Defiant grocers Morrisons and Waitrose both delivered results yesterday and were predictably having to explain their position in light of the growth in the discounter sector.
While there seems to be an element of discount frenzy in the food world at the moment, are the discount specialists really a threat to the established grocers?
Morrisons chief executive Marc Bolland said that while discounters have their own place in the market, they are not a threat to Morrisons. He claimed that Morrisons offers the same value as well as more products, pointing in particular to its fresh lines.
Bolland maintained that over a basket of shopping, including promotions, Morrisons would be very competitive to any other grocer in the country, including the discounters. And in order to cement its position, the retailer is adding new lines to its value range to make sure it maintains its competitive edge.
With Waitrose, Aldi is so far down the food chain it seems unusual that the senior management would consider it a threat, but boss Mark Price is not snobbish about the sector. Instead, he said that everyone who is growing is a threat.
However, he is confident that there is a gap between perception and reality in terms of the discounters and said they may not necessarily always be cheaper. Waitrose commissioned some research that found that in five out of 25 categories, Waitrose is cheaper on its entry price products than Aldi. And the big four grocers were also cheaper than Aldi in many of the product categories.
Waitrose has invested£30 million in its pricing in the first half and judging by this research it seems to have paid off. The upmarket grocer may be investing in prices because the economy is tightening, but that’s not just a result of the growth in discounters.
Later this year, Waitrose plans to label branded products to show it is competitive. The grocer wants shoppers to know it is competitive and on 7,000 branded lines it is within a 2 per cent difference in price to Sainsbury’s. What it won’t do is label its products to show it is cheaper than Aldi, as it may well turn shoppers off.
Tesco boss Sir Terry Leahy has said in the past that he admires Aldi and its work on the development of a more low-cost range to rival the discounters seems to show that it is taking that sector’s growth seriously.
The established grocers have one eye on the discounters but are confident of their loyal shoppers. And if they continue to invest in pricing and value, they should be able to hold the discounters at bay.