While Tesco extended its lead over its rivals in 2007 for the ninth successive year, a new report found that its 0.8 percentage point rise (to 27.6%) was the smallest market share gain since 2002. It was also the first time for five years that Tesco’s share increase was less than the combined market share gain of its principal rivals (Asda, Sainsbury, Morrison and, formerly, Safeway).

Tesco continues to hold a clear lead over its rivals. Despite signs that growing market share is becoming harder, Tesco still recorded both the largest market share gain among the leading players and, due to Tesco’s size, by far the highest cash gain in sales.

In 2007, Verdict estimates that the Big Four – Tesco, Asda, Sainsbury and Morrison – accounted for 65.4% of the £118.2bn market, up from 63.6% in 2006, and grew their sales (excluding fuel) by a combined £3.3bn during the year. These retailers not only outperformed the market, but also played a huge part in driving market growth, deepening their ranges in core categories, and expanding into new areas. The success of these retailers is based on the depth and make up of ranges, a value for money mantra and strong convenience credentials.

Beyond the Big Four, second tier of grocery operators such as Somerfield, M&S, Co-op Group and Waitrose are also growing in scale with each now holding a market share of between 3.0% and 4.0%. While Somerfield and the Co-op see their future in local grocery and convenience store retailing, both M&S and Waitrose have built propositions based on quality, ethical trading and value.

According to Verdict Research, with just one of the Top 12 grocery retailers in the UK failing to add market share in 2007, the outlook for smaller operators and independent retailers looks bleak. “The grocery sector is rapidly consolidating and those without operational scale and a sustainable point of differentiation will struggle. Most leading grocers now have the capacity to open sites in any UK location and independent operators have no choice but to compete directly with them for business,” says Nick Gladding, retail analyst at Verdict research and author of the report.