Food Retailers Dominate in Europe

The 2004 edition of MINTEL's European Retail Rankings shows Tesco steadily closing the gap on Carrefour. Tesco is the clear second player in Europe (and the fourth world-wide) and its sales have risen from under two thirds of Carrefour's a couple of years ago to almost three quarters in 2003/04.

In fact the top 14 European retailers and 17 of the top 20 are food retailers and their jockeying for position is creating significant interest. 'If there is one feature that most of Europe's leading food retailers share, it is that they are all ambitious companies. Organic growth within one country where the market is already mature is just not enough. Although Carrefour is the number one grocery player in Europe by a considerable margin and is number two in the world behind Wal-Mart, Tesco is proving equally successful and its growth in market share has been relentless', comments Richard Perks, Director of Retail Research at MINTEL.

Apart from Tesco the big gainers are the price-led retailers. The hard discounters Aldi and Lidl (The Schwarz group) as well as Wal-Mart, through its UK subsidiary ASDA, have been the biggest winners. In 2002/03 Wal-Mart overtook the combined William Morrison/Safeway business and Aldi overtook Edeka. In 2003/04 Aldi is expected to have moved up another place becoming the fourth largest in Europe, ahead of Rewe, and has the number three player, Intermarché, clearly in its sights.

As food is a mature market, one might expect food retailers to be slowly losing share of retail sales. In fact this is not the case as there are enough countries where food retailing is a growth sector to offset the countries, such as Germany and Austria, where it is not.

Germany proves it is holding onto its central position in the retail world, despite struggling with serious economic problems. Rewe, Edeka Group, Aldi, Metro Group and Schwarz Group all feature in the list of Europe's top 10 retailers, which makes Germany the most dominant country in the top 10. France has three companies in the top 10 - Carrefour, Intermarche and E Leclerc, while the UK makes up the remaining two with Tesco and J Sainsbury. 'Germany is the leading economic force in the European Union and one of the largest economies in the world and many Germany-based retailers feature among the leading European retail groups. An interesting point in the German market is that it is dominated by discounters, with voluntary groups also playing an important role. German consumers are price conscious and can often be seen opting for the lowest prices. As a result, discount formats have seen their sales improving, in a declining retail market, while hypermarket and supermarket formats are struggling', comments Richard Perks.

Nonetheless, German retail sales have declined relative to the rest of Europe. 10 years ago the country accounted for 24% of all European retail sales. Now it is just over 16%. The impact of Germany on European retailing should not be underestimated. With just a couple of pauses to mark time, it has been recession for the last decade.

Despite very impressive performances from some of the top clothing retailers, the European clothing sector as a whole is underperforming, indicating just how difficult it is to get things right in today's fashion industry. 'Retailers are increasingly realising the importance of adapting ranges to suit local markets and that the 'one size fits all' approach will not work with today's demanding and aspirational consumers,' comments Richard Perks.

Despite its troubles and having closed or sold its company owned stores in continental Europe, M&S remains the market leader in clothing as the company has learned its lesson and has achieved an impressive recovery. But today the major winners have been those retailers, who have set up the systems to be able to respond quickly to new fashions 'catwalk to store in three weeks'. The development has gone so far that the truly fashion conscious customers are able to obtain next season's merchandise before the current season has finished. The retailers leading this select group are of course H&M and Zara, who now, as a result, find themselves amongst the leading clothing retailers in Europe. The key drivers shaping the future of the fashion retail industry will be this kind of incorporation of designer fashion styling and the speed and flexibility of the supply chain. 'There are some groups that will continue to grow by expanding into new markets, such as H&M, Inditex, Mango, New Yorker, Takko and Varner. But while the prospects for certain individual companies look promising, the sector as whole will continue to be impacted by fierce competition and the relative decline of the sector as whole will continue,' comments Richard Perks.

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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