Supermarkets target fresh food to fight discounters

By Rod Addy contact

- Last updated on GMT

Morrisons is working hard to close the price gap between traditional supermarkets and discounters
Morrisons is working hard to close the price gap between traditional supermarkets and discounters

Related tags: Tesco, Asda

Fresh food is the first battleground as traditional supermarkets such as Tesco and Sainsbury fight against stiff competition from discounters Aldi and Lidl, according to a leading food analyst.

Shore Capital analyst Darren Shirley said initial signs were positive for traditional retailers in that area. “We will watch to see how matters pan out but we can see grounds for some bounce back in these areas when price files are corrected through a communication with the customer that highlights the virtues of specification, chilled chain, compliance and range density.

“Change in fresh food pricing should, alongside focused work on private label ranging, pricing and merchandising, and proprietary brand management that puts the customer first again, also make a positive difference to top lines.”

His comments followed Morrisons’ announcement last month that it was investing £19M to enhance its fresh food supply chain​.

In a recent store tour in the Wirral area, Shirley noted that Tesco’s Bidston Moss store was “materially enhanced with major works bringing forward fresh produce and counters to the front of the store”.

‘Worry and doubt’

“There is no doubt that the store is visually much better​,” he observed. “However, whether or not it is justifying the investment is a matter of worry and doubt to our minds, a view we sense that has been shared by the Tesco board.”

After visits to Morrisons, Sainsbury and Tesco stores, Shirley was also unenthusiastic about the competitiveness of their pricing strategies. “Whilst value is to the fore of the narrative and debate on UK 'supermarketing', we felt that price and promotion messaging were rather tame in the supermarkets that we visited.

“Morrison's had by far and away the strongest and most extensive price statements, reflecting the group's change in trading strategy announced in March 2014, and to reasonably good effect, to our minds.”

Promotions

But he added: “Promotions continue to have a rather familiar tone across the piece, so largely supplier-led, mainly ambient proprietary brand‎s, stocked to some degree whether the customer wishes to have them or not.”

Overall, the industry remained “in limbo”​, waiting to see the trading strategy Tesco’s new ceo Dave Lewis would adopt, he said.

That said, the signs were that Asda and Morrisons in particular were beginning to close the “insult gap in pricing”​ between the supermarkets and the discounters, he concluded.

 

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