08.10.08 - Location planning expert CACI's annual report on the UK grocery market has identified a remarkable 959 new locations in the UK that could successfully support a discount supermarket.

The changing face of the grocery sector, given impetus by the economic downturn, means that discounters now have the opportunity to challenge Sainsbury's on its home turf - pointing to the emergence of a new grocery landscape in the UK.

CACI's ProVision 2008 data reveals that while the demographic group most frequenting Aldi and Lidl for their main grocery shopping are 'Struggling Families', it is the mid-market 'Secure Families' who are key to the discounters' changing fortunes. Future growth will hinge on maximising the visits of these 'Secure Families' who, while not visiting for their main weekly shop, are the largest demographic group using Aldi and Lidl for their regular 'top-up' visits.

Paul Langston, Associate Director for Location Strategy, CACI explains:

"The people who go to Aldi and Lidl to top up their main weekly shop are representative of the population living nearest to those stores. So if Aldi and Lidl can locate in new areas with similar demographic profiles they stand to attract a good customer base. As well as Struggling and Secure Families, this includes many of the wealthiest groups in the UK, many of whom are traditionally Sainsbury's shoppers. These cash-rich, time-rich 'Affluent Greys' and the 'Flourishing Families' will use Aldi and Lidl if they are within the catchment - significantly increasing the discounters' market share."

CACI's ProVision report pinpoints London and the South East as presenting the greatest opportunities for the discount grocers - where they currently have few stores and where many of their target customers lie. If the discounters manage to deepen their share of the broader groups already using their stores for top-up shopping, CACI identifies a total of 959 new locations UK-wide that could successfully support a discount store.

This expansion would see Aldi and Lidl stores moving into middle-class towns like St. Albans, Horsham and Highgate, severely impacting on sales for supermarkets currently operating in these areas. Based on the discounters' current growth plans, ASDA is identified as the supermarket chain most vulnerable to this discounter expansion. CACI estimates that almost 40 per cent of ASDA's current grocery spend comes from areas in which Aldi or Lidl currently have a store - based on the fact that 'Struggling Families' make up such a high proportion of ASDA's shoppers. These are among the earliest to be feeling the affects of the credit crunch, putting ASDA on the front-line of the discounters' assault.

Morrisons is the next most vulnerable grocer, with more than 30 per cent of its sales coming from sectors that overlap with the key discounters.

It is the future which provides the most startling findings. If discounters seize the opportunities to grow in the locations identified by CACI's report, it is Tesco which has the most to lose. CACI estimates that there could be a discount competitor in areas from which Tesco currently draws over £20 billion of supermarket sales. Sainsbury's could be challenged for over £11 billion of its sales, which come from areas where it directly competes with Aldi or Lidl.

Source: BMRB - TGI/CACI

Paul Langston continues: "Tesco has acted swiftly in the face of the threat from Aldi and Lidl, introducing new discount ranges and investing heavily in marketing strategies. It is right to be concerned. However, Sainsbury's response so far appears limited in the face of this new threat. No longer can the so-called discounters be classed as fringe players in the grocery market. With an increasingly broad appeal across all demographic groups, and with shoppers growing more value-conscious as the credit crunch deepens, larger swathes of the country are becoming target territory. The discounters are already moving into the mainstream and as they expand rapidly their appeal is set to widen."

For further editorial information contact Emily Luscombe, Camargue, tel 020 7636 7366

Notes to Editors:

About ProVision

All figures are estimates based on CACI's grocery catchment model, ProVision. ProVision defines the catchments for all grocery stores over 4,000 sq feet. It takes into account the fact that some stores are more attractive than others dependent on fascia, size and regional strength. Accessibility is also key, the less time a consumer needs to spend driving to a store the better. CACI incorporate data from a range of industry recognised and trusted sources such as TNS (Taylor Nelson Sofres) regional market shares, ONS (Office of National Statistics) based estimates of local area expenditure and IGD (Institute of Grocery Distribution) and Retail Locations store location and size data.

ProVision builds catchments that are made up of Postcode Sectors, which on average contain 2,500 households. For the purpose of this report CACI have aggregated the results to Postcode Areas, which contain approximately 200,000 households or Postcode Districts containing approximately 9,000 households.

About ACORN

ACORN is the market-leading geo-demographic postcode classification that classifies the entire UK population into five categories, 17 groups and 56 types. The UK version is based on the latest census data combined with CACI's consumer lifestyle databases.

ACORN defines the following demographic groups discussed above:

• 'Struggling Families' - Low income or unemployed larger families, living in poor housing areas
• 'Secure Families' - Younger, middle-income working families living in suburban areas
• 'Affluent Greys' - Older affluent professionals or retired couples
• 'Flourishing Families' - Larger, well-off working families in prosperous suburbs or rural areas