A 1059 1953 N/A 988 1961 N/A 835 1970 N/A 357 1980 »3641 206 1982 •3860 145 1984 *4151 112 1986 *4442 100 1988 *4986 85 1990 **5826 77 1992 **6217 62 1994 **6013 52
Source: * Retail Trade Reviews (1988, 8; based on DTI indices)
** Retail Trade Reviews (1995, 36; based on data from the Co-operative Union)
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