The Co-op has launched a programme of price cuts that will total £100m this year as it bids to increase competitiveness against rivals.
The first phase of reductions, backed by a TV advertising campaign and under the ‘Fair and square prices’ banner, includes lower prices on staples such as bananas, bacon and bread, and will include large loaves for 75p each.
Price has been identified as one of the Co-operative Food’s weak spots versus c-store rivals. The latest reductions came on top of price cuts across 1,000 products last year.
“You will see us accelerate our activity. It will be significant, real and customers will notice the difference,” he said.
The Co-operative Group reported that its food business generated full-year sales last year of £7.24bn, down from £7.44bn the previous year. Underlying operating profit fell from £269m to £247m.
A £226m write-down related to the acquisition of Somerfield resulted in the food arm making an operating loss of £35m. The Co-op wants to exit 60% of its former Somerfield stores.
Murrells, who took the helm of the food business in 2012, has overseen the development and implementation of the True North strategy, designed to transform the business, and is focusing his efforts on strengthening its power in the convenience market.
Last year the Co-op’s c-stores generated a like-for-like sales increase of 1.6%, rising to 5.3% in the second half. That compared with a respective 0.2% fall and 0.6% rise at the retailer’s food division overall.
The focus on convenience retail means that the retailer will exit larger premises but will continue to open c-stores. It has 2,800 at present and is targeting 4,000.
The Co-operative Group, hit by problems at its banking arm and riven by strife at group board level, last week recorded an annual loss of £2.5bn after what interim chief executive Richard Pennycook described as a “disastrous” year and the worst in the mutual’s 150-year history.
However Murrells said the Co-op’s food strategy is “totally self-funded and the price investment is being supported by significant ongoing efficiencies and cost reductions”.