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2026.09.29 | TB | Retail | UK Grocery Retail 3Q26 Demand Trends

原标题：Pulse – UK Grocery Retail – Q3 2026 Demand Trends & Market Share Movements

#consumer

Third Bridge · 2026-09-29

Analyst-led • 22 Sep 2026

Companies: TSCO GB, SBRY GB, OCDO GB, MKS GB

Gary Mills (GM) Independent Consultant

Orwa Mohamad (OM) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

OM [00:00:03]: Welcome to Third Bridge's Interview entitled Pulse – UK Grocery Retail – Q3 2026 Demand Trends & Market Share Movements. I'm Orwa Mohamad, and I'll be facilitating today's Interview with Mr Gary Mills, former Director, Group Retail and Logistics at Morrisons.

Before we start, please state I agree or I disagree in response to the following statement, and the statement is: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

GM [00:00:46]: I agree.

OM [00:00:48]: Could you give an introduction to your background?

GM [00:00:52]: Yes. I spent 30 years at Tesco. I was a Director at Tesco for 15 years. My last two positions in Tesco were Managing Director of the Business in Ireland, and I was also Managing Director of the Convenience business in the UK. I then moved to Morrisons, where I was the Group Retail and Logistics Director for five years. Latterly, I've been the CEO of a foodservice company, and I now do consultancy on an independent basis. Yes, I'm telling you, I very nearly joined the Asda team a couple of years ago under Mohsin, was offered a Group Retail Director job there, but declined for personal reasons to continue some of my personal ambitions. Reason of throwing that in is that I got pretty close to the Asda business during that time as well. It gave me a fairly rounded view of all of the major players in the retail sector.

Questions

00:01:59] What approximate like-for-like sales growth or decline do you expect to see for the UK grocery retail market as we near the end of Q3 2026 on a volume vs value basis?

GM [00:02:18]: I don't think there will be a significant change from Q2. I think we're talking 2.3-2.5%. Food inflation is ticking around about the same number. I think what we have saw in the latter part of Q3 is virtually flat volume growth really and like-for-like being fuelled mainly by food inflation. I think that can be put down to some sapping of consumer confidence post summer, post-World Cup with all of the geopolitical and macroeconomic stories that are in the news. I think it's a fairly sobering end of summer coming into autumn, end of Q3. I think we'll see a lot of increased promotional activity and various strategic shifts into Q4 as retailers try to capture the hearts and minds of customers just getting into that very important quarter.

00:03:30] How has the UK grocery retail market trended in terms of the average spend and shopping frequency? How has it compared to previous quarters, and is it stable?

GM [00:03:42]: I think there's a moving trend or otherwise, it's quite marginal, but if you were looking at a graph in terms of spend and frequency, they're going the opposite direction. People are spending. Basket size is decreasing. Frequency of shop is increasing. I think that's as consumers try to control their spend. I think there's also as fresh food is more important than household spend. The days of one big shop doing it for the week have gone, plus the different channels of shopping, which we'll come to in a moment, convenience, online are increasing. I think also if you look at the spend by age category, you can see that generations, gen Z, generation X are spending less money more frequently and that shift is going to continue as there's less people of certain generations and younger generations coming through will shop almost on a daily basis to just buy what they need to eat as opposed to stocking up.

The exception to that would be maybe at seasonal times. There's no doubt that retailers are having to move with that trend in terms of formats, channels and how they're actually set up. I think a really good example of this as we see the growth in Marks & Spencer Simply Food. While M&S from a value perspective wouldn't be high, would be obviously seen as premium retail because people are doing less frequent shops. Smaller footprints are becoming more common. That type of shop will increase, whereas the bigger hypermarkets will continue to struggle as we saw in recent years.

00:06:06] You mentioned M&S [Marks & Spencer], which brings to mind premium private label lines. Is that growth continuing even among traditional grocers, and looking at ranges such as Tesco's Finest, what accounts for the difference?

GM [00:06:23]: Yes. Very much so even though Tesco had a fairly muted Q3 and over the summer was lagged behind on a like-for-like basis. What was very marked was their increase in their Finest products where they saw double-digit growth. I think the reason for that is there's been lots of R&D and investment into the premium label, but also it's consumers treating themselves in the supermarkets where they're maybe not going out to eat. Again, this is all part of how consumers are dealing with increasing fuel prices and high interest rates. It's a really good opportunity for premium retailers and premium brands within all retailers to look at promoting and growing that private own label. There's clear movement there. There's a lot of work has been done, which we'll see on the shelves in the coming weeks and of premium into Christmas. This is always a very big time for supermarkets in terms of premium, Big Night In coming out of summer, back-to-school, consumers feeling the pinch and treating themselves in-house as opposed to going out. We're seeing that within private premium label, but also with premium retailers, Marks & Spencer in particular, as consumers from all the demographics look to treat themselves. It's not just in a higher demographic that we're seeing this.

00:08:16] Inflation has edged up slightly to 2-3% in the UK grocery retail market over the four weeks leading up to 6 September 2026. Do you think this is the start of another sustained inflationary period? I am aware it's a very volatile environment, but what is your outlook for grocery inflation going forwards?

GM [00:08:39]: I think if you could separate food inflation from the impact of fuel, it will begin with 2%. I think 2.3% and 2.5%. Obviously, fuel puts inflation up overall, the impact then on fuel and having to ship goods around the globe could move it. I don't see food inflation going over 3%. I think 2.5-3%, and there's a number of big categories now actually in deflation. A lot will depend on worldwide events and the price of Brent crude. If it stays even in and around the current levels, then I think we will see food inflation starting with the 2%, not getting above the 3% would be how I see it at the moment.

OM [00:09:39]: You mentioned some categories are in deflation. Which are categories those?

GM [00:09:48]: The dairy sector, so cheese and butters are virtually flat YoY, meat after several years of high inflation. The juice sector, cereals and bakery. Some fairly big categories, they are seeing virtually no inflation or slight deflation, which is helping. That's counteracted against some other categories where we're seeing the opposite, fish, energy, soft drinks. Some fruit sectors have been affected because of weather. Cucumbers and satsumas have been a couple where you've had significant inflation throughout the summer because of drought in the continent. Chocolate and coffee continues to be inflationary because of the global shortage of cocoa. There's a real mix there within those categories.

00:10:54] How would you describe the level of pricing and promotion across the industry in Q3 2026? How does it compare to prior periods?

GM [00:11:09]: I think we're seeing promotional activity at a fairly high level. I think a lot of the retailers have been fairly successful over the summer. Morrisons comes to mind as an example, a high percentage of that is in promotions. The summer of the World Cup, I think they've seen fairly strong activity there. I know it's a question further on, where you're asking how are the big brands responding to the increase in private label. I think that is in the answer that there's a lot of strong activity within brands. I can touch on what that looks like. I'm seeing, for instance, more promotional activity. There's a couple of really strong indicators when supermarkets are having to promote to get like-for-like, the 25% off when you buy six bottles of wine or more, there's more of those promotions being run through now. I saw over the summer that Tesco as an example, extended their colleague discount period to 15% over the entire summer period. When supermarkets run a colleague discount scheme, they got to generally gives them about 0.5% like-for-like. They have to pay for it, but it is a very important trade driver, particularly when you're a Tesco, when you've got the hundreds of thousands of staff that they have.

There's no question that promotional activity is high, and I think will continue as consumers continue to shop around. I saw another interesting stat that in a poll of consumers surveyed that I think circa 85%, now of all customers have a loyalty card of some sort. They're starting to shop into that. Good for those who have it. I think those retailers will continue to benefit from that. Yes, as I say, there's certainly plenty of bargains to be bagged when you walk around the supermarket. In many cases, you have to have the loyalty card to get it.

00:13:28] What change do you expect to see in terms of EBIT margins for the sector in Q3 2026 vs Q2 2026?

GM [00:13:44]: The two big players that are still in the public sector, Tesco and Sainsbury's have offered, I think, half-year results were fairly encouraging in terms of end of year expectations. I think they're certainly to the middle or the higher end of consensus. I think they manage the headwinds of inflation, of fuel, the cost savings are on track. I do expect that EBITDA margins will be to the mid-to-high point of consensus as we enter Q3. That's all subject, of course, to global headwinds. I do believe that they have a handle on cost. They've now lapped all of the National Insurance and hikes. They'll be hoping there's no nasty surprises in the budget that's going to become a further headwind. If that doesn't tend to be the case, if we don't see a spike in oil prices, then I don't think there's any underlying reasons why there shouldn't be a fairly positive outlook to what's delivered Q3 and then into the end of the year.

00:15:07] Could you elaborate on the market share movements in Q3 2026?

GM [00:15:19]: Yes. Just one before that, just looking through your questions on promotions. Just one thing to note among the brands is that what I am seeing is a real increase in multi-buys. Lots of brands with the retailers. These multi-buys are running for more than the normal promotional cycle. I think that's their way around trying to eat into private label. I think that's going to be a significant factor as we get into Q4. Yes, in terms of market share, no major changes. Tesco come off a little bit. I don't think it's anything to be massively concerned with. Sainsbury's has continued to consolidate. Asda didn't lose share, which is the first time in a while. Morrisons ticked up a little bit. Morrisons had a decent summer period. World Cup and weather, I think their size of store, their fresh food, their demographics, I think, helps when you have World Cup events and the weather and they took advantage of that. I think Lidl was the big winner, gaining even over Aldi within market share on a smaller increase, smaller base, but we've now got Marks & Spencer above 4% and continue to grow and they have a fairly rapid new store expansion programme. I say new store sort of all on food.

Yes, it's been an interesting quarter because Morrisons and Asda who were lagging have at least stabilised. Tesco coming from a high base slipped a little bit. Hence, I think that colleague discount offer that they put on for a couple of extended periods to try and get a bit of share back, a bit of like-for-like going. It proves how competitive the market is. Tesco have won for a number of months in terms of market share as have Aldi and yet they probably slipped a little bit in the last quarter, which, as I say, shows that it's still a highly volatile and competitive marketplace.

00:17:47] How do you assess Aldi slipping behind a bit?

GM [00:18:00]: I think Lidl have opened a few more stores. I think Lidl have closed poor, small stores and opened larger stores as a result of it. I think the Lidl loyalty app, I know Aldi have trialled something, have now come off it. I think in the battle of the discounters, Lidl are winning and Aldi have lost a little bit to Lidl. Then at the premium end of the market with strong own-label performance continued in Tesco, Sainsbury's, M&S, eats a little bit into Aldi also. They have a bit of a battle, certainly not what you would call a crisis. Again, it just shows their competitive nature. I think the headline in this is how strong Lidl have been. I think if you go back a number of years, if you remember back when discounters first hit the shelves, there were certain demographics wouldn't have shopped in discount, then it became really trendy, but it was more Aldi than Lidl. Aldi were capturing that market, particularly in middle England. That's switched now. I think a lot of that has been to do with the refurbishment of Lidl stores, the new stores that have opened which are brighter, bigger, more range. I think Lidl's programme over the last five or six years is starting to bear fruit.

OM [00:19:49]: Are you seeing any new moves from Aldi and Lidl beyond what we've discussed so far?

GM [00:20:01]: I think they still get this dilemma about brands because consumers regard them as the big six, not the big four. There's an expectation they have more brands. I think that's a slight dilemma for them because they don't really sell brands significantly cheaper than the big four. They just can't. There's no margin. The more brands they bring in, it might tick a box for what consumers want, but it does dilute their overall margin. Also the fact that they are building bigger stores, putting more into in-store refurbishments and increased capital, that does have an impact on their bottom line. For them to continue getting the balance of fantastic value for money while becoming a better supermarket to shop in is part of the dilemma that they're having as the fight back over the last number of years from the big four has reduced the price gap with them.

They continue to innovate within their premium label. They're continuing to be strong on the non-foods and the Lidl app, in particular, has proved to be very successful. The opening programme is still 60-70 new stores a year. They're continuing to grow, but I think the gap in price, I think the expansion of new stores is slowing and the demand from consumers is more demanding on how their stores are set-up and what they're offering. They're in the self-service checkouts now but that does increase their security risk, which they were always very concerned about. Yes, I think they're facing a real battle in the UK. While still successful, it's their underlying growth and their underlying price difference is diminishing as the old big four have really come up to the task of being more competitive.

00:22:35] Asda has suffered the most from the discounters, though it has reported sales growth for the first time in two years. Do you think we are finally seeing the results of lower prices, and has the company already hit the floor?

GM [00:22:57]: Yes, I think it's early days. I think they're coming from a very low base. If you look at two- and three-year like-for-like, it's still negative. There's no question that they have attempted to embark on where they were successful back in the noughties and Rollback and on price being the driver of that. That is expensive to maintain, and as I said, I think it's too early. They've been encouraged by the fact that they have saw growth for the first time. They'll be encouraged by what consumers are saying with regards to price. Their customer metrics, however, are still very low compared to what they would have been in their heyday. They're paying the price for investment in price with labour shortages, availability and service in their stores. Morrisons are very similar, by the way, on that is that if you read the Morrisons headline numbers and 3% growth reported a couple of weeks ago and 15 consecutive periods of growth, I think they quoted.

They still got the highest payroll percentage while they're now embarking on a hybrid Market Street model, which, as you know, in these calls I've been calling out for several years now, I still think they have further to go with that. Their consumer metrics on availability and service are the lowest of the big six. As a reminder, the reasons that people choose a supermarket is always based on location, but then price. While availability and service is lower than that, they are still contenders. If you don't fix those, then generally, that catches up regardless of the work you've done on price. I think both Asda and Morrisons as well, they've enjoyed a better quarter. They've had to strip a lot of labour out to afford the price investment they've made that has made them a less satisfactory shopping trip. If they don't fix that that will eventually erode their like-for-like. I think that's the dilemma that they both face.

00:25:27] There is a risk of us having benefited from an overall buoyant market in a World Cup period. Do you think that has more of a role in the like-for-like growth that we've seen?

GM [00:25:47]: I think one thing that if you consider the marketplace and while everyone enjoys the summer and everyone enjoys World Cup, certain demographics enjoy it more. I think generally, what we saw is that some of the lower demographics will splurge a little bit more on weather and World Cup. I think Asda and Morrisons are always well placed to deliver on that. They did promote heavily as well. There's no question that a rising tide takes all boats with it. They will have definitely benefited from a hot summer and from World Cup, which is lagging into the next quarter. We'll be interested to see if they can maintain that as it turns to the Halloween and Christmas shop. As I say, both will be encouraged, but it's against the low base and it's against the market that showed overall growth due to lots of external factors. I think the big challenge will be if they can afford and maintain the price investment with the still very cumbersome debt that they have and the interest payments they have to pay on the debt. That's continued to be a challenge. I think what we saw, particularly with Morrisons over the last two or three years is that they've had multiple goes at some price launch, and they've called it different things. The latest one we've all seen, but they've never been able to sustain it. That's going to be the challenge as we move forward.

00:27:55] With Morrisons in particular, is there more to add on its performance and ability to hold its own price in a market that's been so competitive? Even Tesco has seen the effects.

GM [00:28:15]: Yes. My view on Morrisons doesn't change. They have made some inroads into reducing their reliance on Market Street both externally, manufacturing-wise, they closed their bakery plant as an example, Rathbones Bakery plant, which was unprofitable. They have closed counters in stores. Then I saw where they got a bit of backlash from customers and put them back in. Again, that's not the decision that I think you need to make if you have to be radical about how you set up your store. I go back to the fact that Tesco removed all their counters. Yes, there will be some customers who don't like it, but for the long-term success of the business, it was the right thing to do and they haven't looked back. Morrisons have done a U-turn in some of that work. I think the culture of the business is still convinced that their point of difference is Market Street, and they don't get the tech from customers on that. I was pleased to see that they are talking about a hybrid model in some of their stores, but I think they need to go further. They still have percentage-wise, the highest wage bill of all retailers. They starve the rest of the store because they have to fund Market Street, which leads to poor service and poor availability and it's expensive and there's higher wastage and higher shrinkage.

They changed their manufacturing to Myton. It's a different name they call their manufacturing business. They say that it's still profitable, but I think what they're not disclosing publicly is that their manufacturing dictates to their supply chain in their stores, where that doesn't happen with other retailers where it's just on time. There's an on-cost for having manufacturing, which is, I think, hidden a bit when they talk about the profitability of their own manufacturing business. They still got a high level of labour and I think historical cost, which stops them being always competitive. That's why I think you see the prices go up and down a lot. They have the lowest volume in terms of sales per square footage of the old big four and that volume, I think, continues to hold them back in terms of supplier negotiations. They've had an encouraging quarter, but I wouldn't be saying that they found the silver bullet. I think it will be expensive for them to continue what they're doing. Unless they become a bit more radical, they will find themselves removing costs from the wrong areas of the business. Their customer metrics are bottom of the league and you can't get away with that forever and Asda is the same.

Anybody can strip money out of the business, put prices down for a while and think you've done the job, but it's not sustainable. Whereas what I'm seeing in Tesco and Sainsbury's in particular, is that they're very consistent in their messaging and very consistent in their operation, and they're not up and down with both. They don't feel stressed. Asda and Morrisons still feel stressed to get where they've got to. It will be a big, big quarter for both of them to see if they can continue with the improvement that they've had, albeit a very small improvement on a low base. Let's not kid ourselves. Five years ago, Morrisons had a market share of 11%, it's now 8%. Asda had a market share of 15%. It's now, we're 11-12%. There are significant erosions in market share when you had no new players coming into the market. I think some things like-for-like can hide where retailers come from. I think when you're looking at Morrisons and Asda performance, you do need to be mindful of two, three, five-year performances. It will take a while of average to recover to some of those.

00:33:12] You mentioned Tesco feeling the effects of the market being so competitive recently. Could we dig deeper into the company's performance in Q3 2026? What are the puts and takes?

GM [00:33:35]: I think the convenience continues to be strong, double-digit. Of course, the slight handicap of their advantage with so many convenience stores is that if you're going to a convenience store, your basket isn't going to be as big as you're going to the main store. They continue to perform well in convenience and premium own label and in online, but they've suffered in the quarter in their hypermarkets, which I think is sometimes weather-driven. People will shop conveniently and go to smaller shops without going… They don't want to spend the time going to the larger stores. Tesco in particular, have still got a lot of large stores. The supermarket and hypermarkets, the Extra struggled a bit. Convenience and online was good. I think they have been a bit disappointed. I don't think there's any underlying concern. Also the Asda, Morrisons promotional activity was very, very strong in that quarter also. It did take a little bit from them. I don't see that being a continuation. They're up against high numbers in a very successful quarter last year. It will be one to watch.

As I say, the reason they put the colleague discount on was to try and just generate a little bit of like-for-like towards the end of the quarter because July was a bit disappointing for them. Yes, it will be a watch out for them. I think it does, again, play to the point again that the larger hypermarkets, not just Tesco, but Asda have them as well, to a certain extent. are struggling in comparison to the smaller formats. Again, Tesco are well placed because they have the biggest market share online, they're the biggest market share in convenience. I think it's another 80. They're not closing any convenience stores this year, which shows that they're all profitable and they're due to open another 70 or 80. That's not franchise, that's actual Express stores. They will hit 3,000 Express stores by the end of the year, which is quite a number. Yes, I think that's how they push it, and I would expect them to come back strong in quarter four.

00:36:30] What are Sainsbury's puts and takes?

GM [00:36:43]: Because they're not the biggest and because they're the least volatile in terms of performance, they almost go under the radar a little bit, but I think they continue to be better on price than they've been. They continue to, I think, impress in how they've managed to deliver price as competitive as Tesco and Asda, but they closed the gap. I think to their customers, that's acceptable. They still hold a very strong fresh food quality reputation and reality. I think their stores continue to be uncluttered. It still continues to be a pleasurable shopping experience. Nectar has given them something to hit back at Tesco, particularly from a loyalty perspective, where they've removed Argos, they've increased the food hall in particularly food cooking areas. I think as I've said before on this call, they have the most loyal customers, particularly in their heartlands in the south of England and consumers are less likely to switch. I think that loyalty and the fact that they are more competitive, very good and fresh, store operation is very comfortable. They don't look stressed. They have the same message. They don't try to be somebody else. I think they were slightly under the radar, but continue to perform on a very consistent basis. I don't see that disimproving. I think the sale of Argos will help the drag that non-food sales was having. Their clothing range continues to impress. Yes, it's a good news story. They've been well run, good management.

00:38:57] Regarding Tesco's convenience footprint and other retailers, who is performing particularly well in convenience, given Asda's expansion and Morrisons shrinking its estate?

GM [00:39:18]: Let's start with Asda. The franchising strategy is an interesting one. Wholesale was successful when Morrisons started doing it 5-6 years ago. It gives you growth without having to open new stores because the franchisees are buying product off you. They've done the trial store. They're looking to do more. The question will be and where Morrisons is going to be difficult is that if you open a franchise business and don't get your supply chain right, you have the franchise business competing with your core business for space, for transport and you put a strain, one puts a strain on the other. When you start off low, that's fine, but if you expand that that will be interesting to see how they manage that. I see they have the guy who's leading that, Joseph Sutton was at Asda, went on to Morrisons. He's back at Asda. He's a good guy, we know that. They've made good management decisions and having the right people leading that. I think that's definitely an opportunity for growth with them. I think the problem with their Express business and the Morrisons mainly franchise convenience businesses, and I've said it before in this call, is that location is always so important for a retail outlet. It's never more important when there's convenience. If you get it wrong, it just doesn't work.

It's interesting that Morrisons have closed McColl's stores and franchise stores that haven't worked. I think sometimes when you read about the number of convenience stores that are opening, the devil is in the detail. Are they good locations? Are they just a petrol station that's put a shop on to it, but it's not in the right place? I think to date, the property work of Morrisons and Asda in terms of convenience hasn't been great. Don't be fooled by the volume of shops. I think Tesco and Sainsbury's have the best locations and the best convenience business. I think it will be difficult, very difficult for Asda and Morrisons to make inroads into that. I think Asda would need to acquire someone. I think they would need a partnership with lots of independents don't know who they're going to be to get their franchise business up and running. Morrisons had McColl's, which give them volume for wholesale. Obviously, then when McColl's started to struggle, they were left with no choice but to buy McColl's, which didn't really work out there.

Morrisons have had a couple of goes at convenience. I still think there isn't enough convenience locations, good convenience locations in the country now for Asda and Morrisons to make a significant inroad to what Tesco and Sainsbury's have. They continue to grow, and convenience is and continues to be one of the growth channels. Yes, it's admirable that they're making an effort into it, but I'm not convinced that they're going to have the right property development plan to give them the necessary growth and do it profitably as well. It's a significant impact having lived through it and it's a significant impact on your supply chain if you're not set up separately. Tesco have got Booker, which is run separately and therefore, isn't an impact on the business. Morrisons has done a hybrid of wholesale with main business, and it had a detrimental effect to the main business. That can't be underestimated. It's with caution you go into that, but I can understand why they're doing it.

00:43:54] Do you see Asda's franchising strategy as an admission that it lacks the investment to secure the best locations even if they were available, making it a cheap way of expanding into convenience?

GM [00:44:14]: Absolutely. At Morrisons, it was worth a significant percentage of the like-for-like. If you get scale in it and you're set up from a supply chain perspective and you get the right players, then yes, Put it this way, it's the right strategy to pursue, but it needs to be very carefully planned. It's not short. I don't see it being something that's going to give you a quick win. It could take years to develop and years to become profitable and significant.

00:44:49] Which players need the most urgent store investment and which are well-placed? Have you seen any movements in that regard in Q3 2026?

GM [00:45:08]: Asda have put basically capital down. This year, they're talking about a Fresh Look programme for numerous stores. I think it's 200 they're hoping to do. Asda need it the most, and they are starting to do some work, but it's not significant. I think Morrisons need work done after the work that was done 2015 to 2020. They've come off a little bit now and their stores are looking a bit dreary. I think Sainsbury's are better maintained, although they haven't put a lot into major refurbishments. They've maintained their estate better, and because they're pretty consistent, I think they're in less need. Tesco were on the back of the last 12 months of fairly significant investment. The store investment almost mirrors the success of the business. When you're trading well, successful, like-for-like is good, you can afford to invest a bit more. We saw Tesco's and Sainsbury's doing that. I think they'll reap the benefit of that because you do get second and third year growth when you invest in your store refurbishment.

Asda have committed to doing it, although it's on a fairly minor scheme. I'm not seeing a lot happening with Morrisons. M&S are growing with new stores and where they've got additional space, they're taking that. The discounters continue to open new stores. Lidl's repurposing of stores in terms of expanding and also in certain times, closing smaller ones and opening larger ones is impressive and has given them the growth. Yes, it's an important part of your strategy of how to grow the business. You can't ignore it. Unfortunately, Asda and Morrisons with the burden of their debt, I think their store refurbishment programmes are always going to be compromised when they look at how it all needs to be paid for.

00:47:26] In terms of the online space, one of the key recent developments has been Asda's partnership deal with Ocado in May 2026. What are your thoughts on that? Do you think this is the right approach for Asda? Could this be a step change in how the company participates in the online space?

GM [00:47:52]: I think it's been widely known in the industry for some time that the Ocado software and mechanics are the best in the business. Morrisons obviously have stepped back a little bit from using Ocado, and it's expensive. The problem when you go into a deal with Ocado, you're paying for it. The best way is to perfect your in-house model that Tesco, in particular, Sainsbury's have done. Morrisons are doing it also. Asda have it. There are advantages of using the expertise of Ocado. I'm not privy to what the deal is, but certainly, Morrisons worked hard to try and unwind the contract they had because it is expensive. I think it's a bit of a surprise. I believe retailers should be mature enough in their knowledge of how to manage and run online now that they don't need to be using Ocado's expertise in software. I think they should be able to do that themselves at a significantly reduced cost. It's slightly surprising. I understand why they're probably looking to deflect some of what they're doing and getting someone else to help them with an important part of it, but it may not be sustainable as we saw retailers over the years coming into the Ocado and go back out again.

00:49:34] Is the Asda-Ocado deal driven by Asda's IT struggles post-separation from Walmart? Does that force the company's hand into using external partners, given its internal IT issues?

GM [00:50:00]: Yes. I think that's a very good way to look at it. The disruption from their IT change over the cost associated with it has not enabled them to grow in other areas. Therefore, getting someone else to do it for you while you're developing is probably something that they were left with no choice. For a business that is burdened with debt and debt repayment, it's pretty short term and could turn out to be more of a financial burden than an operational benefit.

00:50:43] How is overall demand evolving for online grocery shopping?

GM [00:50:54]: Continues to grow. It continues online. Convenience continue to be the fastest-growing sectors. I keep talking about the younger age groups using it more and more frequently. That will continue. Tesco getting great benefit from Whoosh and the one-hour windows. What retailers are looking to do is have their online more on time. I think the partnership with Morrisons with Amazon, with Just Eat, with Deliveroo, there is such an insatiable demand now from younger generations into pressing a button and having your food delivered as quickly as possible and to take away the burden of having to go to a supermarket that it's not just online as we know it, it's the evolving nature of online in terms of lead times, frequency, different providers, different options. That's why there is still so much investment into improving and growing the online business. Actually, what we also see in a period of high fuel prices is an online increase because it's another reason not to drive your car, so you use the online. That's another reason for it to grow. Yes, it continues to be one of the fastest-growing channels.

The supermarkets are having to evolve in terms of there are less people visiting the actual supermarket. They're visiting more frequently, but less big shops. They're also visiting less in the evening times. I've seen some supermarket closures back to 22:00 is the norm because who would go out to a supermarket late night when you can get it delivered to you? There are cost savings through that. They're having to evolve their operation to deal with the demand at the certain times when they need to pick. All of that will continue to be rewarding but also challenging. A huge chunk of time now within the management team, both in-store and in head office is devoted to the trend on online to making it more profitable, to keeping up with the demand of it as it's up to 25-30% of total turnover in some cases.

00:54:05] What do you think will be the key like-for-like drivers for the UK grocery retail market in Q4 2026?

GM [00:54:19]: On the question you just asked and on one when we talk about online, it's a very important strategic development in particularly Tesco, Sainsbury's and Asda with the bigger stores is the repurposing of space within their stores. That's a separate strategy, which there's a lot of investment going into. You're seeing a lot more sushi bars as an example, and other clothing retailers going in to fill up the space where you don't need them now. That's an important aspect, and it will be important from an EBITDA perspective. I think as we enter what is always the most important quarter of the year with the potential geopolitical macroeconomic headwinds, value for money will continue to be the big news story. The use of the loyalty card to get that value for money will be something that… It continues to be the very consistent theme in Morrisons, Tesco and Sainsbury's. The relationship with the brands, I think multi-buys, you can see as being a big focus. I think the iconic promotions that retailers run, particularly the 25% off six and events will be very important also. Halloween will ever be more important coming up, The Big Night In in September.

I think it's always a time of year where you have to really capture the mood of the nation in terms of coming out of back-to-school, going into seasonal periods, what is it the consumers want, core grocery for back-to-school being really important. Of course, it's the affordability of all of that. Yes, I think it's everything to play for because we saw Tesco come off a little bit. We saw Morrisons and Asda stabilise. I wouldn't say grow. The discounters continue to be strong. Premium retailers will be looking for a good quarter, M&S and Waitrose. It's going to be a very competitive quarter if there's no escalation in what's happening in the Middle East, if the budget is reasonably benign and there's no reason why the like-for-like and the volume will pick up as I think buying to eat at home will become more prevalent. Therefore, that's a good thing and should be an advantage. It should be profitable also because you're selling lots of private own label, premium own label. It should be a good quarter if there's no significant external factors that kick in. I would expect to see Tesco fight back after probably a bit of a disappointing July for them.

The question will be whether Asda and Morrisons can afford to maintain what they've done and at the same time, improve their store operation because one of the big factors in Q4, price is important, but it's never more important in Q4 to be able to get what you want when you want it because there's no point on good value for money and you can't get a lot of what you go for. You get away with that a little bit in the summertime where without being too simplistic, it's all about barbecue and beer. That's the most important factors sometimes, and the soft drinks and things that are associated with the summer shopping. It's more important as you go into the seasonal times that the rounded shopping trip is important. Yes, customers want value for money, but it's important that choice, availability and service comes with it. That's why I fear slightly whether Morrisons and Asda will have that in their locker to be able to deliver on both.

00:59:10] Is there anything else that is important to mention about the UK grocery retail market?

GM [00:59:20]: No. I think that what is interesting, while there's no new players entering the market, I think we are starting to see that supermarkets are beginning to realise the value of opening new space in the right locations again. We're certainly not going to be in the space risk that we were in the '90s and the 2000s, but there's a lot of very strategic new store development going on, which is something we haven't saw in the last two or three years. I think that's a credit to the sector for coming through difficult periods, finding themselves in a position where they've got the CAPEX to do it, but also the necessity of realising that you can't stand still. There's also less store closures happening, which means that they've got rid of a lot of the non-profitable stores over the last two or three years, which is a good news story from a profitability point of view. There was a period of time now where we're seeing lots of closures. We're seeing very little of that now. I think that shows that the sector is in fairly good health and is happy that what they have, they're able to make work for them.

OM [01:00:42]: Thank you very much again for your time and input. It's been very insightful as always and a pleasure.

GM [01:00:50]: Thanks..

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