Definition of Concentration Ratios – The percentage of market share taken up by the largest firms. It could be a 3 firm concentration ratio (market share of 3 biggest) or a 5 firm concentration ratio.
Concentration ratios are used to determine the market structure and competitiveness of the market. For example, an oligopoly is defined when there is a 5-firm concentration ratio of greater than 50%
- Tesco – ~ 28.3% (largest share)
- Sainsbury’s – 15.8%.
- Asda – ~ 11.6%
- Aldi – ~ 10.6% (one of the fastest-growing discounters).Â
- Lidl – ~ 8.3%.
- Morrisons – ~8.3%.
- Co-op – ~5.4%
- Waitrose – ~4.4%.Â
- Iceland – ~2.3%.Â
- Ocado (online) – ~2.1% (fastest-growing smaller player).
Five Firm Concentration Ratio of Supermarkets 2025
| 1. Tesco | 28.3 | |
| 2. Sainsbury’s | 15.8 | |
| 3. Asda | 11.6 | |
| 4. Aldi | 10.6 | |
| 5. Lidl | 8.3 | 74.6% |
The Five firm concentration ratio is 74.6%. Which makes it an oligopoly
Sources
Importance of concentration ratios
The degree of competition. If the five-firm concentration ratio rises from 40% to 60%, this is an indication of a fall in competitive pressures. It could lead to higher prices for consumers
Indicate monopoly power. In the UK, the legal definition of a monopoly is a firm with more than 25% market share. Any firm over this threshold has an important market position.
Regulatory oversight. If there is a three-firm concentration ratio of over 80%, then there is greater scope for collusion and abuse of monopoly power. In this kind of industries, the government may need to use a regulator to check monopoly power isn’t being abused. For example, the government has a regulator for railways, electricity and gas – where the market is dominated by a few small firms.
Changes overtime. In 2010 the 5-firm concentration ratio of UK supermarkets was 66%. In 2025 it is 74.6%. Which suggests greater concentration and less competition, though the greater concentration is driven by cut-price discounters like Aldi and Lidl.
Concentration ratios and contestability
One feature of concentration ratios is that they do not indicate the level of contestability. A contestable market has freedom of entry and exit. The threat of competition is sufficient to keep prices low – even if the concentration ratio is quite high.
Examples of market concentration in the UK
This is from a study by the Competition and markets authority into the market share of UK industries. It shows that in electricity distribution the five largest firms controlled nearly 90% of market share. The most competitive markets were retail, motor vehicle trade and road/land transport.
Market share of UK petrol stations
- In the UK retail petrol industry, there is five-firm concentration ratio of 66%
- There is a three-firm concentration ratio of 44%
- The growth of supermarkets selling petrol has made the market more competitive – especially because supermarkets are willing to sell petrol at a competitive pressure to attract customers to shop at the supermarket.
Search Engine market share
Note: I have seen other measures which put Google on closer to 80% of market share. This is from Statcounter.com’s own aggregate statistics.
UK Supermarket industry
The five firm concentration ratio for the industry is 66% – a case of an oligopoly.
- Tesco – 23%
- Asda 13%
- Sainsbury’s 13%
- Morrisons 12%
- Co-op 5%
- Marks & Spencers – 5%
- Waitrose – 4%
- Iceland – 2%
- Lidl – 2%
- Somerfield – 2%
- Aidl – 1%
- internet – 3%
- Others – 14%
What is five firm concentration ratio in 2010?
What suggest has happened to the market over time
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