Julian Hunt The grocery industry's premier league retailers have a fantastic opportunity to widen the gap over the sector's poorer performers as the world economy enters a period of modest recovery, a top consultant told this week's IGD global retailing conference. Johanna Waterous, a director with McKinsey, said there was a small band of 10 strongly performing retailers, Tesco among them, that investors favoured. This premier league of operators accounts for 60% of the capital growth of the world's grocery retail industry. "The capital markets really like these guys," she said. The reason is simple: the premier league operators consistently deliver the best returns for investors. However, investors wanted more growth from these firms. And Waterous suggested this would be tough given the schizophrenic behaviour of consumers and fears of a slowdown in some countries. She pointed out that of the companies in the champions league during the last global downturn, only 40% were still in the box ­ half had slipped back and 10% had either gone bust or been acquired. "So even being a champion is no guarantee of success," Waterous added. Nevertheless, she suggested that, with their strong balance sheets, the current crop of premier league players could look at four main growth strategies ­ consolidation, the introduction of new products, development of new formats and channels, and international expansion. Of these, cross-border M&A activity is ruled out by many operators as they focus on organic growth in new markets and in new formats. Waterous said this was part of the longer term strategic view being taken by the top companies as they looked at how best to "widen the leadership gap by anticipating and exploiting consumer schizophrenia while avoiding over-reaction to countries where there is a slowdown". Her prognosis for the 95% of players in either the second division or the relegation zone was less positive. And she urged them to avoid the "doom loops" that were adopted in the last two recessions. Waterous explained that weak companies either tried to save their way out of poor trading by cutting costs and investment, or tried to buy their way out of trouble by heavy investment in discounts and promotions, which canny shoppers cherrypicked. Both options, she said, created vicious loops ­ "negative reinforcing cycles" ­ that failed to lead to sustainable recovery in sales or profit. {{NEWS }}