Morrisons slashes prices as supermarket price war looms
The cuts, which average 17%, include both own-label and branded products and follow earlier reductions in the price of milk, fresh meat, fruit and vegetables.
Morrisons chief executive Dalton Philips said: “We are cutting prices not corners. We are making great food even more affordable and, in doing so, giving more reasons for customers to shop with us.”
The permanently lower prices will be matched by “unprecedented transparency” on pricing by a British supermarket, he claimed.
The price cuts are being communicated to customers through a new marketing campaign, ‘I’m Your New Cheaper Morrisons’, which launched yesterday (May 1).
‘This is not a temporary skirmish’
“Our lower prices are not just for the next week or next month,” said Philips. “Morrisons is going to be cheaper permanently on the products that matter most to our customers. This is not a temporary skirmish.”
Morrisons makes more than half of the fresh food it sells and pledged to use that supply chain to help costs. “It will be leveraging this vertically integrated structure to control the quality of products and to keep prices down, cost which competitors will find it hard to match,” said the retailer.
The price of a Hovis 50/50 loaf was cut from 135p to 100p and its own-label loaf was cut to 59p, while Tate & Lyle sugar was chopped from 88p to 79p and the price of Jammie Dodgers was axed from 109p to 49p.
City analyst Shore Capital estimated the investment would cost the retailer about £300M. “Morrisons’ price cutting snow-ball has gained a significant amount of momentum, after a measured start revolving largely around weekly fresh produce price cuts; lemons and red onions this week,” said its analysts Clive Black and Darren Shirley.
‘A tail-spin for industry pricing’
“Whilst not necessarily representing a tail-spin for industry pricing, we do see these changes as a material notch up in activity and underscores the concerns that we, and we believe investors, harbour about contagion of gross margin investment, the robustness of industry margins and so earnings.”
Black and Shirley added it was difficult to be more positive about investment in the UK supermarket segment until the pricing environment became more settled.
Shore Capital repeated its sell advice on Morrisons’ stock.
Grocery think tank IGD noted the price cut campaign was aimed to address “growing customer dissatisfaction with the shifting sands of short term promotions”.
About 60% of the products earmarked for cuts come from Morrisons’ own-label ranges, notably in the fresh categories, where the retailer’s integrated supply chain is expected to drive efficiencies, said IDG. The remaining 40% of cuts will concern big branded lines where price comparisons with other retailers are clearest.
