Morrisons fires new salvo in supermarket price war

By Michael Stones contact

- Last updated on GMT

Morrisons has promised another round of price cuts
Morrisons has promised another round of price cuts

Related tags: Supermarket price war, Cost, Morrisons

Morrisons has fired another salvo in the intensifying supermarket price war with the launch of a further round of permanent price cuts.

From today (June 23), the price of 135 products – including Allinson white flour and peeled plum tomatoes – will fall by an average of 14%. The price reductions were spread across a range of everyday products, mainly in the grocery and household categories.

Price reductions are divided equally between big brands and own-label products.

‘Permanent price cuts’

Morrisons chief executive Dalton Philips said: “We are making a real difference to the cost of the weekly family shop by reducing prices on products that our customers use regularly. These are permanent price cuts, not promotions, and they won’t be the last.”

In March the retailer pledged to invest £1bn over three years in cutting product prices, as it battled lower prices from discounters such as Aldi and Lidl. Morrisons said its ‘I’m Cheaper price cuts’ – launched on May 1 2014 had cut the cost of 1,200 products by an average of 17%, contributing to the first fall in food prices for eight years.

“According to the Office for National Statistics, food prices across the sector have fallen by 0.6% and Morrisons is an important contributor to easing the pressure on household budgets,”​ it said in a statement.

Last week the retailer announced plans to cut 2,600 jobs​ in an overhaul of its management structure in stores, in a move criticised by former chairman Sir Ken Morrison.

Staff morale

City analysts Shore Capital said the job cuts were unsurprising, questioning the impact on staff morale.

Commenting before today’s announcement, analysts Clive Black and Darren Shirley said: “As is often the case with such announcements, senior management pledges that the changes are likely to lead to an improvement in customer service; we will see whether this is the case and also whether in-store morale and standards can be maintained through what is a demonstrably challenging and difficult time for all concerned.”

Morrison’s move to cut labour costs will not be the last in the UK supermarket sector, as forces combined to depress demand while boosting costs, they predicted. “Such changes include reduced in-house food waste, more small-store shopping (so depleting large-store footfall), growth online (with higher fulfilment costs) and increased consumption of food eaten out of the home,”​ said Black and Shirley.

Shore Capital remained concerned at Morrisons’ trading momentum – measured by public market share data – and could not rule out further downgrades for Morrisons.

The analyst repeated its sell recommendation on Morrisons’ stock.

Last week, Sainsbury announced a joint venture​ with Danish discounter Netto, as it strove to take the price war to established discounters Aldi and Lidl.

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1 comment

More Bad Decisions Yet Again

Posted by Peter Crolla,

So there is to be another rounds of permanent price cuts? What is the point? The staff levels are ridiculously low, staff morale is low, store atmosphere is low, the stock availability is low, the hygiene levels are low, customer turnout is low, profits are low...and now prices are low.

If anything else can be made low in Morrisons I am sure the Board will make it happen in a blink of an eye.

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