Big four UK grocers share of market to fall 4%

London - Britain's four biggest grocers, Tesco, Asda, Sainsbury's and Morrisons , will lose 4% of their market share by 2020 as fast growing discounters Aldi and Lidl continue to expand, Moody's forecasts.

In a report published on Thursday, the ratings agency also said the "big four" grocers' profit margins were unlikely to recover over the next 12-18 months amid falling like-for-like sales and price cuts as they battle to stem the loss of custom.

The big four currently have a combined market share of about 73.5%, according to market researchers Kantar, with Tesco on 29%, Asda on 17.1%, Sainsbury's on 16.5% and Morrisons on 10.9%.

"We expect Aldi and Lidl's combined share of the UK market to reach 12% to 15% by 2020," said Sven Reinke, Moody's vice president and senior analyst, up from current shares of 4.7% and 3.6% respectively, according to Kantar.

"Although the discounters' sales densities have caught up with the big four retailers, Aldi and Lidl could continue to gain around 1% market share every year supported by their store expansion plans at a time where the big four selectively close unprofitable stores," Reinke said.

The big four's profits have been dented by a fierce price war and record commodity driven deflation, forcing them all to take action to reinvigorate sales.

Moody's said those firms could see a gradual recovery from 2016 to 2017, benefiting from Britain's continued economic growth, as well as their sharper offers and improved stores and customer service.

The agency noted that only Asda, the British arm of US retailer Walmart, had the financial capacity among the big four to engage in many more rounds of price cuts.

It added consolidation among the big four was also very unlikely given their already significant market shares.