Introduction
 
Neighbourhood retailing is outperforming all other locations. The location offers substantial opportunities, but the dynamics of the market are changing. As the market consolidates, growth is becoming more elusive and while substantial opportunities remain, trading conditions are more challenging and the strategies for success very different.
 
 Scope
 
 *Key metrics of neighbourhood retail: sales growth, space, store numbers, store sizes and sales densities.
 
 *Detailed market analysis (convenience, off-licences, CTNs, food specialists, pharmacies) and profiles of all the leading neighbourhood retailers
 
 *Focus on composition of convenience market (The Co-operatives, Multiples, Symbol Groups, Independents, forecourt retailing)
 
 *Market shares for leading players 2003-2008
 
 Highlights
 
 Neighbourhood retailing is benefitting from a shift in shopping habits, an increased demand for convenience, improved standards and the arrival of the grocers. The expansion of the grocers has enticed people to shop locally and the symbol groups to enhance their propositions, encouraging independents to join and consumers to shop with them.
 
 Competition is intensifying and pressures on food specialists, independents, off-licences and CTNs mounting. With the market consolidating, the easy wins of the past are harder to come by, while the boost received from the arrival of the grocers can not be repeated. Growth is set to become more elusive and the strategies for success different.
 
 With propositions becoming more comprehensive, the need for CTNs, off-licenses and undifferentiated specialists is diminishing. As the market consolidates, store environments, fresh food and food-to-go will be key battlegrounds and the multiples, with the expertise and investment available to them, are well placed be the big winners.
 
 Reasons to Purchase
 
 *Benchmark retailer performance against the market. Understand the dynamics of the location, its composition and prospects for each channel
 
 *Identify the growth prospects of key players in neighbourhood retailing
 
 *Analyse the key issues impacting the location and identify thestrategies for success

CHAPTER 1 EXECUTIVE SUMMARY 24
 Food-led neighbourhood to outperform total retail 25
 Neighbourhood retailing creating a virtuous circle 25
 Tesco and Sainsbury feeding virtuos circle and exerting competitive pressure 25
 Takeover of Somerfield cements top place for The Co-operative 25
 Symbol groups recruitment blitz will consolidate market further 26
 CTNs and Off-licences a dwindling format 26
 Grocers look at alternative sites for expansion as market saturates 26
 Symbol groups improve offer, but risk falling behind 27
 Convenience stores benefit from demand for top-up shopping 27
 Diversifying offer to exploit high footfall and desire for convenience 28
 Neighbourhood sales growth becoming more elusive 28
 Power to shift further to grocers and large symbol groups 28
 CHAPTER 2 KEY ISSUES 30
 Exploiting opportunities in outperforming location 31
 Changing shopper demographic 31
 Demand for top-up shopping 32
 Desire for convenience 33
 Adapting to changing dynamics of location 34
 Market consolidating 34
 Competition intensifying 35
 Consolidation to impact future growth opportunities 36
 Flexible formats 38
 Flexible propositions 38
 Symbol groups boost loyalty 38
 Diversify & Differentiate 39
 Threats Remain 40
 CTNs and off-licences lose out to bigger players 41
 Onerous legislation will hit sales and profits 41
 Dwindling need for CTNs & Off-licences 42
 Only highly differentiated food specialists will survive 42
 CHAPTER 3 NEIGHBOURHOOD MARKET 44
 Summary 44
 Supermarkets and symbol groups pressurise unaffiliated independents 44
 Components of neighbourhood retailing 46
 Neighbourhood sales channels 47
 Majority of neighbourhood sales through convenience stores 48
 Space 50
 Multiples and symbol groups slow decline in space 50
 Neighbourhood SWOT analysis 52
 
 CHAPTER 4 NEIGHBOURHOOD V OTHER LOCATIONS 53
 Sales 55
 Sales growth driven by multiples and symbol groups 55
 Space 58
 Opportunistic retailers help slow declines in neighbourhood space 58
 Sales densities 60
 Boosted by product mix and expansion of multiples 60
 Stores 62
 Vacant stores are snapped up quickly 62
 CHAPTER 5 C-STORES AND SMALL GROCERS 65
 Summary 65
 Despite continued consolidation, market remains fragmented 65
 SWOT analysis 67
 Key messages 68
 Unafilliated independents continue to be recruited by symbol groups 68
 Smaller Grocers – The Co-operative stamps authority and supermarkets exert pressure 68
 Convenience retailing will benefit from changing shopping habits 69
 Constrained household budgets make value key 69
 Growing importance of fresh food and food-to-go 70
 C-stores expand on to forecourts 70
 Waitrose sensibly commits to convenince store expansion 71
 
 CHAPTER 6 C-STORES: OTHER SYMBOL GROUPS 73
 Introduction 73
 Summary 73
 How Costcutter / Nisa-Today’s relationship evolves will significantly impact on Nisa 73
 Prevalence of wholesalers with a symbol group offer could decline sharply 74
 Fresh produce and own brands become vital aspects of propositions 74
 Key players 75
 Best-one (Bestway) 75
 Key Store (JW Filshill) 76
 Lifestyle (Landmark Group) 76
 Mace (Palmer & Harvey McLane) 77
 Nisa-Today’s 77
 CHAPTER 7 C-STORES ON FORECOURTS 80
 Summary 80
 Still hold opportunities for convenience and food service brands 80
 Key messages 80
 After decline petrol station numbers stabilise 80
 Modern forecourt convenience stores continue to break old stereotypes 81
 Motorists shop spend was resilient despite high fuel prices in 2008 81
 Convenience store and oil company partnerships still being pursued 82
 Service station food-to-go remains a growth area 83
 Franchise arrangements increasingly prevalent 83
 BP, Shell and Total continue to prospect for new dealers 83
 BP franchise model successful template for others 83
 SWOT analysis 85
 Store numbers 86
 Key players 87
 BP has strongest shop brand on UK forecourts 87
 Shell develops private label food-to-go range 88
 Esso partnership with Tesco leaves it well placed 88
 Total trio of formats 89
 Almost all Texaco sites are dealer-owned 89
 Smaller fuel retailers partner with branded stores 89
 CHAPTER 8 TRADITIONAL FOOD SPECIALISTS 91
 Summary 91
 Niche players set to capitalise in struggling market 91
 SWOT analysis 92
 Key messages 92
 Food specialists continue to struggle 92
 Niche operators that diversify will prosper 93
 Future for the sector looks challenging 94
 Neighbourhood food specialists in wider context 95
 Multiples and symbol groups encroach on specialists territory 95
 Background of total sales, space and stores 97
 Food specialists sales continue to be pressurised by multiples 97
 Space and stores continue to contract as competition intensifies 100
 CHAPTER 9 TRADITIONAL OFF-LICENCES 102
 Summary 102
 Off-licences face uncertain future 102
 SWOT analysis 103
 Key messages 104
 Specialist off-licences under pressure from all sides 104
 Proposed minimum unit pricing will be of no benefit to off-licences 104
 Specialists need to utilise their strengths to advantage 105
 Problem areas: shallow range, lack of knowledge and prices not low enough 105
 First Quench (Threshers, Wine Rack, Haddows and The Local) 106
 Struggles for survival 106
 Other key players 107
 Bargain Booze 107
 Laithwaites 108
 Majestic Wine 108
 Oddbins 109
 Wine Cellar 109
 
 CHAPTER 10 NEIGHBOURHOOD PHARMACIES 110
 Summary 110
 Pharmaceutical market defies downturn 110
 SWOT analysis 111
 Key Messages 112
 Local chemists seek to capitalise 112
 Deregulation allows growth for supermarkets and independents alike 112
 Smaller independents struggle against supermarkets and abolishment of PPA 112
 Swine Flu injects boost 113
 Pharmacies compete with GPs 113
 Alliance Boots 114
 Key Messages 117
 Lloydspharmacy 118
 Key Messages 120
 CHAPTER 11 TRADITIONAL CTN OPERATORS 123
 Summary 123
 CTNs face increasingly uncertain future 123
 SWOT analysis 124
 Key messages 125
 Increasingly competitive marketplace 125
 Diversifying offer essential for survival 125
 Provide service to encourage loyalty and spend 126
 CTNs need to adapt store environments following tobacco legislation 126
 Consolidation in newspaper distribution will see more CTNs close 127
 Martin McColl 128
 CHAPTER 12 FORECAST 130
 Retail spending by location in 2008 and 2013 130
 Multichannel retailers will prosper as online spending grows 130
 Neighbourhood retailing to 2013 131
 Sales growth to rise as multiples and symbol groups take over 131
 Convenience stores will prosper in increasingly competitive market 133
 Declines in space and stores will slow as market consolidates 134
 CHAPTER 13 COMPANY DATA ANALYSIS 136
 Summary 136
 Winners & losers 136
 Expansion of The Co-op and Tesco makes them big winners 136
 Neighbourhood retailers sales 138
 Growth driven by expansion of The Co-op and multiples 138
 Market shares 139
 The Co-operative maintains dominance through acquisition 139
 C-store market shares 142
 The Co-operative overtakes Tesco at top of convenience market 142
 Key operating statistics 144
 The Co-operative continues to lead the way 144
 CHAPTER 14 THE CO-OPERATIVE GROUP 145
 Asserts its dominance 145
 Recent key events 146
 Acquisition of Somerfield 146
 The Co-op now has most stores in UK 147
 The Acquisition of Somerfield - what it means for The Co-operative 147
 Financials 149
 Trading performance boosted by Somerfield acquistion 149
 Space 153
 Expansion set to slow after acquisition provides a boost 153
 Market shares 155
 The Co-operative experiences big gains in share 155
 Outlook - Bright 157
 Record refurbishment 157
 Price harmonisation essential 157
 Competition intensifies 157
 Ethical reputation is valued by customers 158
 Common branding 158
 CHAPTER 15 COSTCUTTER 159
 Continues to improve proposition 159
 Recent key events 160
 Reduces joining costs for retailers 160
 Launches consumer loyalty scheme 160
 Biggest TV campaign 160
 Nisa-Today’s rejects Bibby Line bid 160
 Financials 161
 Stores 164
 Market shares 166
 CHAPTER 16 MUSGRAVE 170
 Positions itself for future growth 170
 Recent key events 171
 Financials 173
 Investment depresses operating profits 173
 Space 178
 Musgrave changes format mix 178
 Market shares 179
 Strong sales growth leads to share uplift 179
 Outlook – Musgrave should reap rewards of investment 182
 Resilient performance 182
 Investing in itself is a sensible strategy 182
 The group is also right to sacrifice profits 182
 Improvements to the supply chain are very important 182
 Fresh food will drive growth 183
 Single entity synergies 183
 Challenge to keep Budgens strong performance going 183
 Consistent store standards imperative 183
 CHAPTER 17 PREMIER (BOOKER) 185
 Continues to grow but challenges remain 185
 Recent key events 186
 Management upholds solid trading performance 186
 Launches new formats and broadens business 186
 Strategy for growth 186
 Three phases for completion by 2010 186
 Financials 187
 Strategies for growth boost trading performance 187
 Premier in the neighbourhood 188
 Space 190
 Continues upwards trend as more stores join symbol 190
 Market shares 191
 Outlook – to grow market share further 193
 Fresh products key 193
 Staples like bread and milk will draw footfall 193
 Standards must be kept high 193
 Booker shoppers could become Premier members 193
 More marketing wouldn’t go amiss 194
 
 CHAPTER 18 SAINSBURY 195
 To expand convenience offer aggressively 195
 Recent key events 196
 Restructures c-store estateProduct development 196
 Then expands once more 196
 Experiments with five formats 196
 Financials 197
 Neighbourhood 198
 Space 199
 Expansion to slow after acquisitions boost 199
 Market shares 201
 Sainsbury enjoys consistent growth over the last five years 201
 Outlook – significant gains 203
 Making Sainsbury’s Great Again achieves aim 203
 Focus on convenience 203
 Realigns prices 203
 Market conditions help expansion 203
 Behind The Co-operative and Tesco 204
 CHAPTER 19 SPAR 205
 Performs strongly in increasinlgy competitive market 205
 Recent key events 206
 Works hard to improve offer 206
 Financials 208
 Currency fluctuations affect performance heavily 208
 Space 211
 Greater competition reduces retailer membership 211
 Market shares 213
 Negatively affected by exchange rate 213
 Outlook – aims to build on advantages 215
 Currency fluctuations hide a strong performance 215
 Store of the Future 215
 Marketing improves brand awareness 215
 Loyalty generation sensible 216
 Needs aggressive recruitment 216
 SPAR to thrive 216
 CHAPTER 20 TESCO 217
 Strong growth in neighbourhood yet challenges remain 217
 Recent key events 218
 Continued expansion increasingly meets resistance 218
 Financials 219
 Tesco continues to dominate 219
 Space 221
 Pace of expansion remains high 221
 Market shares 223
 Growth accelerates as space grows and offer evolves 223
 Outlook – opportunities remain challenging 225
 Tesco continues to lead in UK retail 225
 Convenience best option if Competition Commission findings become law 225
 Former pubs could be snapped up 225
 Heightened resistance in rural areas 225
 Symbol groups key advantage over the supermarket 226
 CHAPTER 21 GLOSSARY 227
 Terminology 227
 Abbreviations 228
 
 LIST OF TABLES
 Table 1: Neighbourhood sales breakdown 2007-2009e 48
 Table 2: Neighbourhood sales breakdown and its share of sectors 2009e 49
 Table 3: Neighbourhood sales, space, density & store nos 1998-2009e 50
 Table 4: Neighbourhood retailing SWOT analysis 2009 52
 Table 5: Retail location definitions 2009 53
 Table 6: Retail sales by location at current prices 1998-2009e 57
 Table 7: Retail selling space by location 1998-2009e 59
 Table 8: Sales densities by location at current prices 1998-2009e 60
 Table 9: Store numbers by location 1998-2009e 63
 Table 10: C-stores and small grocers SWOT analysis 2009 67
 Table 11: Petrol forecourts SWOT analysis 2009 85
 Table 12: Neighbourhood food specialists SWOT analysis 2009 92
 Table 13: Neighbourhood and total food specialists sales 2009e 95
 Table 14: Total food specialists sales 1998-2009e 98
 Table 15: Total food specialists sales value by activity 2004-2009e 99
 Table 16: Total food specialists store numbers and space 1998-2009e 100
 Table 17: Off-licences SWOT analysis 2009 103
 Table 18: First Quench key operating statistics 2004-2009e 106
 Table 19: Pharmacy operators SWOT analysis 2009 111
 Table 20: Alliance Pharmacy key operating statistics 2002-2008e 114
 Table 21: Alliance Boots UK key operating statistics 2005-2010e 114
 Table 22: Lloydspharmacy key operating statistics 2004-2009e 118
 Table 23: Lloydspharmacy – pharmacy profile 1999-2009e 120
 Table 24: CTN operators SWOT analysis 2009 124
 Table 25: Martin McColl key operating statistics 2004-2009e 128
 Table 26: Key neighbourhood retailers UK turnover record 2004-2009e 138
 Table 27: Share of neighbourhood market – leading players 2004-2009e 139
 Table 28: Leading n’hood retailers key operating statistics 2008/09e 144
 Table 29: The Co-operative Group company overview 2009 145
 Table 30: The Co-operative food retail key operating statistics 2004-2009 149
 Table 31: The Co-operative Group trading record 2000-2009 150
 Table 32: The Co-operative Group food retail trading record 2002-2009 150
 Table 33: The Co-operative Group store profile 1998-2009 153
 Table 34: Co-op Group store analysis (incl former Utd Co-op) January 09 153
 Table 35: Co-op Group store numbers incl Somerfield at March 2009 154
 Table 36: Costcutter company overview 2009 159
 Table 37: Costcutter key operating statistics 2004-2009 161
 Table 38: Costcutter estimated UK store profile 2003-2009 164
 Table 39: Musgrave company overview 2009 170
 Table 40: Musgrave retail key operating statistics 2004-2008 173
 Table 41: Musgrave store profile 2002-2008 178
 Table 42: Premier (Booker) company overview 2009 185
 Table 43: Booker Group key operating statistics 2004-2009 187
 Table 44: Booker Group trading record 2002-2009 187
 Table 45: Premier store profile 1998-2009e 190
 Table 46: Sainsbury company overview 2009 195
 Table 47: Sainsbury UK supermarkets key operating statistics 2003-2008e 197
 Table 48: Sainsbury group trading record 1998-2009 197
 Table 49: Sainsbury neighbourhood retail trading record 2003-2009e 198
 Table 50: Sainsbury store profile 1998-2009 199
 Table 51: Sainsbury store profile March 2009 200
 Table 52: SPAR company overview 2009 205
 Table 53: SPAR sales via HQ and UK store numbers 2004-2009e 208
 Table 54: SPAR sales via UK head office 2000-2009e 208
 Table 55: SPAR UK retail trading record 2005-2009e 209
 Table 56: SPAR store profile 1999-2009 211
 Table 57: Tesco company overview 2009 217
 Table 58: Tesco retail key operating statistics 2004-2009 219
 Table 59: Tesco group sales & UK trading record 1998-2009 219
 Table 60: Tesco neighbourhood retail trading record 2004-2009e 221
 Table 61: Tesco store profile 1998-2009 221
 Table 62: Tesco store profile February 2009 222
 
 LIST OF FIGURES
 Figure 1: Neighbourhood retailing 2009 30
 Figure 2: Neighbourhood opportunities 2009 31
 Figure 3: Achieving growth as dynamics of location change 34
 Figure 4: Number of unaffiliated independents 2005-2013e 37
 Figure 5: The threats in neighbourhood retailing 40
 Figure 6: Neighbourhood market – sales 2004-2009e 44
 Figure 7: Components of neighbourhood market – sales 2009 46
 Figure 8: Components of neighbourhood market – stores 2009 46
 Figure 9: Components of the market 2008 and 2009 47
 Figure 10: N’hood density, space & stores y-o-y change % 1998-2009e 51
 Figure 11: Neighbourhood sales growth % vs total store retail 1998-2009e 55
 Figure 12: Sales growth by location 1998-2009e 55
 Figure 13: Y-o-y change % in n’hood space vs total retail 1998-2009e 58
 Figure 14: Space growth by location 1998 to 2009e 60
 Figure 15: Y-o-Y change % in store numbers n’hood vs retail 1998-2009e 62
 Figure 16: Y-o-Y change % in store numbers by location 1998-2009e 64
 Figure 17: Convenience market sales growth 2004-2009e 65
 Figure 18: Components of convenience market – sales 2009e 66
 Figure 19: Components of convenience market – stores 2009e 66
 Figure 20: Forecourt sales growth 2004 to 2009e 80
 Figure 21: Leading oil companies n’hood sites with a shop 2007-2009 86
 Figure 22: N’hood forecourt shops penetration of petrol stations 2005-2009 86
 Figure 23: N’hood petrol station fuel brands & shares of shop sites 2009 87
 Figure 24: Neighbourhood food specialists sales growth 2004-2009e 91
 Figure 25: N’hood vs total food specialists sales growth 2004-2009e 95
 Figure 26: N’hood vs total food specialists store number growth 2004-09e 96
 Figure 27: Total food specialists sales growth 1998-2009e 97
 Figure 28: Total food specialists store number growth 1998 to 2009e 101
 Figure 29: Off-licence sales growth 2004-2009e 102
 Figure 30: Neighbourhood Parmacists sales 2004-2009e 110
 Figure 31: Alliance Boots pharmacy market share 2004-2009e 115
 Figure 32: Alliance Boots share of NHS market 2004-2009e 116
 Figure 33: Alliance Boots share of OTC market 2004-2009e 117
 Figure 34: Lloydspharmacy retail pharmacy market share % 2004-2009e 119
 Figure 35: Lloydspharmacy share of NHS and OTC markets % 2004-2009e 119
 Figure 36: CTN sales growth 2004-2009e 123
 Figure 37: Retail spending by location 2008 and 2013e 130
 Figure 38: Neighbourhood sales 1998-2013e 131
 Figure 39: Neighbourhood sales 2008 and 2013e 133
 Figure 40: Neighbourhood space 1998-2013e 134
 Figure 41: Neighbourhood store numbers 1998-2013e 134
 Figure 42: Neighbourhood winners & losers in sales & space 2008/09 136
 Figure 43: Market share changes of profilled n’hood stores 2008 on 2007 140
 Figure 44: C-stores market shares 2007-2009e 142
 Figure 45: The Co-operative food operating profit to January 2004-2009e 151
 Figure 46: The Co-op n’hood sales and growth to January 2004-2009e 152
 Figure 47: The Co-op Group neighbourhood market share 2004-2009e 155
 Figure 48: The Co-op Group convenience-store market share 2004-2009e 156
 Figure 49: Costcutter neighbourhood sales and growth to April 2004-2009e 163
 Figure 50: Costcutter neighbourhood market share 2004-2009e 166
 Figure 51: Costcutter c-store share 2004-2009e 167
 Figure 52: Budgens neighbourhood sales and growth to Dec 2004-2009e 174
 Figure 53: Londis n’hood sales and growth to December 2004-2009e 175
 Figure 54: Musgrave NI n’hood sales and growth to December 2004-2009e 176
 Figure 55: Musgrave GB n’hood sales and growth to December 2004-2009e 177
 Figure 56: Musgrave neighbourhood market share 2004-2009e 179
 Figure 57: Musgrave c-store market share 2004-2009e 181
 Figure 58: Booker Group n’hood sales and growth to March 2004-2009e 188
 Figure 59: Premier neighbourhood market share 2004-2009e 191
 Figure 60: Premier c-store market share 2004-2009e 192
 Figure 61: Sainsbury n’hood sales and growth to March 2004-2009 198
 Figure 62: Sainsbury neighbourhood market share 2004-2009e 201
 Figure 63: Sainsbury c-store market share 2004-2009e 202
 Figure 64: SPAR n’hood sales and growth to December 2004-2009e 209
 Figure 65: SPAR neighbourhood market share 2004-2009e 213
 Figure 66: SPAR c-store market share 2004-2009e 214
 Figure 67: Tesco neighbourhood sales and growth to February 2004-2009 220
 Figure 68: Tesco neighbourhood market share 2004-2009e 223
 Figure 69: Tesco c-store market share 2004-2009e 224