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How has the Morrisons ‘Price Crunch’ campaign evolved?

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Morrisons first introduced its ‘Price Crunch’ in February 2016, to rival its competitor supermarkets’ pricing initiatives. Since its introduction the ‘Price Crunch’ has evolved, with promotional changes every few months.

Following the Brexit vote, supermarkets have sought to alleviate shoppers’ concerns that a weaker pound would lead to inflation of everyday goods. Andy Atkinson, Customer and Marketing Director at Morrisons said, “we are constantly listening to our customers and know they are concerned about whether food prices will go up following the Brexit vote.” He continued, “we are British farming’s biggest supermarket customer, which means we can better control our prices, and this latest round of crunches demonstrates our commitment to offering the best possible value to our customers this summer.”

Morrisons has made two subsequent ‘Price Crunch’ announcements following Brand View’s publication of the ‘Price Crunch’ analysis on 2 May 2016. Morrisons’ ‘Price Crunch’ announcement on 4 September led with the headline “Morrisons to chop meat prices” while the 1 August announcement focused on family essentials, such as seasonal fruit and vegetables and toiletries, as well as meat.

Brand View has analysed the products reduced in price on 1 August 2016 and 30-31 August 2016 to investigate which products were included in Morrisons’ most recent ‘Price Crunch’ campaigns. (On 1 August 2016 and 30-31 August 2016 there were peaks in price decreases without a corresponding peak in price increases. The 30-31 August price changes equate to the price cuts announced on 4 September.)

Price cut analysis by category
Brand View has reviewed Morrisons’ four rounds of price cuts by category – all price cuts in the Beers, Wines & Spirits, Grocery, Health & Beauty and Home Care categories have been analysed.

The two most recent rounds of price cuts focused heavily on the Grocery category, accounting for 91.1 percent of price reductions on 30-31 August 2016 and 87.9 percent of price cuts on 1 August 2016. These showed a much greater focus on the Grocery category compared to just 49.5 percent on 2 May 2016.

Chilled Foods accounted for the greatest proportions of price reductions in the Grocery category in the two most recent rounds of price cuts. In contrast, Ambient Foods had the greatest proportion of price reductions in the Grocery category during the first two rounds of price cuts.

There was a much greater emphasis on Frozen Foods during the most recent ‘Price Crunch’ – the range and pricing of Morrisons’ Frozen Foods categories were reviewed in the previous Insight ‘Shoppers want more frozen food: how have supermarkets reacted?

Price cut analysis by sub-category
“Morrisons to chop meat prices” was the headline of its most recent round of cuts – Brand View analysis showed that two of the categories with the greatest number of price reductions on 30-31 August 2016 were Meat categories. The category that accounted for the greatest number of products reduced in price on 30-31 August 2016 was ‘Cooked Meat’.

Morrisons’ Customer and Marketing Director, Andy Atkinson, stated, “meat is one of the priciest items in families’ shopping baskets and as kids go back to school the cost of packed lunches is an added cost.”

All of the categories with the greatest number of price reductions in the most recent rounds of price cuts were Grocery items, with the exception of the Party Items category on 1 August 2016.

On 2 May 2016 cuts were focused more on Health & Beauty – seven of the top ten categories with the greatest number of products reduced in price on this date were Health & Beauty categories. In the first round of cuts in February, six of the top ten categories were Grocery items, with products in the Cakes and Cookies category accounting for the greatest number of SKUs reduced in price.

Average shelf price reduction of products included in Morrisons’ most recent ‘Price Crunch’
Brand View has analysed the average reduction in shelf price for the categories accounting for the greatest number of price reductions (shown in the previous graph) during the two most recent ‘Price Crunch’ campaigns. The analysis showed that the price reductions varied greatly by category.

The Frozen Pizza/Garlic Bread Brand View category accounted for the greatest average shelf price reduction on 30-31 August – 47.7 percent – while Chilled Ready Meals accounted for the smallest average shelf price reduction – 11.3 percent.

On 1 August 2016 Crisps and Snacking Nuts accounted for the greatest average shelf price reduction – 36.0 percent – while Chilled Ready Meals once again accounted for the smallest average shelf price reduction – 5.0 percent.

The categories with the greatest average price reductions were mostly comprised of branded items, while the categories with the smallest average price reductions mostly consisted of Own Label items.

How did Morrisons’ pricing compare with its competitors?
Morrisons also highlighted that its most recent price reductions would focus on the supermarket’s Own Label range. However, the analysis showed that the majority of reductions, 64.5 percent, on 30-31 August 2016 were on branded items.

Brand View has analysed the shelf price of a sample of 14 branded products that Morrisons reduced in price on 30-31 August 2016 (4 September ‘Price Crunch’ announcement) to investigate how the pricing of these goods compared to its rivals – before and after the most recent cuts (29 August and 9 September 2016).

Before the ‘Price Crunch’ Morrisons was the sole or joint cheapest retailer on just three products. However, after the ‘Price Crunch’ Morrisons was the joint cheapest retailer on 11 products and the sole cheapest retailer on two products – ‘Copella Apple 900ml’ and ‘Kellogg’s Rice Krispies Multi-Grain Mini Biscuits 5x24g 120g’.

On 9 September 2016, the only rival retailers to adjust pricing were Sainsbury’s, which reduced the prices of five products and raised the prices of three products, and Tesco, which reduced the price of one product, ‘Maltesers Gift Box 360g’.

For the sample selection of branded products reviewed, Morrisons provided much more competitive pricing following the ‘Price Crunch’.

How have the ‘Price Crunch’ campaigns affected Morrisons’ performance?
Morrisons stated in its interim results that the company had made good progress with its plan to ‘Fix, Rebuild and Grow’ the business. Eighteen months after David Potts was appointed Chief Executive of Morrisons, the retailer’s financial performance has improved – profits rose 13.5 percent for the six months to 31 July 2016, the first increase in half-year profits for four years.

Morrisons’ “back to basics” approach, focusing on pricing of these core Grocery products, has been accompanied with category resets and new product ranges, as well as a greater focus on improved customer service and store facilities. The company recently renegotiated its contract with Ocado and entered into new strategic partnerships with Timpson and AmazonFresh, which stocks Morrisons’ Own Label items. Morrisons is aiming to further cement its ties with the US e-tailer, as the company announced it will be installing Amazon lockers across hundreds of its stores.

Rival retailer, Asda, recently announced its own round of price cuts on 9 September in response to Morrisons’ ‘Price Crunch’ campaign. Retail analysts now expect Sainsbury’s and Tesco to respond in the coming weeks, heating up the price war as the supermarkets prepare for the important Christmas trading period.

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