Although it is still too early to talk about the impact of last week’s round of cuts, “we
have seen very strong uplifts”, says Mr Philips.
But Dave McCarthy, an analyst at HSBC, says: “I don’t recall seeing anything as bad
as these sales figures from one of the big four supermarkets.”
And he warns that there will be “short-term pain before any benefits”.
Despite its efforts, Mr Philips says Morrison failed to lure customers away from the
discounters over Easter, when they traditionally trade up.
According to the latest figures from Kantar Worldpanel, the consumer research
group, Aldi’s sales rose by a record 40.2 per cent in the four weeks to April 27, while
Lidl’s rose by 27.3 per cent.
Mr McCarthy estimates that on their current trajectory, Aldi and Lidl’s combined
market share will overtake Morrison within the next 12 months.
Tesco has also seen little benefit from its £200m investment in price cuts, announced
in February. JPMorgan Cazenove estimates that based on Kantar data, Tesco’s like-
for-like sales fell 5.1 per cent in the eight weeks to April 27.
Mr Philips reckons that it could take about six months for Morrison to see results.
Investors will “hold our feet to the fire” until then, he says.
However, he could take heart from Asda, a rival north of England-based grocer which
faces many of the same pressures. All through last year it cut back on what it called
the “gimmicks” of vouchers and promotions, choosing instead to emphasise low,
It was also the first to notice the threat from the discounters, cutting prices on
grocery staples a year ago, and pledging in November to spend £1bn lowering prices
further over the next five years. Over the past three months, Asda has been the
fastest-growing of the big four supermarkets, according to Kantar.
J Sainsbury, meanwhile, is trying to keep above the fray.
Justin King, its outgoing chief executive, stopped short of announcing any headline-
grabbing price promises with its annual results on Wednesday.
Although the company says its prices are “toe to toe” with rivals, it is fighting on
other fronts, from the provenance of its food, to the tidiness of its stores.
“Viewing value as being purely about the single dimension of price completely
misreads where the customer is,” says Mr King.
Clive Black, an analyst at Shore Capital, says that if the big supermarkets’ price
offensives do start to gain traction, then “the party for Aldi and Lidl could be starting
to be just a bit less fun”.
But in the meantime, there are fears that the grocers – including Sainsbury – will be
drawn deeper into combat.
One senior supermarket executive says that in the past, big price-cutting campaigns
tended to involve trimming a penny or so off categories with large numbers of
products – such as hair colourants or jars of spices – but that matter little to
This time, the commitments have focused on staples, such as bread, milk and eggs,
where prices at the big grocers had drifted up from the discounters.
“The competitive dynamics have led to a situation where that gap is unsustainable.
That is quite a significant reset,” says the executive.
Bruno Monteyene, an analyst at Bernstein, says this round of price cuts initially took
the form of “precision bombing” – focusing on fast-selling own-brand items.
However, Morrison has lowered prices on some well-known brands, raising the
prospect of the big four not only defending themselves against the discounters, but
battling between themselves for customers.
According to Mr Black: “Price wars tend to be fought in waves until the crisis hits the
beach, and we don’t know how close we are to the beach yet . . . The silent and deadly
shark in the sea is Tesco, which has yet to reveal its teeth.”