Assessing Market Size and Future Demand for Vegetarian Food in UK: Expansion Strategy for Tesco

This presentation assesses market size and trends for vegetarian food in UK, focusing on expansion strategy for Tesco. It includes identification and selection of market segment, market trend analysis, Tesco competitors, strategic group, SWOT analysis, and UK food industry overview.

Task 3
Assess market size and
future demand

Introduction
• The business unit needs to evaluate market
size and trends before expanding its
operations.
• The presentation is going to assess market size
and for vegetarian food in UK.
• It focuses on expansion strategy for Tesco.

What a market consists of?
A market consists of all types of consumers who purchase the variety
of goods and services. A market is sub-divided into many small segments.
These all segment can be considered as a different market. Therefore, it is very
important for every business organization to select the best suitable market
segment in order to increase the demand and supply of the products and
services what they are offering. Moreover, an organization should select the
market considering its size, growth, availability of competitors and many more
things.

Selection of Market
• The main focus of Tesco is to establish its
foothold in vegetarian food market of UK.
• United Kingdom is selected as a market for
Tesco to expand its vegetarian food market
segment.

Identification and selection of the
market segment
• Tesco is a retail company who is expanding its business in UK
by offering vegetarian food products to the customers of the
United Kingdom. In order to start the vegetarian food market
company should focus to sell its products and services to the
old age people who normally faces various health issues. It
should also aim to sell its product and service to the area
where large number of non-resident are living in United
Kingdom.

Contd.
In order to start up the vegetation food market in United Kingdom Tesco
can select the best market; by dividing the big market into small segments.
Company can divide the market on the basis of demographic,
psychological and geographical bases.
 In Demographic Segment company can focus on the age of the
individual. It should focus on the old age people above the age of 45 years
who normally faces various health issues.

Contd.
• In Psychological Segment company should focus on the interest of the
customers. What actually customer want from them. What type of products
they want and how they can be attracted towards the purchase of the
products.
• In Geographical segment, company should focus on the area where large
number of old age people are living and the area where non-resident of UK
are living like citizen of India, Pakistan.
Thus, taking into consideration the all these factors Tesco will be able to
properly flourish its vegetarian food market in UK.

Market’s size volume or value
• Rate of people preferring the vegetarian food products have been
increased from year 2013 to 2014 in the country like UK where large
number of people have started facing various health related problem. Sales
of vegetarian products has also increased because of the arrival of large
number of non-resident who normally prefers to eat vegetarian food
products. Therefore, it can be estimated that the market size of the Tesco
has increased in lieu of selling the vegetarian products.

Contd.
• It is also estimated that market volume of the vegetarian products has
increased with the increase in size of market. Therefore, it can also be
estimated that with the increase in size and volume of the vegetarian
market; value of variety of products of Tesco has also increased. The
reason behind this could be that nowadays people are becoming more
health conscious in regard of which they want to reduce the reduce the
consumption of non- vegetarian products like mutton, chicken and other
related products.

Market trend
• It is found out that market trend of the vegetarian products has shown a
tremendous growth in the UK market. Thus, it is find out that in the year
2013 the sales of meat free products hit the sales by £625m which was
further increased by £657m in 2014. It is also noticed that about 12% of
the UK population are using both the vegetarian and non-vegetarian
products and about 20% of the people between the age group of 16-25
years are self identify. It was also seen that about 53% of the orders in the
vegetarian restaurants has increased as compared to previous year. It is
seen out that order of vegetarian products has increased from 1.7m to
12.8m in the year 2014.

Analyses of market trend
• From the following analyze it is can be concluded that introduction of
vegetarian products in the market has affects the growth of the Tesco.
Introduction of products aid the company to increase its brand image by
increasing its sales. Increased sales will lead the company towards the
market growth. It is find out that the consumption of meat free products
has increased in the areas where large number of old age people and non-
resident are staying. Therefore, at last it can be concluded that introduction
of vegetarian products in the UK market has proved to be beneficial for the
Tesco.

Tesco Competitors
• ASDA
• Sainsbury
• Morrisons
• Aldi
• Lidl

Analyze of Tesco competitor
Tesco is the large UK grocery and retailer firm whose main competitors are
ASDA, Sainsbury's and Morrison's. These four companies are normally known as
Big Four in the United kingdom. Slowly and gradually Aldi and Lidl a German
retail company and Waitrose also becoming one of the strong competitors of
Tesco.
It is also analyzed that Tesco is achieving popularity due to the opening of
convenience stores. It is also find out that up to August 2015, Tesco has became
the market leader with 28.4% market share in the grocery market, followed by
Sainsbury and ASDA which were just under the 17% market share.

Strategic group
• The strategic group refers to a group of
companies that operates within similar
industry or work on similar combination of
business models.
• The companies that adopts similar kind of
strategies are also considered as a strategic
group.

Strategic group that Tesco belongs
to
 Tesco belong to the strategic group of ASDA and Sainsbury's.
This is because all these stores are selling their products at a high
discount rate. Due to this similarity in the business strategy all
these companies comes in a strategic group. The other main
similarity in these companies is that two German retailers Lidl
and Aldi are emerging players in UK retail industry and by
generating economies in scale in their operations these business
firms are giving a stiff competition to these three giant players.

Contd.
 Currently, share of Lidl and Aldi in the UK retail industry is
low but their growth rate is nearby to 20% which is higher
then growth rate of Tesco ,ASDA and Sainsbury's which is
2 or 3%. hence, all these three companies are facing same
challenge from German retailers and due to this reason also
Tesco ,ASDA and Sainsbury's comes in a same strategic
group.
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Identification of supermarket likely
competitors
 Lidl, Aldi, Asda, Sainsbury and Morrison are the major
competitor of the Tesco. Lidl and Aldi having a strong
presence in the UK food market. They are offering
quality food items at the affordable prices to the people.
Due to this reason, their market share in this segment of
retail industry is increasing. Asda, Sainsbury and
Morrison are also present in the industry but they are
not able to curtail their cost. Due to this reason these
firms are unable to generate economies of scale in their
business.

Contd.
 Whereas, in case of these three large retail players very
low amount of economies of scale in generated. In order to
remain in the market it is necessary for these companies to
offer product at a low price. This compel firms to sell their
products at a competitive price. Same thing is happened in
case of Tesco. Due to this reason Tesco is facing a loss in its
business. It is also compelled to close its stores in some cities
of UK. Hence, it can be said that Tesco is facing a
competition from Asda, Sainsbury and Morrison. But in
comparison to these three Lidl and Aldi are giving a very
high competition to the Tesco.
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Plan and analysis of supermarket
competitors
 The main players in the UK supermarket are Tesco, Sainsbury,
Lidl, Aldi and Morrison. The market share of Lidl in the UK
retail industry is 3.7%. Whereas, same of Aldi is 5.3%. market
share of Tesco is 28.4% followed by Sainsbury 16.9%. Morrison
market share is 10.9%. Hence, it can be said that Tesco is a
largest retailer in the UK followed by Morrison and Sainsbury.
But on the basis of growth rate Lidl and Aldi are far ahead of
these top rival firms.

Porter’s five forces model

Contd.
 Threat of new entrant- It is very difficult to make entry in to the UK retail
market due to strong grip of existing market players. Hence, threat of new
entrant is medium for Tesco.
 Bargaining power of suppliers- Tesco directly purchase products from
companies and their product distributors in bulk. Large of suppliers are
supplying products to the Tesco and due to this reason there bargaining power
is low in context of Tesco.
 Rivalry among firms- There is high rivalry among firms and due to this
reason Tesco is facing stiff competition from the rival firms. All companies of
the UK retail industry are paying focus on generating economies of scale in
order to offer products at low price. Hence, there is very high rivalry among the
retail firms in the UK.

Contd.
 Bargaining power of buyers- Bargaining power of buyers in the UK retail
industry is moderate because all retail stores offer products at a nearby prices to
each other products. Hence, due to this reason bargaining power of buyers is
moderate in UK.
 Threat of substitute products- Threat from substitute products is very low
because same products are served by the all retail firms that are operating in the
UK retail industry. Overnight, so many new products can not comes in
existence. Due to this reason threat of substitute products is very low for Tesco.
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SWOT analysis
Strength
 Tesco has large market share in the UK
retail industry.
 Have a well established brand name.
Weakness
 Lack of core competencies that are
required to give completion to the Lidl
and Aldi.
 Not able to generate sufficient
economies of scale.
Opportunity
 Due to reduced unemployment rate in
future demand for retail products will
increase in UK.
 Recovery in economies of developing
nations create ample opportunities of
business expansion for Tesco.
Threat
Lidl and Aldi are generating huge
economies of scale and due to this reason
they are eligible to make available
products at cheaper price to the
consumers. Hence, growth of these two
firms is big threat for the Tesco.

UK food industry
 In UK food industry there are many varieties of products that are served by
the large retail players. As per facts meat sales grow by 6.6%. In terms of
value its sales is around 252.9 million. On volume basis its demand plunged
by the 3.8%. Sales of Quorn food increase by 20%. in case of many retailers
this sale increase by 30%. hence, it can be said that Quorn food has a great
demand in the UK market. Fry vegetarian products sales also rose by 20%.
Thus, it can be said that there is a high demand for the vegetarian products in
the UK and in upcoming year also sale of food products will increase by
20%.

Thank You
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