In Western Europe, the grocery retail market is relatively mature with established retailers in each main market and strong competition. Consolidation within each country is taking place and cross-border activity continues. The leading retailers are investing in ‘differentiation’ whether through store formats or product ranges and this has led to a polarisation of price versus premium. The strength of consumer demand for responsibility in the sector is starting to have an impact at a corporate level.

Market size and structure

IGD estimates that the largest seven grocery retail markets in Western Europe are worth around $1,120 billion. The French retail operator Carrefour leads the ranking for total sales in this region, and the Spanish retail grocery market is growing most quickly.

Polarisation (price versus premium)

In Western Europe, growth is being achieved by those retailers who have successfully targeted either the value or premium ends of the market (or both) through their total store proposition or by developing strong, identifiable private label ranges that meet specific consumer needs. By contrast, those retailers operating in the ‘middle ground’ are finding the trading environment considerably more challenging.

Competition heating up

Price continues to be a major battleground for retailers in Western Europe, particularly for those operating in France, as legislation governing relations between grocery retailers and suppliers was relaxed at the end of 2007 in order to increase competition. This development, coupled with the introduction of TV advertising at the beginning of 2007, will provide French retailers with the ability to compete on price more publicly in the future. Retailers in the UK also face potential increased competition. In October 2007 the Competition Commission published its provisional findings, following its investigation into the UK’s grocery retailing market. The initial report expressed concern for lack of local competition in some areas, ineffective competition owing to land holdings and other practices, and the exposure of excessive risks and costs to suppliers through various purchasing practices. The final report and recommendations are due in spring 2008.

Consolidation and downscaling

Corporate activity was significant in 2007 both within individual countries as well as cross-border, fuelling further consolidation in the grocery retail market. At the time of writing such activity is continuing and is expected to carry on throughout 2008.

Corporate responsibility

Being responsible has become an important development for grocery retailers. This is particularly prevalent in the UK and is starting to become more prominent in other areas of Europe, influenced by increasing consumer interest, greater media coverage and government and NGO focus on issues such as food safety, ethical trading and the environment. As a result grocery retailers have started to promote their corporate responsibility credentials more openly and there has been an increase in availability and popularity of products that embrace ethical, environmental and social issues (for example organic and Fairtrade).

Healthy eating

Some retailers have also started to take more responsibility for providing more nutritional information and guidance to help their consumers make informed decisions about the foods they are buying. In 2006 the UK’s Food Standards Agency recommended the introduction of a front-of-pack food labelling traffic light system and retailers have responded with a range of nutritional labelling initiatives. In France, several retailers have introduced new labelling schemes including Casino (Le Curseur Nutritionnel labelling scheme), Leclerc (online diagnostic tool and guide) and Les Mousqetaires (Nutri-pass nutritional labelling scheme).