Boots faces beauty counter price battle

BRITAIN'S pounds 11BN health and beauty retail market is facing a ruinous price war which will see supermarket operators slash prices to grab market share from specialists such as Boots.

The warning comes in a survey published today by Verdict, the retail consultancy. It says the takeover of Asda by Wal-Mart, the US discount giant, will polarise the market between the "commodity" players such as supermarkets and the "pampering element". The report says Boots will prosper in the short term but may find it hard to maintain customer loyalty as grocers add pharmacies to their stores.

The report claims that health and beauty retailers have enjoyed fat margins in the past when they have been largely bypassed by growing price competition in other markets. Wal-Mart's takeover of Asda will change that, Verdict says.

Wal-Mart has health and beauty sales of pounds 8bn compared with Boots' pounds 2.8bn. This buying power advantage will enable it to drive higher volumes with lower prices, Verdict claims.

Major supermarkets have already wrested top place in the market from specialists such as Boots and Superdrug for the first time, the report says. They account for 42 per cent of the UK's health and beauty market, slightly more than the share of Boots, Superdrug, Body Shop and others.

Boots increased its share of the UK's toiletries, cosmetics and over the counter medicines market from 25.2 per cent to 25.8 per cent last year. This is still more than twice the share of its nearest competitor, Tesco.