European new entry into UK grocery retailing

Until recently, the UK grocery retail market was extremely national in nature, dominated by home-grown incumbents which had developed from regional strongholds (Sainsbury in southern England, Asda in northern England, for example). The lack of any significant presence in the UK market from Europe or the wider world was a remarkable characteristic, particularly when Europe had a number of cross-border grocery retailers. In the final years of the last decade, this changed, when two European grocery retailers, Germany's Aldi and the Danish Netto, entered the UK market. The entry of these retailers, and the possible entry of others like them, raises a number of significant matters relating to the structure, present and future, of the UK grocery retail market. The objective of this article is to explain how these new entrants were able to penetrate the market's barriers to entry, to analyse the events which created the market opportunity targeted, and to describe the response of UK incumbents and the long-run effects on the market which are likely to result.