Among the "big-four" supermarkets (Tesco, Asda, Morrisons, Sainsbury's) only Walmart-owned Asda has the capacity to undertake further rounds of grocery price cuts because the other three have "limited financial capacity to absorb further margin declines", a report by financial analyst Moody's has claimed.
But the report also considers consolidation among the Big Four "unlikely given their already significant markets shares". The report foresees the big four's market share to continue to decline by four per cent by 2020, with discounters Aldi and Lidl reaching a combined market share of 12-15 per cent as they continue to open new stores, just as the big four close unprofitable stores to save costs.
The big four's margins are also unlikely to recover over the next 12-18 months, it found. Senior analyst Sven Reinke said: "However, the UK's economic growth, rising real wages and improving consumer sentiment could support the big four's gradual recovery from fiscal 2016-17."
The big retailers will "need to develop strategies to operate successfully with lower market shares", the report also suggested.
Vegetables have been consistently among the grocery items with which the main retailers have conducted an ongoing price war since last year in a bid to hold onto market share, which has contributed to overall deflationary pricing in the grocery sector - now at its lowest since 2006.
Sainsbury's chief executive Mike Coupe last week blamed "strong levels of food deflation and a highly competitive pricing backdrop" combined with "the effect of our own targeted price investment" for a 2.1 per cent fall in like-for-like sales at the supermarket for the 12 weeks to 6 June, despite reporting higher sales volumes.