Tesco 'stranglehold' on UK market

High street supermarket chain Tesco is achieving record profits with a “stranglehold” on the grocery market in some parts of the UK, a report claimed today.

The group has almost total control of the UK market in 108, or 7.4%, of Britain’s 1,452 postal areas, according to a survey conducted by research group CACI for The Sunday Times.

The study showed that the company had an almost total grip on the food market in areas, the newspaper said.

In a further 104 places, Tesco dominated the local food market and accounted for more than 50% of grocery spending.

Regulators believe a supermarket should not account for more than a quarter of the UK market nationally, but the study showed 325 areas where Tesco exceeds this limit.

The newspaper claimed the company’s policy of buying up chains of small corner shops in city centres and converting them to convenience stores had contributed to the sharp rise in profits.

The Sunday Times published the results of the study today as Tesco prepares to announce what analysts expect to be record annual profits this week.

The group is tipped to report a 19% rise in 2003 profits to £1.67bn (€2.5bn) against 2002 when it reports its annual figures on Tuesday.

A Tesco spokesman said its convenience sites made up a very small proportion of the company’s nationwide store network.

He pointed out that the traditional and convenience grocery markets had differing characteristics and that Tesco’s convenience format, Tesco Express, only holds about 6% of the latter market.

The spokesman added that two Competition Commission studies in 2000 and last year had both shown the supermarket industry to be very competitive.

“We have a very successful and profitable business, but the reason for that is consumer choice,” he said.