Tesco has already undertaken a similar – albeit what is believed to be slightly smaller – cull of its SKUs in an attempt to compete with the limited assortment discounters (LADs) Aldi and Lidl. Asda’s move has been driven in part by the success Tesco achieved, which fed through into its own most recent poor set of results. These had Asda reporting a 5.8% fall in sales in the fourth quarter of 2015.
Big fightback
It is all part of the big fightback that the multiples recognised was necessary to stem the loss to the LADs of customers, lured away by their cheap (but good quality) product offerings. The LADs now have a combined market share of around 10%. However, some commentators have suggested that their phenomenal growth might have peaked.
Speaking with delegates – including retailers – at the Food Standards Agency’s ‘Our Food Future’ event last week, the general view was that the vast ‘choice’ that supermarkets once offered their shoppers on similar catagories of food was always nonsense and ripe for review. After all, who actually needed a choice between 14-odd different types of ketchup?
Painful for manufacturers
However, the impact of SKU reduction by the big retailers is inevitably going to be painful for many manufacturers.
While the biggest brands and suppliers should be able to ‘sharpen their pencils’ on price and avoid being delisted, the same is unlikely to hold true for many small food and drink firms that lack the clout or flexibility on price to make the cuts expected of them.
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