Begbies Traynor : Independent Food Retailers Suffer Most from Supermarket Price Wars

April 16, 2014

More than 2,600 SMEs in the sector struggle to survive as consumer spending habits evolve

New research out today from business recovery experts Begbies Traynor reveals that the UK's smallest independent food retailers are by far the biggest unrecognised casualties of the current price war between Britain's largest supermarket groups, which have slashed prices ahead of the busy Easter weekend in a bid to entice customers back from the popular discounters, Aldi and Lidl.

In the latest Begbies Traynor Red Flag Alert for Q1 2014, which monitors the financial health of "Corporate UK", levels of 'Significant' financial distress among UK food retailers increased by more than 14 percent compared with the equivalent quarter in 2013, as 2,823 UK food retailers, 95 percent of which are small and medium sized businesses (SMEs), struggle to survive.

According to Julie Palmer, Partner at Begbies Traynor, the food retail industry in the UK is going through one of the biggest structural changes in more than 30 years, as consumers from all walks of life seek out the best bargains on offer, both in store and online - a playing field on which the UK's smallest food retailers simply cannot compete given their tight margins and lower economies of scale.

Julie Palmer commented: "While the news agenda so far has focused on Tesco, Morrisons, Asda and Sainsbury's and their struggles to maintain market share, the real victims of the current supermarket price wars, namely the smaller independent food retailers and local grocery suppliers which fuel our communities, have largely been forgotten."

"For much of the population, disposable income is still being squeezed no thanks to above inflation increases in utility bills and public transport fares, which are hitting families hard and driving more and more people towards the supermarkets' rock-bottom prices."

"Even for the middle classes, who have been less impacted by economic austerity, the appeal of finding a bargain now far outweighs the pre-recessionary charm of buying local produce from trendy independent retailers. Meanwhile the growing popularity of online food delivery services is encouraging yet more of this consumer group away from smaller local shops, which simply cannot compete on convenience or value for money."

"The plight of small food retailers looks set to continue into Q2 as the late falling of Easter drives more deal-hungry consumers away from the more pricey local shops and through the supermarkets' doors as families do their 'big shop' in preparation for the long Bank Holiday weekend ahead."