Waitrose has long been the darling of British farmers and foodies - but could its crown be about to slip with its latest move into smaller format stores? Next week, it opens the first of three trial Market Town stores in St Neots, Cambridgeshire. At 10,000 sq ft to 15,000 sq ft, the stores are really small supermarkets rather than the c-stores they have been described as, but that hasn't stopped complaints that the new format could jeopardise the businesses of independent delicatessens, bakeries and butchers. And it could be just the first plank in a multi-format strategy that does include c-stores, critics warn. So how serious a threat do Waitrose's new stores pose? And is it really in danger of tarnishing its reputation? The retailer, which currently has 187 outlets and just 4% of the grocery market, is thought to be hoping to open as many as 100 smaller stores, which may eventually include convenience stores of 3,000-4,000 sq ft. The new format is targeting local shoppers who currently drive significant distances to buy food, says Diana Hunter, head of format development at Waitrose. "We want to increase access to the Waitrose brand and small towns are perfect locations for us," she says. The town centre stores will include separate fresh meat, fish, deli and bakery counters and close to 50% of the range will be made up of fresh and chilled foods. They will also promote foods sourced from within a 30-mile radius, which will make up about 1% of the offer. Local producers will be promoted at the front door and in special gondola-end displays and will also be encouraged to come and give tastings and advice to customers, says Hunter. She claims there "isn't much competition" in the type of towns Waitrose is targeting and that "there are foodies in those locations who will be glad we are coming into town". However, while the Association of Convenience Stores is confident that the stores will not compete directly with the majority of its members , more specialist retailers are not so convinced. "It's bad news because Waitrose is the one store that my members really fear," says Bob Farrand from the Guild of Fine Food, which represents 1,300 delicatessens and specialist food importers. "If Tesco or Asda open on a high street then we're not particularly worried because their genuine foodie offer is not big enough to worry a proper deli. But Waitrose buyers buy better-quality foods and will always be able to compete on price." Unlike Sainsbury's and Tesco, which charge up to 5% more for products in their convenience formats than they do in larger stores, Waitrose plans to keep prices in the Market Town stores the same as in its larger outlets - which won't scare its big four rivals but will frighten the specialists. With Waitrose now in competition with Marks & Spencer's Simply Food, Tesco Express and Sainsbury's Local for sites, rents could well be forced up, making it harder for smaller retailers to acquire stores. The retailer will also be able to use data from Ocado, its home shopping partner, to help identify new locations, points out Nick Gladding, lead analyst on food retail at Verdict Research. He believes the new format will do well in areas that have a strong foodie community. However, he warns, the maths won't necessarily stack up in smaller stores, which are more expensive to run. Keeping prices in line with the rest of the estate could hit profit margins, he says. More worryingly, the impact on local retailers could spark a backlash of negative publicity of the sort usually reserved for the likes of Tesco. "It could create issues for Waitrose, a company that is generally seen as 'good'," he argues. "If they are seen to be harming smaller stores it could damage their reputation." Waitrose remains optimistic, however, that the model will succeed - and that consumers will warm to its smaller stores rather than see them as endangering the future of existing town centre retailers. "By spending time with our customers and delivering exactly what they want, we should be able to make it work," says Hunter. "The customer is showing signs of going back to traditional values. More people are wanting to shop locally and want towns with the vibrancy of the local community." Local and specialist retailers will be keeping their fingers crossed that those vibrant communities still involve them.

the competition 836 Tesco (Express) 507 Tesco (One Stop) 292 Marks & Spencer (Simply Food) 325 Sainsbury's (Local)

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