Down, down, profit margins are down

Earlier this month I travelled to Europe and the UK to undertake a detailed assessment of the supermarket sector. These markets are further down the road than Australia in terms of the disruption from discount supermarkets like Aldi, so it is useful for us to analyse the situation there in order to understand how the situation is likely to unfold here in the next few years. The trip included meetings with Tesco, Jeronimo Martins, Sainsbury, Morrisons, Colgate and DIA. I was also fortunate enough to meet with Archie Norman who has, among other things, been chairman and chief executive of ASDA and was a British MP from 1997-2005. He also advised Wesfarmers on the acquisition of Coles and was instrumental in turning the Coles business around. The key observation is that once discounters enter a market and gain a foothold, they have profound and structural negative impact on profits for the established players. MORE: (VIEW LINK)