Cash in on supermarket price cuts

17 September 2008

Households are set to benefit from Britain’s two biggest supermarkets slashing their prices in an effort to stop customers defecting to budget alternatives.

ASDA and Tesco have both announced cost-cutting exercises that they claim will help thousands of cash-strapped shoppers hit by rising food prices. Morrisons also recently announced that it was cutting 4,000 prices this month on a range of products right across the weekly shop to help its customers beat the credit crunch.

Tesco says it has already cut prices by £620 million since March, and is planning a new range of “discount” ranges that it estimates will shave £24 off the typical weekly shop.

The new range will include 350 new products - from tea-bags to shampoo - as well as cheaper deals on existing products.

Richard Brasher, commercial director of Tesco, says: "We want to help customers have it all in an uncertain world – an unbeatable range of products at prices to suit every budget combined with helpful staff, full ranges, Clubcard points and convenience."

Meanwhile, ASDA says it is introducing 5,000 price cuts, that could halve the cost of a weekly shop.

Andy Bond, the chief executive of ASDA, says that food price inflation has peaked. However, he adds: “When I talk to customers they tell me that they’re really worried about how to make ends meet and they look to supermarkets to help them. That’s why I’m determined that as and when cost prices fall it will be ASDA which leads the charge and drives down prices for shoppers not just in the short-term but permanently.”

The price cuts represent a war among the large supermarkets, all of whom are keen to compete for business and market share. But, equally, the reflect concerns that customers are increasingly turning to budget supermarkets, such as Aldi and Lidl, to offset higher food prices.

The latest figures from TNS Worldpanel show that shoppers are responding to low-price messages, with turnover at Aldi and Lidl up 20.8% and 11.1% respectively. Iceland, the frozen-food store, is also puling in more new business, and its “75p Freezer Essentials” marketing campaign has produced growth of 12.9%.

The top four supermarkets – Tesco, ASDA, Sainsbury’s and Morrisons – have also seen growth, albeit slower than their budget rivals.

Tesco saw its market share increase 6.7% during September, while ASDA saw its turnover increase by around 9%.

However, over the past 12 months, Tesco has seen its market share dip slightly: from 31.7% last year to 31.5% today. ASDA’s market share has increased by 0.3% over the past 12 months to 17.3%, while Sainsbury’s has fallen 0.2% to 15.8%. Morrison’s market share has increased from 10.8% last year to 11% today.

In contrast, more up-market supermarkets appear to be feeling the pain.

Waitrose has seen its growth held at 3.2% year-on-year, resulting in the share dipping by 0.1% to 3.8%. Meanwhile, data from research group Nielsen, suggests that Marks & Spencer's food sales are also suffering, with 5% less food being sold than this time last year.

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