Supermarkets were ‘totally and utterly’ complacent

By Michael Stones contact

- Last updated on GMT

A supermarket price war, which could follow Morrisons' recent price pledge, could damage supermarkets more than their suppliers, said Black
A supermarket price war, which could follow Morrisons' recent price pledge, could damage supermarkets more than their suppliers, said Black

Related tags: Asda, Wal-mart

Britain’s big four supermarkets have been “totally and utterly complacent”, in failing to keep pace with key developments in retailing and are now paying the price, warns a leading City analyst.

In this exclusive podcast, Clive Black, head of research at Shore Capital stockbrokers, was scathing in his assessment of Britain’s big four supermarkets: Tesco, Sainsbury, Asda and Morrisons. All had  failed to recognise the emerging threat from discount stores, such as Aldi and Lidl, he said.

“The big four were very content to take suppliers’ cheques for promotions,”​ he said. “And content to pass on input cost rises through inflation. But they lost sight of the fact there may be other people out there, who might be interested in factors other than pure price and that customers, in larger numbers, might be interested in their proposition too.”

Black went on to explain that supermarkets might be more at risk from the consequences of a price war – as initially initiated by Morrisons in response to its tumbling sales – than their suppliers.

‘A loss of credibility with shareholders’

“A number of statements have been made by the big players about reducing prices and if they are not seen through, there will be a loss of credibility with shareholders and customers. It’s very difficult to control one’s destiny when you go down this line. The issues of contagion and unintended consequences come to mind.”

But tightening supply and demand – ironically caused by the industry concentration brought about by supermarkets’ tough negotiating stance – had now put food manufacturers in a much stronger position than 20 years ago, he said. Read the May edition of our sister publication Food Manufacture​ to discover why food and drink manufacturers are now better placed to negotiate with supermarket buyers than for a generation.

Black was speaking at a meeting of the Food, Drink and Agriculture Group of the Chartered Institute of Marketing at New Zealand House in London this week (April 8).

Meanwhile, read why the current turmoil in retailing was caused more by supermarkets “falling asleep at the wheel”, ​than the sharp price competition of the discount stores.

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