ANALYSIS: Supermarkets spy local attraction

Supermarkets have taken to purchasing convenience stores in a bid to increase their share of local 'top-up' buying, says Rachel Barnes.

Already dominant on the high street and in retail parks nationwide, the UK's major supermarket chains now have their sights set firmly on the corner shop market.

Tesco's pending £54m acquisition of 45 Adminstore convenience outlets in some of the wealthiest parts of London has been followed by a mooted bid by Sainsbury's for TM Group, which operates 1200 stores, including the Forbuoys and Martins chains.

Add to the mix Tesco's £377m acquisition of T&S's 800-plus stores in October 2002, and Co-op's purchase of Alldays from receivership the same year, and it's clear that the convenience - or 'top-up' - sector represents the latest strategy for supermarkets to extend their reach.

Planning problems

One reason why supermarkets have been eyeing up this market is the difficulty in buying ground for superstores. According to Verdict Research senior retail analyst Steve Gotham, planning restrictions are making it difficult to open stores.

Coupled with a change in lifestyle - consumers demanding convenient products to fit in with hectic timetables - it means the buoyant top-up stores have become prime targets.

Smaller players argue that a fragmented convenience sector means supermarkets tapping into the market could use their massive buying power to disadvantage rivals.

But in 2000, the Competition Commission decided that top-up shopping was entirely separate to consumers' weekly shop, and so the sectors were split into supermarkets and convenience stores.

This paved the way for recent takeovers, which have given Tesco a 6% share of that sector, despite already having more than 25% of the overall grocery market.

"Tesco has been aided in the pursuit of convenience stores by the competition authority's lenient approach," says Gotham. "It was extremely fortuitous when it acquired T&S. If that had happened after the Safeway takeover there would have been an investigation." He believes that the law should be changed to consider both sectors as a single larger market.

Not surprisingly, Tesco is happy with the law and is confident that its Adminstore purchase will go through without a problem. The market, it says, is big enough for everyone.

"There are 54,000 individual businesses in the market and it's a £21bn sector," says Tesco spokesman Jonathan Church. "If other companies continue to offer good prices and convenience, there will still be an awful lot of choice out there for consumers."

Integrating acquisitions

Tesco insists its acquisitions are not signs of a general trend for supermarkets to take control of the entire convenience market. Sainsbury's refuses to comment at all.

Convenience store takeovers have so far followed a pattern of leaving existing management and staff in place. But this places a question mark over how easily convenience chains operating under their own guidelines and culture can fall into line with a new set of values.

Tesco claims there is "no risk to the brand at all". It says that the proof lies in the "good job" that Adminstore's staff have done. "They will all be retrained so that they can talk about our different brands and they'll be brought into the Tesco model," says Church.

All the stores, which include the Europa, Harts and Cullens brands, will be renamed Tesco Express, offering fresh foods and convenience meals at, most importantly, lower prices. But how quickly and effectively this can be done will affect whether Tesco's presence is strengthened or its brand becomes diluted and compromised.

Judging by the speed of Tesco's conversion of T&S's One Stops since the acquisition 16 months ago (110 so far out of 450 selected for rebranding), Gotham believes a quick changeover is difficult. In his opinion, this is where the retailer's operational skills are put to the test. "Tesco must be able to offer consumers an experience of its brand, but it takes time to get it right."


Supermarket brand Convenience store target No of stores

Musgrave and Londis circa 2000

Big Food Group

Sainsbury's TM Group - Forbuoys, Martins and McColls 1200

Tesco Adminstore - Europa, Harts and Cullens 45


Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now


Oasis #springasmile digital campaign gets people doing good deeds
Coca-Cola: 'Don't approach bloggers with a fait accompli'
Tesco CMO Matt Atkinson: 'It is so important not to stereotype mothers'
McDonald's gives Ronald a new look ahead of global 'Fun times' social media push
In pictures: BrewDog opens first craft beer shop BottleDog for 'beer aficionados'
Facebook ad revenue leaps $1bn as it invests in targeting
Malteser or Maltesers? Mars takes Hershey trademark dispute to court
Apple Q2 profits top $10bn as iPhone sales soar
Lynx tells men not to leave love to fate
HBO captures awkwardness of watching sex scenes with parents
Primark to open first US stores with Boston chosen as flagship location
Marketing spend on the up but a reality check is needed before celebrating
Top 10 ads of the week: Jackpotjoy and BT Broadband fend off Kevin Bacon
Lidl beats Tesco to 10m Facebook fans
Center Parcs ad banned for encouraging parents to take kids out of school
Coca-Cola, Cadbury and Amazon named top brands for targeting youth market
Leaked document shows Nokia to be rebranded as Microsoft Mobile
Nike lays-off hardware staff in move that casts doubt on future of FuelBand
Greenpeace says save the bees or humans will die
What brands need to know about changes to VAT and online downloads in 2015
Jimmy Savile victims urged to claim compensation in new ad campaign
UKIP launches biggest  ad campaign and stirs up 'racist' accusations
Apple boss Tim Cook provides voiceover on ad touting firm's renewed green commitments
John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Tom of Finland's 'homoerotic' drawings made into stamps
Toyota achieves the impossible by calming angry Roman drivers
YouTube reveals user habits to appeal to 'older' marketers