Waitrose and the Co-op are cutting prices on hundreds of essential goods this week as supermarkets prepare to battle it out for customers ahead of a budget Christmas season.
On Wednesday, Waitrose is lowering the prices of more than 200 of its basic own-label products, including beef mince, tea and washing-up-liquid, by an average of more than 15%.
The Co-op is investing £50m in lowering the price of more than 300 branded and own-label products, including rice, pasta and coffee, by nearly 15% on average and introducing a new low-price range for shoppers on a budget. “Honest Value” will include 50 items, including British meat, soft drinks, fruit and vegetables.
Jo Whitfield, the chief executive of the Co-op’s food stores, said: “Value is uppermost in the minds of shoppers.”
The UK’s sixth- and eighth-largest supermarkets are taking action after their bigger rivals launched a price war in an attempt to win over more budget-conscious shoppers whose finances are under increased strain due to the economic impact of the Covid-19 pandemic.
Tesco kicked off the pricing shift in June with a pledge to match Aldi on nearly 500 products – extending an existing promise to match the discounter on some items. Since then, Sainsbury’s announced price cuts on 1,000 products, Asda said it would invest £100m on price cuts and Morrisons said it was cutting prices on 400 items in September by an average of 23%.
Supermarkets are trying to avoid a repeat of their mistake in the last recession when discounters Aldi and Lidl, as well as the likes of B&M and Poundland, took market share as the major grocers allowed themselves to be undercut.
The price war has caused grocery inflation to more than halve to 1.9% since a peak of 4% in June and the focus on price is expected to sharpen further in the run up to a tricky festive season, according to market analysts at Kantar. It said 31% of grocery sales were linked to promotions in September – the highest proportion all year as price cuts were stepped up.
With fears of the spread of the virus and lockdowns increasing, supermarkets are partly trying to win over shoppers who might be cautious about heading out to stores in the coming months and irritated by insufficient capacity to meet soaring demand for online shopping. The closure of many hospitality venues in some parts of the country is also adding to demand in stores.
“It is going to be incredibly challenging to deal with the levels of demand given the restrictions in place because of Covid-19,” said Richard Lim at Retail Economics. “The tactic is to build up a bit of loyalty ahead of Christmas.”
Limits on household mixing and fears about the end of the government’s furlough scheme and rising unemployment mean that most families are likely to be “less indulgent” in their food spending in the run up to the festive period according to Lim.
More than a third (36%) of shoppers expect to cut back on their festive spending, with just 12% of consumers expecting to spend more than last year according to Retail Economics.